NFC. HCE. EMV. “B4B” payments. What will be the next payments trend or fad? To get their perspectives on this year and predictions on next, PYMNTS talked to 12 innovators on what has most impacted their business in 2014, and what will and won’t be dominating payments conversations in 2015. Find out what they had to say.
@Pay’s Director of Strategic Partnerships, Manny Ju
What is the one thing that happened in 2014 that you didn’t see coming but has had a most profound impact on payments and your business?
Call me Old School, but I truly did not expect Bitcoin and other crypto-currencies to hit main stream so soon. I still trust crypto-currencies no more than I trust mortgage-backed securities or any other non-regulated financial instrument. But sooner rather than later, the need will come to evolve our product to support crypto-currencies as payment. Fortunately, here at @Pay, we are payment-medium agnostic. We will work with any payment gateway that supports crypto-currencies. We will merely need to adapt our own systems according to the published web services of those gateways.
What is the one thing that happened in 2014 that you think will most shape the direction of payments in 2015?
Payment tokenization is something currently in the background that will emerge to the limelight in 2015. High profile data breaches reported in mainstream media throughout 2014 has brought consumer sensitivity of e-commerce security to its highest level. So far, discussions on tokenization have been confined predominantly to the Payments industry and Apple Pay affecionados. I predict that increased consumer awareness and demand for better security models will open up huge opportunities for technology solutions like @Pay’s and others’ that provide payment tokenization to the masses simply and cost effectively.
What is the one thing that we won’t be talking about a year from now that is totally dominating the payments conversation today?
Conversion to EMV in advance of next October’s deadline is a hot topic although maybe not necessarily “dominating” the conversation. Millions of merchants nationwide are affected not to mention even more credit card holders. But just like preparation for Y2K, and more recently the conversion of television broadcast from analog to digital, this topic will fade to the background after next year’s deadline.
41st Parameter, a part of Experian’s Global Risk Strategy Director, Mike Gross
What is the one thing that happened in 2014 that you didn’t see coming but has had a most profound impact on payments and your business?
In the fraud prevention space, we typically have the luxury of seeing major changes well in advance (whether they be regulatory-driven, new product-focused, or an emerging threat), so surprises are fortunately fairly uncommon. However, the one theme that we continue to see across the payments landscape is the incessant focus on consumer experience and reducing sales friction. Depending on your business, that could mean significant changes in fraud and risk models to enhance revenue and limit potential customer insult at the expense of slightly higher fraud losses. This is especially true in the mobile channel, as consumers are increasingly turning to their mobile devices for traditional online orders. So businesses must have effective strategies in place to ensure that consumers have a seamless purchase and user experience in-app, online, and in-store to maximize revenue. That can present challenges for fraud controls that were developed independently for each channel, so it’s important for merchants to consider fraud solutions that can effectively evaluate risk and enhance revenue across all channels. Our business has been profoundly impacted by this push, as clients expect to have a single cross-channel view of their customers (including loyalty programs and call center customer servicing) with high fraud detection and minimal false positives impacting their aggressive revenue objectives.
What is the one thing that happened in 2014 that you think will most shape the direction of payments in 2015?
Several high-profile merchant and financial institution data breaches hit the wires in 2014 and undoubtedly impacted the retail industry’s perspective around the need for EMV, tokenization, and enhanced information security protections around payment information and consumer data. While there have been significant merchant and processor breaches in the past, we have never seen a year like 2014, where they just kept coming, month-after-month, hundreds of millions of compromised cards and identities. Consumers are numb to new breach notifications, issuers are constantly challenged with the re-issue debate, and major retailers are scrambling to ensure that they have adequate security controls against the same type of malware and attacks that led to most of the successful POS breaches in 2014. This continuous cycle of data breaches has both reinvigorated discussions about the need for chip-and-PIN, card tokenization, and similar POS efforts and highlighted the urgency of the migration. October 2015 is just around the corner and the migration requires significant changes to terminals, issued cards, and consumer behaviors, so organizations who are just starting to plan for the change (or worse, have still yet to prioritize the effort) will likely find themselves struggling to meet the deadline and at heightened risk of a breach event affecting their company.
