Following Merchant Payments Ecosystem 2020 (MPE2020), I wanted to share some of my thoughts on Secure Customer Authentication (SCA), how close the world is to a Soft POS future, and what merchants can do to facilitate stronger relationships with their customers and make certain they’re prepared for the ever-evolving practice of open banking.
As you know, there was a lot of chat about Secure Customer Authentication. I heard a lot of questions about how it might work, and a lot of statements on what's not right, but what was missing was clear guidance on what everyone should be doing. The reality is that whether we like it or not, there won't be any more extensions to implementation deadlines.
If you're a merchant, the answer has got to be two things.
1. Put the Customer First
Know your customer – which is something that great retailers do very well in any case. Build flows through your website which both encourage and reward your customers to register and log in. The more you can offer customers to be operating in a "known" rather than "guest" situation, the more options you're going to have to deal with authentication during the actual payment process.
More importantly, make sure that you're working now, urgently, with your processor and/or acquirer to ensure that your 3DS authentication experience is going to be as polished as possible. Don't assume that you will be able to use exemptions and exceptions.
If you're an acquirer or processor/gateway, you have about six months to get everything not only in place, but also well-managed and well understood. Some providers are bringing their A-game to their 3DS flows, and in particular, big merchants are going to move towards providers with strong propositions around low risk customer portfolios and trusted beneficiaries.
And issuers? If you're thinking you're going to use declines to defend against poor authentication experiences, I think you've got a rude shock lying in wait. There are some aggressive, agile neobanks who are just waiting for traditional issuers to misread the situation and assume customers won't care about poor 3DS experiences. They will, and the neobanks are well-equipped to put a card into the hands of your customers within 48 hours. Once they move and realise that the neobank experience is good, you'll have a real war on your hands to win them back.
2. Experiment and Collaborate for Open Banking Success
Beyond 3DS and SCA, we heard a lot about open banking, but not many answers about how it’s going to break out into the mainstream. Here, I think the advice has to be experiment and collaborate. It's not obvious to me which providers are going to win in open banking, particularly at the physical Point of Sale, but I believe the next two years will see some strong propositions emerge, even in traditional card-dominated markets. Find a partner to help you build some prototype solutions or do research.
Lastly, 2020 feels like the year "Soft POS" (phone as a terminal, or downloadable POS) will come of age. PayCore announced that they've achieved the holy grail of both processing the contactless card payment via a mobile phone without any additional hardware (so no "dongle" to be connected by bluetooth or headphone jack) and capturing the PIN entry from the cardholder on the same phone. That opens the door to mainstream high-value card acceptance using just a phone. As an econsystem, though, we're still missing the certification regimes that allow merchants, issuers, processors and schemes to have confidence to really push adoption, and I hope that the next 12 months sees emerging standards for the combination of card read and PIN entry without specialist hardware.
Soft POS is important because it has applicability for lots of merchants' use cases: Embedded payment capability for retail staff who have tablets for managing stock queries. Delivery staff who could take payment on delivery. Back-up devices in retail outlets when the main terminal or landline goes down. Immediate capability for when a customer needs a new outlet somewhere or as part of a Disaster Recovery (DR) plan.
For acquirers, it means more card acceptance, and quick lead to live conversion, as well as value added services, a low-cost route into micromerchants and an economic solution for the NFP sector like clubs, schools, societies or community groups.
More places, more pay. Everyone wins.