If one message landed like a payments meteor last week, it was that the world of merchant payments has been changed enormously by the pandemic that we are all living through. Speaker after speaker pointed to a huge acceleration in the shift from physical to digital channels and from cash to card and other electronic or digital payment methods. The consensus seems to be that this shift would have happened anyway but that COVID-19 has catalysed the transformation. In particular, it has coaxed consumers that had never ventured onto the internet before through the experience of making their first online shopping purchase. One survey quoted during the event suggested that 18% of consumers initiated their first ever digital commerce transaction during the last six months.
THE ADVENT OF THE “DIGITAL NAÏVE”
We talk a lot about a generation of shoppers that are “digital natives”, but now merchants need to address the needs of a generation that is completely new to the online channel – I call these consumers the “digital naïve”. They are a group of consumers who are unfamiliar with the tropes and tricks of advanced, super slick, friction-free ecommerce experiences. There is an implied consent between UX designers and users that have spent their whole lives online that results in payments being pushed into the background, and for the agreement to purchase to be little more than the raising of a digital eyebrow or the barely perceptible twitching of a digital forefinger. But just as someone walking into an old-fashioned auction house for the first time would find the conventions, customs and behaviours imperceptible or incomprehensible or both, so a generation of older, less connected consumers now find themselves navigating sites and apps which use unfamiliar vocabulary and unexpected behavioural cues. The “new normal” includes a population of digital innocents, and merchants and providers now need to face the increased diversity of these audiences.
AUTHENTICATION TECHNOLOGY AND SOFT POS AS FUTURE BENCHMARKS
It's also clear that the industry should be bracing for a significant uptick in fraud as the migration to digital channels continues. There was of course ongoing discussion of the implementation of 3DS and other mechanisms for providing strong customer authentication in the European market. The market is also watching carefully what SCA will do to conversion in online payment experiences. The data published by Microsoft recently on their own experiences of 3DS2 readiness and availability suggests a very uneven landscape. I expect to see authentication experiences becoming a prime differentiator for both merchants and for providers like gateways, issuers and schemes over the next couple of years.
Elsewhere in MPE, the breakout session on so-called Soft POS (where the card terminal is deployed on standard phones and tablets) was full, with a waitlist for hopefuls looking to join. It feels like the momentum behind this technology is unstoppable – both for single outlet merchants looking for a low-cost way of taking cards, but also for larger organisations who want to add a flexible payment capability for sales staff in their physical stores. In this new normal, physical retailers are going to have to compete on experience and convenience against remote stores. They can do this by delighting shoppers, providing instant fulfilment, smoothly managing returns and refunds, and removing barriers to making the sale like queuing. I am ever more convinced that Soft POS is part of that future.
THE POSSIBILITY OF NEW SCHEMES AND THE FUTURE
Another striking session that caught my eye discussed the emergence of a new pan-European payment scheme to compete with the global schemes, and whether that would be a traditional pull/card-based system, or – which seems more likely – if it will use push payments straight from the consumer’s bank account. Innovations like iDeal over QR in the Netherlands point in the direction of how this could be provided in store, though if and how consumers will shift to a new scheme is a question that hasn’t yet been resolved.
We closed the week by looking at the more distant future of payments. The criticality of understanding risk and of being able to solve the challenge of identity in payments while protecting the privacy of the participants remain hard problems to solve – it’s exciting to see the ecosystem of merchants and providers looking ahead to work on solutions together.