What is the one thing that we won’t be talking about a year from now that is totally dominating the payments conversation today?
Apple Pay is a well-designed, consumer friendly, technically sound, and security-conscious payments application that finally brought mass-adoption to a digital wallet. Based on the huge Apple following alone, there was bound to be significant traction in consumers both testing the service for the “cool factor” and to start leveraging their mobile device as a payment mechanism for an increasing percentage of POS and app-based purchases. Apple Pay purchase volume is still a minuscule percentage of POS transactions across the industry, but there are some great success stories where certain tech-savvy or uber convenience driven merchants saw 1%+ of users pay with this new method. Any new Apple service is bound to make waves in the industry — but aside from major breach news, Apple Pay has dominated the headlines late in 2014. The good news for 2015 and beyond is that Apple Pay will likely continue to grow quickly as a more convenient and secure payment method, especially as additional issuers come on-board; but its progress will likely be more of a page two story as its novelty wears off with consumers and a well-built, easy-to-use mobile wallet becomes more of the norm in payments.
Aurus’ Chief Strategy Officer, Bob Wesley
What is the one thing that happened in 2014 that you didn’t see coming but has had a most profound impact on payments and your business?
POS data breaches at major retailers and restaurant chains occurred at an alarming rate throughout 2014. Concern around payment security for the first time has been elevated to the CEO and Board level of top retailers. The card associations have used these events to rally support for EMV. In 2015, Aurus will be experiencing tremendous demand from retailers for a Security Solution to protect against POS malware attacks plus ensuring their stores can accept EMV payments.
What is the one thing that happened in 2014 that you think will most shape the direction of payments in 2015?
Apple’s announcement to launch Apple Pay was a major event in 2014. The announcement has created renewed interest in NFC technology. However more important, Apple was able to successfully rally the support of about 500 banks and all major credit cards, while Google in the past had stumbled. While banks are behind Apple, top Retailers such as Walmart, CVS, Rite-Aide and 7 Eleven have rejected the product. It will be interesting to see how these Retailers and Samsung will respond to Apple Pay’s initiative in 2015.
What is the one thing that we won’t be talking about a year from now that is totally dominating the payments conversation today?
By this time next year, Square, Inc. may very well have been acquired or ceased business operations. It is well documented that Square has stumbled in 2014 starting with financial problems reported by the WSJ in April 2014 to the embarrassment of removing the Square Wallet from the APP store. During the last half of 2014, there have been on-going rumors of Google, PayPal and now Apple being potential acquirers of Square’s business.
Bell ID’s Global Head of Sales, Martin Cox
What is the one thing that happened in 2014 that you didn’t see coming but has had a most profound impact on payments and your business?
The speed of tokenization adoption and the interest this has generated amongst issuers who were not previously looking at HCE solutions has been impressive. We knew that tokenization was important in securing mobile payments and have incorporated this functionality in our Secure Element in the Cloud solution for some time. We believed that banks would come to realize the importance but the impact of Apple Pay in conjunction with the services offered by the card schemes and the release of clear specifications from EMVCo has been dramatic. Having already implemented such solutions in 2014 and having a proven product available in market has generated a lot of interest in Bell ID and we see this as an exciting opportunity to share our experience to those who are new to this concept.
What is the one thing that happened in 2014 that you think will most shape the direction of payments in 2015?
