The payments industry moves at such a rapid pace. It does not matter if you`re new to this space or a fervent observer for quite some time now. You have probably already realized that keeping pace with what’s happening in this continuously evolving landscape is no easy job.
The 2018 edition of the Merchant Payments Ecosystem (MPE) – held in Berlin last week – proved to be the perfect example. We had almost 3 days packed with sessions that explored current trends in the payments ecosystem and how they are expected to evolve. The adoption of new technologies and strategies, as well as opportunities and risks predicted to emerge were also top of the agenda.
For now, we have selected 4 main event takeaways that we consider crucial for present and future developments. Here they are:
1. PSD2 and GDPR set to change European payments landscape significantly
But what challenges must the industry overcome, in order to achieve this change? At a European level, this year is key from a regulatory perspective. Two equally important regulations, namely the Payment Service Directive 2 (PSD2) and the General Data Protection Regulation (GDPR) come into play. Despite being equally important, they seemingly go in opposite directions. The first requires banks to open customer data to third parties, while GDPR aims to impose rigid requirements on protecting that data.
Is regulation driving change in the merchant payments ecosystem? How to innovate payments in a complex regulatory environment? Is the industry aware of the inherent challenges and opportunities? These were only some of the questions under debate throughout the event.
• What is GDPR?
GDPR will come into force on 25 May this year, pushing businesses to increase the protection of personal data. How? The regulation aims primarily to put control back into EU residents` hands over their personal data and how it gets processed. Regardless of whether you are based in an EU member nation or not, your organization is still required to adhere to the GDPR if you process the data of anyone residing in the EU.
• What is PSD2?
In a nutshell, PSD2 is seen as a real game-changer in the industry. It requires banks to grant access to consumers’ account (XS2A) to third party providers (TPPs), that can initiate payments and source customer data in a secure way. PSD2 enables a lot of new companies to get into the payments space. Also, it will force existing players, including banks, to innovate and develop value added services, in order to stay relevant and competitive and provide an improved customer experience.
The industry has strongly focused on the implications of PSD2 for Open Banking (the principle whereby TPPs are able to access the customer account data held by the major banks). However, many industry commentators look at the idea of non-banks accessing your financial data with a critical eye. Such third-party access in a standardized format (via open APIs) could expose banks to increased risk of fraud and data breaches.
Combine this with a lack of public awareness and you might get an idea on why the transposition of PSD2 into national law is being delayed in 20 member states. Although the industry has been talking about it for some time now (and the law went live on January 2018), fully understanding it (plus its implications) is still a process underway. In this context, as highlighted during MPE, there is a dire need to educate industry participants, especially the consumers on such regulations via rich and accurate information.
2. Cryptocurrencies ≠ blockchain
• When crypto enthusiasts meet payment business representatives …
During the blockchain and crypto panel discussions, we learned about new cryptocurrencies for instant transactions, we took part in lively discussions on the differences between cryptocurrencies and blockchain (do not use them as synonyms, because they are not) and we`re still pondering on one unanswered (yet) question from the panel. Won’t GDPR make blockchain illegal because you can’t delete user data? Also, interesting point made by some panelists: merchants using blockchain payments will have their actual payments visible publicly. Who owns the data?
MPE has gained a well-deserved reputation throughout its many editions by keeping a good balance and diversity in terms of topics addressed and the range of points of view expressed. Such diversity became obvious during the crypto/ blockchain discussions, reflecting the entire industry`s current debate and attitudes, with each side casting a curious but frequently skeptical eye at the other.
• Bitcoin. Cryptocurrencies. Blockchain. These are not synonyms, as some event speakers clearly pointed out. Despite what many still believe, blockchain ’s usage goes beyond Bitcoins and cryptocurrency by creating an infrastructure to support smart contracts. Put simply, blockchain is a decentralized and transparent public ledger supervised by a network of nodes (or computers) executing economic transactions. While blockchain (financial but also non-financial) use cases are exciting to explore and research, it’s important to have in mind the gap between potential applications versus their actual rollout.
• The cooldown on the ICO market
Initial Coin Offerings (ICOs) are one of the hottest industry topics: it is an easy way to raise cash, largely unregulated. The conversation around it will probably not stop anytime soon amidst the latest rumors, panics, cryptocurrency news and blockchain projects. However, the current cooling off of this market could be an important step towards reaching an ICO context in which only the best-built coins are prone to succeed. Or where at least new companies brave enough to stand shoulder to shoulder with the heavyweights and challenge them every step of the way.
3. Artificial Intelligence (AI): the technology is there, but are we ready for it?
As new technology gets smarter and smarter, AI is being tested more often with payments as well, especially when it comes to customer interaction, fraud detection and improving the eCommerce experience. But with all the excitement regarding the potential of AI, questions and concerns still remain: what role do humans play? How to address data privacy? How can consent be managed in an AI context (GDPR anyone)?
4. eCommerce becoming mCommerce
As we`ve seen throughout the event, successful online business models are being quickly adapted or incorporated into mobile devices in order to fully increase revenue opportunities. It is now impossible to discuss eCommerce developments without mCommerce, as these two sectors have become so closely linked. The eCommerce and mCommerce services have become so dynamic that keeping abreast of the emerging trends is now a key priority for many industry players. The Internet of Things, AI, Data Science, Machine learning are only some technological factors driving this boom.
We truly enjoyed the event for its ability to bring such a great variety of professionals together, share best practices on burning industry topics and encourage further discussions. As a global business that specializes in payments, we are very pleased to see so much time dedicated to finding ways to address all the industry changes that are occurring simultaneously.
With the ever-deepening abilities of new technologies, regulatory updates and a fresh focus on customer experience, this year is going to be an exciting one which might just redefine the saying “money makes the world go round”.
Maik Bodden, Marketing Manager @ G2A PAY