Experts from the payments industry shared the virtual stage on the 27-29 of April 2021, to learn and debate what’s new in payments developments, securing transactions, and regulations. Since we are now witnessing a digital-first era where consumers expect smooth and secure shopping journeys, solution providers must efficiently deal with technical scalability, while hiding the payment complexity. Out of a comprehensive and diverse agenda, we have chosen the hottest topics that will surely be front-page information this year and beyond: Account-to-Account (A2A) payments, Buy Now, Pay Later (BNPL), and payments regulations.
Account-to-Account payments up and running, up and rising
The development of A2A payments is driven by an ecosystem formed of merchants, customers, regulators, tech innovators, and disruptors, as the speakers Marc Cregan from Paddy Power Betfair and Jordan Lawrence from Volt.io revealed. Either we are talking about B2B, B2C, C2B or P2P transactions, both domestic and cross-border, the next generation of payments is real-time and instant. Several benefits of this type of payment include richer outputs, real-time payouts (especially for the gaming industry), security and verifiability.
The seamless experience that A2A payments can offer regards a proper standardisation and interoperability that can be achieved by leveraging the full potential of Open Banking APIs. Methods like Sofort in Germany, or iDEAL in The Netherlands account for at least 80% of payments in their countries, UPI in India has become the most popular method within two years since the rollout, and PIX in Brazil is growing at a fast pace. Looking into the UK market, more than 2.5 million people use Open Banking to move, manage and make the most of their money, and there is a remarkable uptick in customer adoption there, which is believed to be driven by the merchants.
As regards the anti-fraud concerns, there are a couple of scenarios that need to be tackled, if bank account login details are stolen, for instance. More worrisome is the friendly fraud tactic that can affect the merchant: consumers can immediately withdraw the money from their bank account after making the instant payment.
Buy Now, Pay Later innovation asks for fraud prevention too
When it comes to innovation, customer adoption, future opportunities and the need for regulation, almost everything has been said so far. What has not been thoroughly debated across the industry is the fraud and risk that come along with BNPL services.
Apart from the unpaid or delayed loan risks and increased debts, payment fraud is also a high concern. Hubert Rachwalski of Nethone depicted several fraud vectors of attack that apply in the BNPL payments scenarios: account takeover, identity theft, and synthetic identity injection attempt. Although not all applications are subjected to a risk score check, reliable users’ identities are valuable for fraudsters. As well, a good customer account can be taken over and used on various platforms, which can damage the reputation of a company by revealing its unsafe environment prone to data breaches. These risks are challenging to meet, especially when new customers apply for these services, because in order to recognize the consumers’ real intention, collecting a lot of data is key.
How the payment Industry has adapted to PSD2
Speakers from Mastercard, Delivery Hero and Zalando revealed several updates regarding the market adoption, benefits, and challenges of PSD2 so far. Since 1 January 2021, when PSD2’s SCA came into effect in most of the European countries, many markets enabled a ‘soft enforcement’ for a smooth transition. Moreover, a lot of merchants, schemes and issuers have started to share data and their first results after the SCA implementation. Issuers have more data through EMV 3DS and are incorporating data into their authorization logic, while merchants are exploring further opportunities to better the customer experience, like exemptions or delegated authentication.
The bottom line here is that although PSD2 is essentially a law that regards 30 countries, the customer behaviour varies from one market to another, so the implementation process varies by timeline and methods. In some markets there is a hard push for exemptions, but less focus on educating the consumers, in others, the SCA goes all the way with the consumers that are familiar with the process and complies with it. And these different approaches are not easy to deal with for the merchants operating in multiple EU countries.
Closing remarks
In 2020, the payments industry observed the sea change and tried to quickly adapt along the way. In 2021, the payments and ecommerce players already know the impact of certain trends and behaviours, and they should be more than ready to prevent fraud, innovate and collaborate. So based on the knowledge that has been made available at MRC Virtual, here is what we should consider further:
Moreover, fraudsters have their own business models and economics. They create technology and software for malicious purposes, they have organized ‘personnel’ to distribute fraudulent tasks, they are able to delete digital footprints– all in all, it’s an expanded and quite organized industry. So having events like MRC Virtual is key for everyone to share insights and collaborate closely to fight fraud and invest in emerging payments.
About Anda Kania
Anda is doctor in Political Sciences, currently exploring her research skills to discover the latest trends in the payment and commerce industry. At the Paypers she is in the wonderful position to analyse the hottest topics, and to discuss them with thought leaders in order to get the pulse of the payments environment.
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