The launch of Apple Pay was the most newsworthy item of note in the payments world in 2014. True to Apple philosophy they took existing standards and functionality and wrapped it in a great user experience that generated huge attention in mobile payments and will shape the direction for many in 2015. Giving such attention to tokenization ensures that this will be the subject of discussion at many conferences in 2015 and the functionality that will gain most attention and market activity. I believe we’ll see other Token Service Providers enter the market in 2015 and challenge the position of the card schemes who in the Apple model have dominance today. This will enable banks to bring together their HCE and Apple strategies together with a single tokenization solution. I believe many will decide that the schemes are not the most cost effective providers for this service, particularly if they have a large “on-us” transaction model. As the schemes add solutions to their service provision portfolio and the processors move into tokenization, I think this will be a key area to watch in 2015.
What is the one thing that we won’t be talking about a year from now that is totally dominating the payments conversation today?
I think we will see a huge reduction in the ‘noise’ around the security of a non-SE mobile payments solution going away. Today, there are many with a vested interest in the TSM/SE model but as the banks demand the flexibility, time to market and cost profile of an HCE solution, these vendors will bring their own HCE solutions to market and the debate on security will subside. Already, I believe that this is a dramatically over emphasized concern considering the security that tokenization brings and is only being pushed so hard by those with another agenda. By the end of 2015 with many full scale production roll outs of HCE solutions in market, there will be no need for further debate on this subject.
Brighterion’s Director of Operations and Strategy, Thomas Rand-Nash, PhD
What is the one thing that happened in 2014 that you didn’t see coming but has had a most profound impact on payments and your business?
We assumed that data breaches would become more prevalent this year, but no one could have predicted the size and scope of the businesses and customers affected. As a result, we at Brighterion have expedited our product offerings focused on rapidly identifying data breaches and identifying breach point(s). If recent trends of larger breaches at more varied businesses continues, the business case for adoption of intelligent real-time solutions like ours becomes stronger, even for smaller businesses who want to avoid the brand damage accompanying data breaches.
What is the one thing that happened in 2014 that you think will most shape the direction of payments in 2015?
The number and extent of data breaches in 2014 will cause retailers large and small to rethink all aspects of their strategies with respect to payments; from how soon they make the switch to EMV, to the fraud detection and prevention solutions they incorporate, to whether or not they decide to enroll in insurance to protect against cyber threats and data breaches.
What is the one thing that we won’t be talking about a year from now that is totally dominating the payments conversation today?
Apple Pay is currently dominating the conversation within payment circles as a new and shiny technology. However, given that iPhones only represent about 15-20% of the total smart phone market, “Apple Pay” as a stand-alone topic will fade from the spotlight a year from now. If Google were to adopt the same level of tokenization as Apple Pay however, then the conversation about mobile payments in general will grow in size and importance.
CyberSource’s Senior Vice President, Andre Machicao
What is the one thing that happened in 2014 that you didn’t see coming but has had a most profound impact on payments and your business?
Was anything a complete surprise? Not really. But, there are certainly a few trends that warrant attention as the digital economy continues to reshape customer expectations, competition, and associated payment operations. The obvious dynamic everyone talks about is the growth of mobile and cross-channel commerce. However, cross-border commerce, growing at a rate of 26% worldwide (OC&C Strategy Consultants and Google cited by yStats.com), was also a strong force in 2014 and will continue to reshape business and payment operations in 2015 and beyond. The digital economy has created a world marketplace that makes it easier than ever before to engage new customers, while also increasing domestic competition as international competitors enter local markets. Business are being driven to support both omni-channel and “omni-region” operations in order to compete. Whether entering one or many countries, merchants are investing their time and resources to better understand local market needs and nuances. In fact, a recent CyberSource survey of European C-level executives indicates that 86% see international expansion as a top growth path for their company.
Payment management appears to still be one of the most critical factors for the success of retailers’ global expansion initiatives. Our survey also reveals that over 50% U.S. merchants sell cross-border, with larger merchants having approximately 20% of orders originate outside of the U.S. The ability to localize checkout effectively and efficiently, deal with local currency and tax presentation, offer the optimum mix of preferred payment methods and plans, and manage fraud successfully all have clear implications for revenue generation through their effects on market reach and sales conversion. The ultimate goal is to get to market faster, sell safer and expand with confidence.
