The 2015 Tokenization And Loyalty Face-Off

Merchant interest in finding new and better ways to connect with consumers via gifts, offers, discounts and more is a key driver of payments innovation today. But Cayan CEO Henry Helgeson says that the “looming cloud” of EMV and developments in tokenization technology piques their interest in a single solution that helps them get the best of both worlds: state of the art security and the best of consumer engagement. Helgeson caught up with MPD CEO Karen Webster to talk about the feasibility of giving merchants that single platform that “eliminates the fuzziness” and how tokenization could propel a turf war when it comes to consumer loyalty.

KW: You and I were together a couple of weeks ago as part of a panel discussion at an acquiring conference. We covered a lot of ground with respect to the drivers and disruptions in payments innovation. I’d love to get your thoughts on what you took away from that discussion. What do you think is really driving the direction of payments technology today?

HH: That’s a great question, but it’s a very big question. Right now, I still think the same things that were valid 24 months ago are still a lot of the drivers. That is, merchants are still looking for better ways to connect with consumers with gifts, offers, discounts, coupons – all of those on paper and plastic are broken and it’s an opportunity for us to fix it. But we also have these other clouds looming over the industry – EMV and security. Somehow, all of this connects as we go out and work on the merchant’s countertop to upgrade it. All of these things come together at the same time.

KW: So what’s a merchant to do?

HH: There are a lot different answers to that. What we’re recommending to our merchants is that they need to get educated on these things first – what is EMV, what’s a good holistic approach to security, and what are some of these new solutions coming down the pipe? So for merchants to make better buying decisions they first have to understand all of this, and then they have to look at how they’re going to plan to implement all of these new technologies.

KW: So one of the things we debated as part of our discussion a couple of weeks ago was the prioritization of a number of these initiatives and this notion that, as you said, mobile introduces such an opportunity to reinvent the relationship with the consumer. At the same time, you’ve got the buzz saw of security and the liability shift facing merchants who really don’t know how to sort it all out. What are you hearing from them with respect to their direction and roadmap? 

HH: From our merchants, we’re finally starting to hear that they do have a direction. We’ve been pounding on the drum of sending integrated solutions now for a couple of years with our Genius platform, and merchants are starting to realize that an integrated solution like we offer, and like some of our competitors offer as well, is the future. We can go out and connect to the merchant’s POS system, take them out of scope from PA-DSS, secure them, give them a path to EMV, and at the same time enable them with NFC technology and allow them to have a path to upgrade to multiple other mobile payment solutions.

KW: So they are being driven to that particular conclusion because they want it all and in the simplest way possible?

HH: Well, I’ve got to say, most of our merchants don’t want it all or might not understand it all, but they want one piece of that. They understand that they either need an EMV solution or they need a way to better secure their countertop, or they’ve got to accept Apple Pay. What we’ve done is bundled it in the same solution.

Even though they may not understand all of the complexities around payments and the future of payments, we provide a solution that allows them to get all of that with a single buy.

KW: So there’s a mix of options available. There are any number of mobile payment solutions like Apple Pay, Google Wallet, PayPal and others emerging. Then there are a number of enabling technologies like NFC, HCE, QR codes, and who knows what’s to come. What’s your perspective on the winner?

HH: The way we position ourselves and our products is by understanding that we don’t have a crystal ball. We have certainly been fooled a couple of times by this changing mobile payments market, and what we’re trying to do is build a platform that’s flexible enough that we can do anything. Whether that’s a QR code on a consumer’s phone, or a QR code on a device or countertop, or HCE, or regular NFC or you name it, our job is to extract the complexity away from the merchants’ POS vendors and do the heavy lifting ourselves. So we have built a platform that allows merchants and POS vendors to get out of the fray and the fuzziness that is mobile payments and have a single solution.

KW: We’ve talked about this before – everything in payments seems to take twice as long and cost twice as much. From a mobile payment perspective, we’ve been talking about this for more than a decade. Do you think things will move faster now?

HH: I am optimistic that we’ll start to make the shift to mobile payments now in 2015, or at least get a toehold on mobile payments for the average consumer. But what I am not optimistic about is that 2015 is going to be the year where we grab all of this promise of offers, coupons, discounts and loyalty on a single path of your phone. The integration work that needs to be done for that is still pretty complex, and it’s going to take awhile to get there.

I think this is the year we’ll see people on the bleeding edge start to implement that, but I don’t think that will be mainstream. And I think that’s the big driver of mobile payments.

You and I have talked about this before where getting a credit card onto a phone at some point seems like a parlor trick, and the real value is being able to drive consumer behavior and message them on individual offers to their phones.

I’m not sure 2015 is going to get us completely there yet, although we will start to see some solutions that do.

KW: So a question on that – I think there’s the whole notion of tokenization and what Apple Pay has done to bring that to the forefront of an innovative solution and also what merchants understand it to be. I’ve also heard merchants talk about how that can get in the way of deploying some of the loyalty solutions important to them. Do you have a point of view on that?

HH: Defining tokenization, we’re really talking about more the Apple Pay solution here and not necessarily plastic card tokenization and security that goes along with that point-to-point encryption. But you’re right, this tokenization that anonymizes the consumer does make it a little more difficult for merchants to offer their own loyalty programs because those payments credentials can change. That does make it a little more challenging.

I don’t know whether or not that is actually going to benefit the issuers in being able to do issuer-based loyalty programs that they control – the consumer is not anonymous to them and neither is the merchant. So it’s going to be a little bit of a turf war here too with tokenization to see who really owns that loyalty product with the consumer.

KW: I agree. As is the case in a lot of situations, it’s not the technology that holds us back. It’s sorting out some of the business issues and getting those things squared away for us to move forward. So we’re very early into the year 2015 – what do you think the most significant accomplishment we’ll see in mobile payments will be this year?

HH: From what we’re seeing from our seats, it’s surprising to see the traction that NFC has had in January of this year. I’ve been very bullish on NFC for the last 12 months, and I think I was even surprised to see the number of consumers that actually have an iPhone 6 and the contactless payment volume we’re seeing on the Genius platform is surprising to a lot of us here. As the year progresses, we’ll get more clarity around what will happen with Softcard and what Google may do down the road to enter the market – there’s still a lot of NFC-enabled Android phones out there. As we upgrade to EMV, we’ll see a lot of NFC readers on merchants’ countertops, and I think it will be a very interesting year for NFC. It will also be interesting to see how some of these other technologies like QR codes or beacons or other empty hands type transactions work out to compete with it.

Henry Helgeson
CEO, Cayan

As CEO and Founder of Cayan™, Henry Helgeson is responsible for driving the future vision of the company, ensuring that Cayan remains at the forefront of payments innovation. Henry is involved in numerous industry associations and is an active member of the Electronic Transactions Association’s (ETA’s) Mobile Payments Committee. He has spoken at numerous events and conferences including ETA, Money2020, RSPA Retail Now, SXSW and PYMNTS.com. In 2012, he received the ETA Member of the Year Award, recognizing his contributions to the future success of the industry and he has been named to the Boston Business Journal’s (BBJ’s) “40 under 40” list.

To listen to the full podcast, click here.