By Dale S. Laszig
Present-day payment technologies bear little resemblance to predecessors that used dial modems for authorization and settlement. This three-part series charts the evolutionary journey from payment acceptance to commerce enablement. In Part 1, industry leaders discussed payments' quantum leap from paper to electronic transactions. In Part 2, the journey follows transactions as they graduate from simple tasks to complex, interactive communications.
From minimal to multilayered
Vlad Branin, Vice President, Professional Services at Zooz Inc., a global technology company, remembers when the payments ecosystem had just four components. "There was the customer, the merchant, the merchant acquirer and the customer card issuer," he said. "Every transaction initiated would pass through these four entities for approval and transfer of funds."
Remarkably, as the ecosystem diversified and added more layers to transactions, the customer experience remained unaffected, Branin said. Technologies such as gateways, fraud detectors and analytics improved security and efficiencies while remaining invisible to consumers.
"For example, 3D Secure, designed to authenticate customers at checkout, has been updated," he said. "Now 3DS 2.0 does not interrupt the front-end transaction approval process; it authenticates the transaction without redirecting the customer, enabling a more seamless front-end experience without compromising security."
From practice to mastery
Cory Capoccia, President of Womply, a software-as-a-service company, likened his company's evolutionary journey to parenting: both require patience, empathy, focus and flexibility.
"Just like an infant who starts by crawling, then learns to walk and quickly takes to running, we've spent the last six years coaching and educating businesses through their own progression as they increase adoption rates of core technologies that are now part of their everyday lives," he said. "We began with the basics, helping businesses get a handle on their key performance metrics."
Capoccia added that after mastering the basics, business owners can harness technology to manage their online reputations, connect with customers, enhance loyalty and leverage advertising budgets. "We're enjoying this phase of the journey as we start to sprint through our expanded suite of capabilities with many of our customers," he said.
From uniformity to diversity
Rod Hometh, payment veteran and adviser to Rocketpay Group, saw payments reach an inflection point when device manufacturers began to customize their solutions. "Business owners wanted a customizable, flexible platform they could take to any market," he said. "Manufacturers began to focus on creating an architecture that could make a midlevel payment do what merchants wanted it to do."
Hometh said consumers want the same experience everywhere, every time. They tend to get frustrated not because technology is difficult, but because it's different every place they go. "The Nirvana was the way it was," he said. "No matter where you went, or what you bought, you'd swipe a card, press a green button and walk out."
We may get to a place where 80 percent of consumers are dipping a card or tapping a phone, but we will never get back to the former ubiquity of payments that required no thought, he said, adding that low-ticket, low-risk EMV (Europay, Mastercard and Visa) has changed the game. We used to forget how we paid for things; now you might tap your phone, insert your card or swipe your finger.
"Merchants may be enamored with large interactive screens, but it can take years for some consumer-facing technologies to catch on," Hometh said. "You have to keep things unremarkable for consumers."
From plastic card to mobile wallet
The U.S. EMV migration has required system-wide upgrades of hardware, software and host processing technologies. As consumers and merchants adapt to contact and contactless smart card technologies, they are noticing the ease and speed of tapping at the POS.
"Near field communication (NFC), a payment scheme used in mobile wallets and contactless cards, is past the point of being new, but people are still getting used to it," said Samuel Mulligan, Communications Specialist at Mobeewave Inc., a technology company specializing in NFC solutions. A tap, like a card swipe, takes one to two seconds; a dip can take up to 10 to 12 seconds, he noted.
"Tapping is faster than dipping, and the convenience of contactless payments helps to resolve friction at the till," Mulligan said. "NFC and mobile wallets are prevalent in Canada, and adoption is growing in the United States."
NFC-enabled smartphones are removing barriers to adoption across the globe by facilitating peer-to-peer (P2P) and mobile commerce for anyone who wants to pay or accept payment on a phone. Mulligan, who has seen a diversity of approaches and use cases, mentioned Australia has a 97 percent NFC-adoption rate, while the United States is just getting started. "Banks are working with fintech companies to provide this capability to their customers," he said, noting that open-loop technology makes the process as simple as can be for a customer, enabling mobile tellers and concession sellers to accept payment. "It's not a case of fintechs competing with banks," he added. "Banks have the customer relationships and are simply adding our NFC technology to their white label solutions."
From tethered to mobile peripherals
EMV technologies are widely available in quick service restaurants but pose challenges in fine dining establishments. Restaurateurs are reluctant to ask diners to leave their tables and walk to a POS to pay by chip card. And diners have become uncomfortable releasing credit cards to strangers, noted John Wethington, CEO at MySensitiveData.com Inc.