EVO Payments International’s SVP, Peter Osberg
What is the one thing that happened in 2014 that you didn’t see coming but has had a most profound impact on payments and your business?
Although we’ve been planning for the shift to EMV in 2015, what we didn’t expect was that so many software integrators would wait so long before beginning the process to achieve EMV compliance. As a result, we’ve concentrated a large portion of our resources on scaling to meet this global demand in a shorter period of time. To help achieve this, we’ve introduced a new pre-certified EMV SDK (EVO Snap* Commerce Driver™) that allows software developers to add secure EMV global transaction processing to their Point of Sale (POS) applications. Like a printer driver, the pre-certified EMV SDK installs alongside the software application – adding EMV transaction processing to Windows or iOS-based POS systems – allowing software developers to quickly address EMV compliance requirements.
What is the one thing that happened in 2014 that you think will most shape the direction of payments in 2015?
We have found that the majority of software developers – both card-present and card-not-present – are expanding their boundaries across global borders. As a result, solving for global omni-channel payment acceptance is one of the biggest demands we’ve seen this year and is sure to shape the direction of payments in 2015.
What is the one thing that we won’t be talking about a year from now that is totally dominating the payments conversation today?
It feels like counsel is leading the witness to say Apple Pay. However, we believe the prevailing theme is broader than that. The payments conversation this year has been dominated largely by U.S.-only payment innovations. And, with approaching EMV deadlines driving a reterminalization of U.S. POS systems, the conversation on EMV and related topics – including chip and PIN and contactless payments – is sure to continue well into 2015. As these systems normalize across global markets, we expect to see the conversation shift from U.S.-only single-service solutions (like Apple Pay) to more expansive global solutions (like cross-border payments, wallet-as-a-service, global marketing and data services).
FIS’ EVP North American Retail Payments, Bruce Lowthers
What is the one thing that happened in 2014 that you didn’t see coming but has had a most profound impact on payments and your business?
Probably the single event that no one could have predicted was the impact the Target breach has had as a catalyst in bringing Fraud, EMV and Tokenization to the forefront – not only to issuers and merchants but also to consumers. Since the beginning of 2014, there has been a merchant breach every month – not only have sales been impacted for many of these merchants, but consumer concern has moved issuers, brands, and the entire payments ecosystem forward at a much faster pace than prior to these events taking place. The byproduct of the breaches has accelerated our Fraud, EMV and Tokenization efforts on a number of fronts – from educating, training and certifying our credit, debit, ATM and prepaid clients, card production and getting our NYCE® Network ready.
What is the one thing that happened in 2014 that you think will most shape the direction of payments in 2015?
The other event that has and will continue to have a profound impact on shaping payments is the launch of Apple Pay. The marketing muscle and consumer awareness that Apple brings forth is again a major catalyst in further shaping payments technology – while many talk about the technology aspects including tokenization and adding a new level of security for mobile at the POS (mPOS), card-not-present and in-app transactions, the real story for me is Apple opening the door to a new business model and getting the traditional players to agree to a new revenue share. It remains to be seen how fast consumers will ultimately adopt but look for more creative deals to unfold in 2015.
What is the one thing that we won’t be talking about a year from now that is totally dominating the payments conversation today?
That is a very interesting question – a couple of things come to mind, but most notably is would be the conversation surrounding “NFC”. There is always a topic like “Big Data” every year that the industry obsesses over until the next hot topic. NFC was declared dead by many to start 2014 then resurrected by the Apple announcement, I think it will come to pass as one of many options available to consumers it was never an all or nothing discussion.
Mahindra Comviva’s Sr. VP & Head of Mobile Financial Solutions, Srinivas Nidugondi
What is the one thing that happened in 2014 that you didn’t see coming but has had a most profound impact on payments and your business?
