The payment industry, and online payments in particular, have evolved a lot in the last few years. How has online payment changed, concretely?
It is important to underline that online payment is the direct consequence of the digitization of every aspect of our daily life. Indeed, a lot of our daily tasks, for which we used to have to go to a physical place to do them, can now be done online. Payment has naturally followed this evolution and is now digitized.
What kind of role does authentication play in online payments and how has it evolved in the last few years?
Authentication is a core aspect of online payments because these payments happen without the physical presence of the payment card. Indeed, in the case of an in-store purchase, the customer is physically in front of the merchant and needs to enter its PIN code, which allows the payment’s authentication. But, at the start of the online payments, online authentication was not yet in place. Indeed, consumers only had to enter their card’s number to make an online purchase and that was not ideal in terms of security and payment guarantee. This is exactly why banks and schemes* put authentication systems, such as 3Dsecure, in place for online payments with bank card. These systems guarantee payments for merchants and protect consumers from potential fraud.
Now that authentication is up and running, digitized payments continue to evolve through digital wallets, such as Paylib, powered by Worldline, and ApplePay. Authentication within these wallets is either done directly through the smartphone, through fingerprint scanning or by entering a code.
How are consumers impacted by these changes?
Consumers have adapted quite naturally to the new consumption models and online payment facilitates these.
Regarding authentication, the experience gained from the 3Dsecure implementation has shown that it is crucial for issuing banks to guide their customers through these systems. That way, customers will have a clear understanding of these new systems and will adopt them more easily for their daily payments.
Digital wallets, like Paylib, can offer a smoother user experience than 3Dsecure but, so far, user enrollment has been slow and the actual adoption depends on the development of the acceptance network. That said, digital wallets are bound to be widely used in the future because it is a flexible solution that simplifies payments.
And what are the impacts on merchants and banks?
I believe that merchants are beneficially impacted by these changes. Indeed, all these authentication mechanisms for online payments guarantee these payments for them. Furthermore, the fraud responsibility is no longer with merchants with solutions like 3Dsecure. In the past, merchants carried this responsibility and they were directly impacted by the losses from these fraudulent payments. In addition, they even had to prove that a payment was fraudulent. Now, the cardholders have to prove that their payment method was used without their knowledge.
The benefits for banks are also linked to fraud. Indeed, with the help from these new authentication systems, fraud will be harder to achieve and related costs for banks will, therefore, lower. In addition, banks will be able to invoice these transactions, processed through 3Dsecure for example, at a lower price to merchants.
How does our solution Sips answer the issues previously mentioned?
Sips answers them on different levels:
- Authentication: 3Dsecure has been integrated in Sips since its launch. Merchants can choose to have it turned on directly during the setup of our solution. They can also manage this functionality; amongst others, in real-time.
- Digital wallet: Sips is compatible with all the currently available wallets, such as Paylib and MasterPass. Therefore, merchants are able to allow their customers to pay with their preferred wallet.
- Fraud: Sips also embarks functionalities for fraud prevention upstream of payments. This way, if a potential fraud is detected based on a certain number of parameters, merchants will be automatically alerted in order to take the necessary actions.
What major evolutions do you foresee for e-Commerce, m-Commerce and online payments in the next few years?
First of all, the separation, which existed in the past, between High Street retail and e-Commerce is slowly starting to disappear. Our solution is ideal in this setup as it takes this cross-channel business model into account. Besides, merchants will also need to invest in this new customer experience and imbricate their physical stores with their websites.
Mobile phones will also play a double role: first, as an online purchasing platform and, second, as a payment tool in physical stores, with the help of mPOS technology which can transform a mobile phone into a card reader.
We also expect the democratization of digital wallets in the near future and not just in its current payment functionality.
Finally, it is worth mentioning SEPA transfers because they are so far out the traditional bank card’s way. These transfers being irrevocable and less expensive for banks and merchants, they also deserve a seat at the online payment table.
Thank you for your time today, Matthieu. I will leave you with one final question: we live in a hyper connected digital world and, suddenly, you find yourself stranded on a desert island, which electronic product do you have to have with you?
My mobile phone because it is truly a digital Swiss pocket knife.
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Matthieu Bédard is Business Developer for Payment Acceptance in our Global Business Line Merchant Services and Terminals, in which he works alongside the Sales team to identify and define new functionalities and new offers for our payment solutions. He joined Worldline in January 2012.