The Past, Present and Future of Payments - What does the future hold for payments?

These developments - experienced over the past two decades - are reflected in a three-interview series on the Past, Present and Future of Payments. In part I of this series Ralf Gladis takes a close look at the payment industry over the past 20 years, the key drivers for change, and the main challenges with payment options; in part II, he talks about the payment industry today, who are the real innovators of today’s payment scene, and what are challenges the payments industry currently faces.

What do the next 5 years, 10 years & 20 years of payments hold for us?

The Internet of Things (IoT) is fast becoming a reality around the world. Small and large devices will process payments for us. Our cars will automatically pay for fuel and parking fees, our smartwatches will pay for taxis and our smartphones will prove to be a universal tool to buy and pay everywhere. Payment will have to become a silent, smooth and automatic process. Only payment methods that support this will have a future. That does not mean, however, that the world needs new payment methods. We need established payment brands that consumers trust, as handing that process over to our devices will be a big change in consumer behaviour. New payment brands with no history or trust would keep consumers from embracing new technology and would slow the process down. Established brands will probably make the decision easier.

Technology is another reason to stick with current payment schemes like cards, e-wallets and bank transfers. Automatic processing requires many features that only a few payment systems support. Credit cards and e-wallets are most flexible and powerful. Merchants can first reserve a certain amount of money on a card – that is called authorisation- and, if necessary, that authorisation can be increased. For instance, if a hotel guest decides to keep his room for one more day or if a merchant could only deliver its goods with partial deliveries, credit cards and some e-wallets allow partial captures of the money. That is the moment when money flows from consumers to the merchant. In the case of returns, partial refunds are also important features. Doing all of this automatically, worldwide and on all sales channels are requirements that few payment schemes currently support. The payment industry needs to enhance current payment methods rather than inventing new ones. Apple Pay, Samsung Pay and Android Pay are all examples of how to build a better service with cards as an existing payment scheme.

What role will banks play in the payment world?

Banks face challenging future. Today, banks are huge organisations with hundreds of different products. They are large resellers of the products and services they often buy from third parties. Their biggest asset is the exclusive access to accounts and their customer’s financial data. This asset is going to disappear soon. In order to improve competition and innovation, European regulation (PSD2) forces banks to give third parties access to accounts if the account holder asks for it. This allows thousands of fintech companies to build and promote innovative and competitive solutions. Consumers can hold accounts in a bank but use third party services to manage accounts, loans and payments. Therefore, banks will have to compete directly with fintech companies for each product and in every area where they currently have no competition. To remain competitive, banks need to get innovation and compete or cooperate with small, fast and smart fintech companies.

What are the biggest opportunities for consumers?

Firstly, it is convenience. Smooth processes, a global reach and payment schemes that allow automatic processing will undoubtedly make payments popular with consumers. And popularity usually leads to an increase in trust, conversions and turnover for both merchants and the payment industry. Now, how will we get there? Whether you are a sceptic or not, I believe in the power of biometrics. In the near future, we will see user names and passwords replaced with biometric authentication like fingerprints, face and voice recognition. Biometrics technology is evolving all the time, thus becoming faster, more secure and reliable. We won`t forget a fingerprint or have to type in complex passwords on small touch screens anymore. That is a compelling offer for consumers. Payment schemes that allow biometric authentication will be popular and successful.

Another opportunity often talked about but rarely done well is business intelligence. The analysis and use of big data. Merchants with an omnichannel payment strategy can collect data on all sales channels – mobile, online and in-store. They can easily recognise their customers on all touch points, learn how they behave in different channels and provide products, services and special offers catered to their customers’ needs. Currently, in-store, mobile and online payments are often processed by different parties. Data is stored in different locations and different databases. Implementing a truly omnichannel strategy and analysing payments from all sales channels will provide merchants with competitive advantages.

What are the threats to payment innovation?

Security. Every data breach, every stolen card and every account take-over is another blow for consumer trust. One technology, however, is capable of providing both security and convenience: biometric authentication.

Fingerprint and voice recognition provide better security than user names with complex passwords. It is also more convenient to put a finger on a sensor and say a few words.

The European Central Bank (ECB) already allows banks and payment companies to use biometric authentication. However, according to its guidelines, user name and password are insufficient and by 2018 banks and payment companies will be required to either improve passwords with an additional security feature – like second factor authentication with PIN/TAN via SMS. That is a complex procedure. I believe that, instead, banks will introduce biometric authentication.

Another security threat facing the industry is the increase in occurrences and ferocity of DDOS attacks. It is not only an issue for business, but for the national and global infrastructure too. Societies’ infrastructure needs better protection form hackers. It is easy to run attacks and overload whole data centres with data in order to bring these services down. The SMEs suffer most from lack of proper protection against cyber attacks. I believe that the Internet requires regulation that forces data centres and Internet networks to provide appropriate protection for all their customers. If all data centres and Internet networks were forced to provide appropriate firewall and DDOS protection, the Internet would be a safer place for businesses as well as infrastructure. However, that requires regulation that market forces are much too slow to adopt.

Where do you see Computop in 20 years’ time?

Today, Computop is an IT company focused on global omnichannel payments and fraud prevention with a processing volume of USD 24 billion per annum. In 20 years’ time Computop will be a bank, but not the kind of bank we are used to today. Computop will be a banking group focusing on payments as well as merchant financing, biometric authentication, and artificial intelligence. We will not only work for merchants, other banks and white label partners, but also for consumers providing security and biometric authentication for accounts, online shops, payments and also for physical access control to buildings, cars and any type of device. The digitalisation of our society requires more security. Computop will still be an expert in secure global payments and fraud prevention and, therefore, well positioned to also provide biometric security solutions to consumers, banks and merchants.

About Ralf Gladis

Ralf Gladis is the co-founder and CEO of Computop. In his early years, he worked as a software architect in the successful development of the Computop Paygate platform. Gladis had gained the necessary understanding of technology as a student of Business Information Systems at the University of Bamberg. Today, as founding director, he is responsible for international expansion and for Computops strategic direction.

About Computop

Computop is a leading global payment service provider (PSP) that provides compliant and secure solutions in the fields of ecommerce, POS, m-commerce and Mail Order and Telephone Order (MOTO). The company, founded in 1997, is headquartered in Bamberg, Germany, with additional independent offices in China, the UK and the US. Computop processes transactions totalling USD 24 billion per year for its client network of over 14,000 large international merchants and global marketplace partners in industries such as retail, travel and gaming. Global customers include C&A, Fossil, Metro Cash & Carry, Rakuten, Samsung and Swarovski. Following the recent asset deal with the Otto Group, Computop is now processing payments for merchants that previously used EOS Payment, including all 100 Otto retail brands.