While HCE was an expected move, it was assumed that the third party TSM’s would be replaced by third party TSPs (tokenization service provider). It was however not expected that the card schemes would launch their own tokenization platforms. This will make it easier for Service Providers to leverage the existing relationships and for platforms to pre-integrate thereby reducing the time to launch for the service.
What is the one thing that happened in 2014 that you think will most shape the direction of payments in 2015?
Host Card Emulation is here to stay. Traditional NFC using SE for contactless proximity payments had too many challenges which HCE has resolved. The tokenization service offered by card schemes would enable Financial Institutions to launch NFC Wallets by simply working with a mobile wallet platform provider.
What is the one thing that we won’t be talking about a year from now that is totally dominating the payments conversation today?
Card provisioning on the secure element would be dead by next year. Even in case the Service Provider chooses to use the hardware based secure element, they would start using tokens rather than provisioning card profiles on the SE.
PwC’s US Financial Services Partner, Drew Luca
What is the one thing that happened in 2014 that you didn’t see coming but has had a most profound impact on payments and your business?
Technology obstacles, the requirement for ubiquitous merchant acceptance, and the lack of a sufficient consumer value proposition are among the issues that have so far prevented wide-spread adoption of mobile payments in the United States. Despite the introduction of a number of solutions from both established and emerging providers, mobile payments have still not produced the clear and compelling business case necessary to shift consumer behavior dramatically.
While recent announcements have provided solutions focused on customer experience and payment security, results during the early holiday shopping period still point to a long adoption cycle. Moreover, while the outsourcing of the nuts and bolts of payment processing to mature industry partners and the leveraging of existing POS contactless technology has facilitated the relative ease of acceptance, a clear winner still hasn’t emerged. In order for mobile payments to become ubiquitous and to truly catch on, the solution(s) will need to be device agnostic and be able to support large and small merchants alike.
One of the solutions recently announced has created an efficient way to scale quickly in the rapidly-growing mobile payments market and even marginal adoption will spur industry growth and help continue the drive towards wide-spread consumer usage. For the players who have chosen to not partner, or who have developed their own networks outside of the traditional rails, the stakes to stay competitive are high. These companies will need to reassess their market strategies based on the success – or failure – of these other mobile payment solutions. The pressure is now on incumbents – networks, processors, etc. – to leverage the momentum that has been established and use this limited opportunity to introduce solutions of their own. Interoperability and ubiquity – two things that we are accustomed to – are tablestakes in this game.
What is the one thing that happened in 2014 that you think will most shape the direction of payments in 2015?
While security has always been a big concern for payments players, the continued security breaches at major players in 2014 have spurred additional support and interest in EMV and, in particular, Chip and PIN solutions. The network EMV mandates were always known, but the 2014 events and the subsequent marketplace reactions, including the ‘BuySecure’ executive order, have made issuers and merchants alike focus significant attention on implementing EMV, with some believing that the technology represents a “silver bullet” for payment security. In 2015, we will continue to see a focus upon payment security and, while issuers and merchants will scramble to meet the network deadline, they will also likely re-evaluate their strategies and focus on other security aspects such as tokenization and end-to-end encryption, forcing significant infrastructure investments.
It’s important to note that the recent announcements in the payments industry clearly aren’t the destination – rather, they represent early steps in a much, much longer journey. In 2015 and beyond, expect to see merchants leverage the successes of others to bring the payments capabilities into their own commerce experiences through mobile solutions that will begin to incorporate payments within the experience. For example, consider a food service merchant that allows you to place an order through a mobile app, pay for it within that app, and have it ready to pick up at the counter or drive-thru window when you arrive without the need to interact with a human other than to pick up your order. Also, expect to see technology providers move more towards a next generation mobile POS that can leverage existing tablet and smartphone capabilities to provide solutions to merchants. Also expect to see other technology companies push into this space as well as incumbents (e.g., networks, processors) begin to provide competing solutions that are device agnostic.
