2015 has been the year to show us the direction that the payments world will be taking in years to come, says Jonathan Williams, director of strategic development at Experian. Here are some of the key developments that have paved the path:
1. Spotlight on Blockchain
Banks have woken up to the potential of blockchain to facilitate a secure distributed ledger for clearing payments. It’s been a big topic of conversation at industry events this year. While blockchain initiatives are in their infancy, there are already some early projects looking to apply this new technology to existing problems, such as cross-border payments and liquidity markets.
2. Real Time Payments
The rise in internet usage and demand for faster payments have driven Australia, the USA, Sri-Lanka and the Eurozone as a whole to bring their Instant Payments projects forward.
Historically systems were reliant on deferred settlement models, which could be less stable. Now some countries are opting to settle in real time. In the UK, the Faster Payments Scheme has been in operation for years, but this issue was tackled this year by requiring pre-funding of transactions.
It will be interesting to see these services develop and whether a model for best practice and interoperability is established.
3. Increased mobile payments
2015 saw investment in companies producing mobile payment apps, particularly those who leverage the existing payments systems, such as Pingit.
We also saw Apple, Samsung and Google launch their mobile payments platforms, albeit with different standards that could affect adoption by retailers. For example, Google’s offering also supports online purchases but not yet in-app whereas Apple is exactly the opposite. Google requires PINs for cards from some issuers and it’s not clear how many card providers will be supporting Samsung Pay, although it does offer a simulation of magnetic stripe in addition to contactless transactions supported by the other two.
It remains to be seen whether standardisation can develop or if merchants and issuers choose one mobile payment scheme over another. Consumers could find themselves limited to the merchants using the platform they happen to have.
4. Opening up UK Clearing
The Payment Services Regulator took up the reins in 2015. A key focus for them was giving existing and new banks comparable access to the UK clearing systems. This may help with another key initiative – increased competition in the consumer banking market.
5. All Change for Interchange Fees
During 2015 the EU of regulations introduced a cap on the % of a transaction that can be charged as a fee for debit and credit card transactions. While this has changed the structure, it doesn’t appear to have lowered the total costs to most merchants. Lower value transactions, for example, may have seen merchant fees increase. Business models have, therefore, adapted and had a knock on effect on some consumer benefits.
And few other highlights…
– SEPA was once more a hot topic with the 2016 SEPA deadlines approaching.
– The use of ISO20022 XML, already the SEPA standard for 36 billion payments, continued its progress towards becoming a truly global standard by being chosen for all the new instant payment schemes.
– The revision to the Payment Services Directive, PSD2, was adopted by the EU comprising much more than a simple tweak to the text.
– Around the world, internet security became a big issue for payment schemes like Bacs and the PCI DSS in the cards world. For standards, the expiry date for SSL and SHA-1 passed and SHA-256 and TLS 1.1 or greater are now the order of the day