"In the 'demand economy,' no one wants to flag down a waiter or hand over a card that could be skimmed or stolen," he said. "It's becoming unnatural to physically get rid of your card because the card represents a gateway to your money." Todd Brokenshire, co-founder and CEO at payment solutions provider AdaptPOS, saw a need for restaurant-friendly, mobile EMV. He said restaurateurs want to be EMV-compliant but find existing EMV-certified products cumbersome. "There's nothing elegant about bringing an EMV reader on a three-foot-long cord to the table," he pointed out. He launched AdaptPAY, an untethered, mobile EMV reader that uses Wi-Fi, 4G and 3G. Compatible with any POS system, the peripheral solves for security without disturbing the restaurant's flow, he said.
"We're one of the new disruptors working with Android, which is basically Linux with a specific interface," said Richard Bennett, co-founder and Chief Information Officer at AdaptPOS. "Our software communicates to the cloud to enable bi-directional communication while protecting POS from illegal entry."
From proprietary to open source
Now that countertop card terminals share an increasingly crowded field with mobile devices, integrated POS systems and commerce-enabled appliances; manufacturers are revisiting device architectures and strategy. In recent years, Ingenico Group has expanded from a single focus on secure payment transactions to include other forms of connected commerce.
"We've evolved into a conversation that balances the need to securely accept payments with the need to run a business," said Scott Holt, Vice President Marketing and Product, North America at Ingenico Group.
"We spent more than 30 years building a secure terminal infrastructure, and that core architecture will not be affected by the new solutions we've introduced."
Holt said that while creating Telium Tetra, Ingenico engineers left the secure payments infrastructure intact and added a next-generation operating system that enables estate owners to seamlessly update device populations and allows third-party developers to create business applications. Ingenico's objective is to provide secure payments, regardless of means, to enable commerce online, in stores and on mobile devices, he stated.
The Telium Tetra suite includes payment terminals, applications, a hosted version of Estate Manager and an app marketplace. Holt described it as an ecosystem that delivers value through each of its payment mechanisms. "We used HTML 5 and Java-driven scripts to create hooks between the open world of third-party applications with the trusted world of bankcard and retail apps," he said. "It enables people to develop non-payment apps that in no way compromise the secure world."
Adding ancillary applications to multi-app terminals is not a sustainable strategy, Holt said. It makes sense to give processors and merchants more control of the "open side," to allow retailers to create apps that have nothing to do with payments, but everything to do with user experience, he noted. The new technology is backward compatible, to enable millions of Telium users worldwide to convert to the new standard and operating model, he added.
From purpose-built to adaptable
Kathleen Houseman is Senior Vice President of Sales and Marketing at Castles Technology Co. Ltd., a global technology company. "At Castles, our core design principles are simplicity and reusability," she said. "Throughout our numerous hardware and software releases, our kernels remain the same, enabling our partners to adapt without constantly recertifying our solutions."
Houseman said fragmentation and market churn motivated Castles to simplify iOS and Android coding. Developers who previously required up to six months to develop a terminal have written a complete app in a matter of hours, using Castles' library tools and Luna application framework.
Castles' key differentiator is its highly adaptable software, Houseman added. "Our cloud services enable real-time on-boarding and updates, whenever software, firmware or security protocols change," she said. "Think of it as a remote control for your terminal: remote key injection, terminal management in a cloud and a complete dashboard that processors can manage."
Winston Fong, Chief Strategy Officer at Castles, described a classic dilemma facing device manufacturers. "We must balance the things we care about in our fragmented industry: compliance, security and helping merchants create exciting, interactive environments," he said, adding that POS technology is no longer designed for engineers by engineers; it accommodates human interaction within Payment Application Data Security Standard-certified screens without impacting off-the-shelf scripts.
"Design thinking is a wonderful principle that starts with a human in the middle," Fong said. "We began with a blank slate and designed Castles' architecture to optimize the human experience while keeping the things we care about in the background."
Castles measures device performance in the field to learn how people interact at the POS. "Understanding consumer behavior helps us design an interface that makes people want to come back," Fong said. "We brought Angry Birds design-centered language into the world of terminals."
From terminals to PaaS
Jeff Wakefield, Vice President Americas, Sales Enablement at Verifone Inc., has seen Verifone evolve from a terminal-centric company to a payment-as-a-service provider offering an array of support, software and hardware services to channel partners and their customers.
"We didn't change our technology as much as we changed our vision," Wakefield said. "Verifone's new commerce vision has inspired its development of a new, enterprise-scale platform." He cited three elements as critical to the company's success:
- Create digital payment solutions: We need to get away from payment cards, which are easy to steal," Wakefield said. "This will require interoperability, which is still a challenge."
- Improve authentication technology: Wakefield stressed the need for authentication schemes that are not clumsy or require multiple steps.
- Make payments invisible: Enterprise clients want to solve problems, small business owners want off-the-shelf solutions and reseller partners want to accommodate everyone, Wakefield said. However much these agendas may seem to compete, Wakefield sees embedded payments as both inevitable and necessary.
"Accomplishing these three things will help us make the payments go away and be magical," he said. "And we are still several years away from being done."
Part 3 of this series will explore the payments journey into advanced design principles, artificial intelligence, machine learning and the Internet of Things.