What is the one thing that we won’t be talking about a year from now that is totally dominating the payments conversation today?
In the coming year, we will likely see both the emergence of additional options as well as the fading away of some of the earlier entrants as new offerings capitalize upon the successes of those that came before while adjusting for the failures. Many of the existing players have struggled due to the lack of sufficient differentiation across their network of suppliers and/or consumer unwillingness to adopt. The introduction and approach of solutions that play along with traditional players will result in more challenges for these solutions. Unless there is a revolutionary change with a strong reason for adoption, these solutions will be only used as examples in the payment conversations.
ThreatMetrix’s Chief Products Officer, Alisdair Faulkner
What is the one thing that happened in 2014 that you didn’t see coming but has had a most profound impact on payments and your business?
“I’ve been in cybersecurity for a long time but even I was shocked by the breadth and depth of companies that were breached in 2014. It was a “Who’s Who” of major banks, e-commerce merchants, healthcare providers and others totaling hundreds of millions of usernames, passwords and credit card details. As a result, ThreatMetrix has an 100% increase in account takeover attacks. Usernames and passwords in mobile wallet is now a bigger target than the credit card details themselves.
What is the one thing that happened in 2014 that you think will most shape the direction of payments in 2015?
“Without a question, I’d point to Alibaba, their IPO and China’s November 11 Singles’ Day. A single company — Alibaba — achieved more revenue on a single day — $9 billion — than the entire U.S. economy generated during the Black Friday – Cyber Monday holiday season. What does this mean for merchants, card brand brands and technology companies? Chinese mobile-first millennials are shaping the way we all think about payments in 2015 and beyond.”
What is the one thing that we won’t be talking about a year from now that is totally dominating the payments conversation today?
“Apple Pay. It’s a credit card token on your mobile. Is it going to lead to increased purchases in-store? No. On the contrary , technologies like Touch ID and frictionless persona authentication applied to the web and mobile channels can dramatically increase convenience and payments volume.”
Traxpay’s CMO and Senior Vice President, Product Management, David Desharnais
What is the one thing that happened in 2014 that you didn’t see coming but has had a most profound impact on payments and your business?
It was not a single event, but a series of related events throughout 2013 and 2014 that is causing a profound and seminal shift in the B2B commerce landscape. It is the combination of B2B commerce networks and payments, and the ability to leverage value-added financial services related to payments across the network – such as dynamic discounting, supply chain financing, factoring, and more. It is becoming the competitive differentiator for B2B commerce networks and their customers.
Witness Ariba, and its offer of AribaPay via Discover, which just recently surpassed the $1B payments processed mark. Likewise, Basware with its recent announcement of Basware Pay with MasterCard, and its extension into Supply Chain Financing. SAP also made a similar move with Visa to offer invoice payments to its multiple millions of ERP users. This is just the tip of the iceberg, and many more similar announcements are in the works.
It is a clear indication of payments or “compensation” being at the crux of a broader set of strategic tools now being offered to the small “b’s” and large “B’s” in the B2B equation, and a fundamental shift whereby supply chains could more easily collaborate to higher and better mutual business outcomes.
Think B4B instead of B2B. Big difference. What I think surprised a lot of people is how fast it this came on, and how quickly it was adopted, and how this is impacting the social fabric of B2B commerce globally. As a dynamic payments provider that connects the worlds of transaction banking, data, and B2B trade, this is right in our wheelhouse, and the timing is perfect.
What is the one thing that we won’t be talking about a year from now that is totally dominating the payments conversation today?
Arguments surrounding the demise or viability of Apple Pay. For the mobile-enabled consumer payments set, Apple Pay will be ubiquitous as the preferred method of payment for those who are inclined to pay via a mobile device. Apple wins. Game over. Now…how Apple Pay or a derivative will impact B2B in the future will be an interesting discussion for 2015 and beyond.
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