Deadlines loom in the United States as credit network exclusivity is set to end next year.
Monica Kennedy, senior vice president and head of merchant services portfolio management at Bank of America, said the bank’s corporate clients are pivoting to meet the new logistical and technical challenges as a result of the Federal Reserve’s impending card-focused mandate.
“We’re hearing a lot from merchants that they’re really struggling to keep up with the complexities of the ever-changing payments landscape,” Kennedy said in an interview with PYMNTS.
Change Is in the Cards
Those rules, which take effect in early 2023, will allow/require merchants to choose between (at least) two unaffiliated networks for electronic transactions.
Legislation that would put similar processes in place for credit card transactions (through the latest Durbin amendments on Capitol Hill) remains an unknown at the moment.
“We’re all sitting back and wondering what’s going to happen [with the credit amendment] because it does impact the entire payments ecosystem, from the issuers to the processors to the merchants,” she said.
Many of Bank of America’s clients are facing digitization as a “must do” or “have to do” as they already branded cards for spring and fall 2023 releases.
In some cases, the changes are simple ones, said Kennedy. There may be people- and/or process-focused changes where a chargeback team may need to shift the timeframes in which they handle disputes. In other cases, the changes are technical, such as sending additional data elements within a transaction packet.
“This can add a lot of stress to merchants and their environments, and they need to assess if their technical infrastructure can accommodate those changes — and if they have the resources available to implement the changes,” said Kennedy.
Many merchants are facing budgetary constraints as they strive to meet timelines for card brand compliance.
Examining the Infrastructure
The urgency is there to take stock of the enterprise’s capabilities, she said, because there could be ramifications — including fines — for companies that don’t meet the new requirements and specs.
There are also a host of questions surrounding network tokens, digital authentication frameworks and 3DS credentials, she said, “[and] merchants are trying to understand what roles they play — how they will handle specific data elements, how to pass that data though, ingest it and store it.”
Beyond the card mandates, the 25-year BofA veteran also said that merchants want to embrace innovation that lets them offer customers the ability to pay by any mechanism they would like.
“We’re seeing huge increases in smartphone shopping and in digital wallets and with QR codes being used with marketing, and all of this is being tied to loyalty, pay by bank and real-time payments,” she said.
When it comes to QR codes, “do merchants enable the marketing aspect, do they tie it to loyalty, do they enable ordering and payments through QR?” she added.
There will likely be increased use of pay-by-bank and real-time payments options.
Complexity in the Mix
But with new payment efforts comes more complexity, said Kennedy, who added that merchants must mull whether they need to purchase additional hardware or software, and if they’ll have to partner with third parties or different processors.
The current environment demands that finance teams must be judicious as they manage capex spend. Security remains top of mind, too, said Kennedy, who added that companies “have to ensure that whatever third parties they bring in or whatever systems that they select do have the same level of commitment to cardholder and data security that the merchants do.”
As these enterprises juggle innovation with tighter budgets and check off the “must do’s” of new card mandates, Kennedy likened the process to “building and maintaining a Porsche on a bicycle budget.”
As she told PYMNTS: “Cardholders and consumers are driving the need for merchants to innovate … and enable customers to pay by whatever methods they prefer.”
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