Balancing authentication and frictionless payments as Open Banking and Digital Identity make waves

Next Gen Insights | Nick Telford Reed |
31 October 2019

Following on from the Q&A with Nick Telford-Reed prior to Money2020 Vegas, where he shared his thoughts around the current payments trends and the event agenda, we wanted to catch up with him on the final day of the event, to see if there had been anything that surprised or inspired him.

1. You have attended both Money2020 USA and Money2020 Europe. How do you find the two events compare?

While I believe that the US event is still bigger, I find there is more variety in the debates that go on at Money2020 Europe, meaning you get more diverse points of view, both in content and from panel speakers. This may simply be attributed to the fact that Money2020 Europe consists of attendees and exhibitors from a whole region who are not afraid to express differences in opinion, while Vegas is focused mostly on just the US region, with a handful of neighbouring Canadians who are too polite to disagree anyway.

2. In your previous blog, you mentioned looking forward to seeing the debut of new products and exploring new points of view in unexpectedly interesting sessions. So, what caught your eye?

One very interesting product that caught my attention was from a company called Applause, who can create a testing infrastructure that injects real payments into your payments system. I’ve not seen something like this productised before – it’s really interesting because instead of having to rely on test cards, or a handful of test injectors, they’re relying on crowd sourced “real” individuals and their own, real payment instruments, so you get much better real-world coverage.

I didn’t see any new payment products this time that made me stop and stare. Nor have I been aware of any major launches. The focus was more around direction of travel – crypto had very little debate and there was less about blockchain. Everyone is still waiting for that big use-case, I stand by what I said in my previous blog – we’re all still waiting for the moment of “blockchain supremacy”.

In terms of the positives, the Financial Data Exchange and Open Banking initiatives are really interesting to me. A lot of the stands at the event were focused on identity and authentication, which is hardly surprising as this topic is at the very heart of payments, but it seems the debate has moved to identity, biometrics, authentication and risk management. I think that recognising that identity is at the heart of payments is going to drive the next cycle of developments in the industry – how do you balance identity (who are you), authorisation (what can you do?), and authentication (is it really you?) with friction and consent?

3. There were a lot of stats being presented in each of the sessions. Did any of them take you by surprise?

One session quoted that “98% of real-time payments go through JP Morgan”. That is an astounding figure and speaks to an almost certainly unhealthy a level of dominance in the US market at this time.

In the Idemia session, the speakers stated that they are the leading drivers licence provider in the US, responsible for 80% of the market, and they thought majority of licence holders would have digital or mobile version of their licence inside of 2-3 years.

Another interesting stat was that “77% of consumers in the US are using mobile payments” to complete some transactions. That is ¾ of US consumers. So now that mobile payments have left being an edge case long behind and are moving toward ubiquity, it’s time that mainstream retail experiences start to meet this reality. When looking at alternative payments, something I don’t think is there yet but is of interest is “Libra”. There was a lot of talk about it. I think Libra is something we’ll be seeing become a reality in 2021 and 2022, but it’s an open question as to whether it achieves the scale and success that Facebook are looking for.

4. What are your overall takeaways from the event?

Open Banking is a big focus for the US payments industry. So, whether you are a merchant or a payments provider, you need to be thinking about what your responses to the Open Banking initiatives are going to be – what products will you build and how will they serve your customers’ needs? My instinct would be to closely examine what economic and feature improvements consumers will demand in order to move away from card and cash, so that I could build those into my products right from the start and drive adoption.

Everyone agrees digital identity is important, but the question on if it should be centralised or decentralised, and who provides it - the government, your bank, the tech giants or yourself - are highly debated and open questions, which the industry will quickly need to provide answers to.

Nick Telford Reed

Consultant

Nick is a passionate and award-winning technology innovator who has a strong focus on ensuring great customer experience. For close to two decades, he has worked to develop compelling visions of the future, to build strategies to help businesses achieve their goals. When he isn’t consulting, Nick can be found spending hours reading PSD2 drafts, asking waiting staff about the model number of their mobile POS, mountaineering, planning his next travel adventure or running around after his four kids.

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