The conventional wisdom may have been that once consumers could get back into the physical world, payments behaviors would revert to pre-pandemic norms.
That hasn’t been the case.
In fact, we’ve seen an even greater embrace of digital and digital-first experiences that consumers want, whether they’re shopping inside a store or they continue to shop online.
But no matter where consumers are transacting, a few overarching principles still reign, according to Diane Offereins, executive vice president, president of payment services at Discover Global Network. As she put it, “Form factors never die.”
There’s proof in that declarative statement to be seen with near field communication (NFC), which Offereins said, “What seemed like a good idea at the beginning,” back four decades ago, never really took off. It took marquee names like Google and Apple to take that technology and make it their own. And voila: NFC was back, decades after it never really was … here.
The 2000s were about plastic terminals, and the early years of the millennium were about mobile phones and apps — and now we’re onto a new decade that promises still more transformation to come. Some consumers want to use digital wallets. For others, plastic still holds sway. Still others have no problem filling in online forms with their data.
Offereins said that when all is said and done, consumers will choose the payment methods that offer up what’s important to them. In the U.S., she said, rewards — cash back and loyalty points — matter a lot. Less so in Europe. Financing over time? Well, that’s picking up steam everywhere, and so are peer-to-peer (P2P) payments.
No matter the payment types, Offereins said, interoperability is becoming increasingly important. There’s some precedence here, as credit cards offer a best use case example of interoperability around the globe. A consumer can conceivably travel anywhere in the world, check into a hotel, wield their card, pay for the room, pay for room service, travel around the city and encounter no real problems in pursuit of frictionless commerce.
“Maybe currency conversion might stump you for a second,” she said, “but then you pretty much figure that out.”
There’s been one notable difference when it comes to plastic: The credit card/debit card infrastructure was built through the decades with interoperability in mind. Other payment schemes have not developed that way — and in fact grew from their roots as geographic solutions, where interoperability was never a key concern.
Beyond credit cards, in the recent past, larger financial services players and FinTechs together have created closed-loop systems. The network effect evinced by Discover, she said, “acts as a sort of governor in the middle” that arbitrates rules, dispute times, fraud controls and other features. Compliance remains a key concern.
For Discover, with partnerships spanning dozens of payments networks, she said, “It’s amazing how many things we’re supporting these days.” Those partnerships are critical, she said, as payments ecosystems are not forged easily. It takes time and money, and the technology stack gets ever-more complicated.
“We’ve figured out how to help each other,” she told Webster, “and share [payments] acceptance, share technology, operating rules and best practices. … It’s a co-op in the best sense of the word.”
Looking ahead, some notable shifts are on the horizon, she said. FedNow will help move the needle for real-time payments, though RTP has been around since 2017. The part that’s still missing is the seamless authentication that does away with the parade of warnings and prompts that have been mainstays of mobile payments.
“FedNow,” she said, “will be a big step forward for everyone … which will meet consumers where they want to be.”
The 2020s and beyond may well prove to be the years where connected devices — and by extension, connected economies gain firmer footing. Right now the landscape is fragmented, depending on where you look. Infrastructure varies greatly globally, and there are always the questions surrounding consumer-permissioned data, authentication and whether standards boards should govern it all — not to mention who will manage the token. Get it right, and the super app is on the horizon.
“There has to be a business model where everyone has to come right to a central point and allow consumers, through APIs, permission into these things,” she said. “Data moves out and credentials move in.”
Asked about what’s next, with the experience of decades in hand, Offereins said, “Ultimately the consumers will make the decisions — and define what works for them and what doesn’t. Meeting a consumer where they want to be with the kind of technology and experience that they want is the most important thing.”
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