Online Payments: Service vs. Security vs. Survival?

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Blog Paul Alfing: chair e-payments committee Ecommerce Europe

Since ApplePay was launched I am regularly asked what I think about all the new methods of payment. Most of these developments are providing consumers with more choice and greater convenience. Greater convenience both due to enhanced insight in application use, and due to the extra services. How could I respond in any other way than with enthusiasm? The next logical question is often whether this ‘deluge’ of new methods of payment isn’t confusing for those same consumers? It is, of course, a pity that some methods are linked to an appliance, such as ApplePay is to the iPhone, or to a certain provider. On the other hand, if consumers are satisfied with their usual method of payment, e.g. iDEAL, credit card or PayPal, they will not be on the lookout for anything new. Only those who have an occupational aberration, yours truly included, will see just how fast the forest is growing, despite the number of trees. This could be a different matter if one looks at the wide variety of security measures. These really do demand European harmonisation.

Confusion due to security requirements
No, confusion will not result from the growing number of methods of payment. But the increasingly strict (and often different) implementations relating to security for consumers could well be confusing. This could put the brakes on online payments and, therefore, on purchasing. In fact, confusion among consumers about new methods of payment will mainly result from the various security requirements. This applies in particular to consumers who want to make cross-border purchases and are unable to use their usual ‘national’ method of payment. This is because security requirements are not based on a European protocol. A protocol, or framework, that encourages inter-operability could harmonise the user experience for consumers. This is not something that can easily be solved by the market. The market can provide people with guidance regarding most of the services that consumers want (or will want). This should be left in the hands of the market parties; the supervision of the so-called protocol could be left, for example, to the European Central Bank (ECB) and/or the Euro Retail Payments Board.
From top-down to bottom-up
Speaking of the ECB, at the end of October I was invited to be a panellist during a meeting of the ECB and Banque de France in Paris on the security of online payments. This meeting showed just how far we still have to go before all stakeholders in the payment landscape realise that payment itself is becoming an increasingly smaller element of the check-out process. Far be it from me to play down the importance of security, but we must avoid allowing this limited focus to prematurely stagnate any further innovation in the payments landscape. For many, this will require a changed perspective. Reasoning based on security is a perfect illustration of the top-down perspective that has long (too long) dominated the (European) payments landscape, and focuses in particular on how existing systems need to be adjusted to fit in with the new circumstances. What is essential right now is a bottom-up perspective that reasons on the basis of clients’ wants, and from there examines what is needed to get and keep everything up and working. Without this turnabout in perspective and by keeping the primary and secondary approach on payment, many established payment institutions will miss the boat. Of course security is very important, but focusing only on that, without services for the users is much too limited to guarantee market survival.
Don’t simply cling to how things used to be
Confirmation of this proposition seems to come from the party I mentioned earlier: Apple. Apart from being rapidly adopted in the United States, in the first week after its launch 600 banks had already got linked up, Apple and the Chinese Alibaba (which operates Alipay) are talking about possibilities for collaboration in the field of payment systems. Don’t cling to how things used to be. Simply changing to fit in with new requirements, e.g., by pimping up security and not searching for ways of optimising the entire process, will be at the expense of consumer convenience and therefore also at the expense of adoption by consumers. Failing to provide services will threaten the very existence of payment institutions. Only parties who manage to see things from another perspective in time will continue to determine the market and be able to count on enthusiasm from the online sector.

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