Small-scale experiments and new partnerships are vital
Until a few years ago, financial institutions were a relatively closed shop. Product developers worked behind the scenes for years on new products and services for the market, which were extensively tested and then presented to the outside world. In a certain sense, this is hardly surprising. Banks and other organisations have major responsibilities because of the key role they play in the financial and economic ecosystem. Clients have always and unquestioningly placed their trust in them to handle this responsibly.
However, in this ever-changing world it is no longer possible to spend years working on new solutions behind closed doors. Companies no longer have the luxury of time as developments occur so incredibly quickly, both technologically speaking and in terms of the wishes of the end user.
Banks and payment systems such as Visa Europe, are up to this new challenge of faster development without sacrificing the trust placed in them by working more closely together.
So what do we need? An inquisitive and outward-looking mind able to understand the changes in consumer behaviour as well as new developments in technology, and the consequences for payment traffic. A can-do mindset focused on examining what is possible in terms of working together for innovation. And a willingness to conduct small-scale experiments in new and sometimes unexpected partnerships. Shorter turnaround times are crucial as well. Today, innovation is all about speed and flexibility.
In the article below I will discuss the implications of this changing attitude, from the point-of-view of my role as Netherlands Country Manager for Visa Europe. What does this mean for our organisation and how will it affect our clients? I will also explain a number of developments and innovative ideas that, to my mind, will have a great impact on the future of our payment traffic.
From inside-out to outside-in at Visa Europe
At Visa Europe, we keep our finger on the pulse of a rapidly changing world and the changing needs generated as a result, in a variety of different ways. With these initiatives, we both follow as well as help shape a changing payment landscape.
- This year we have opened three Visa Europe Collab innovation hubs. These Collabs are physical hotbeds for innovation to help start-ups develop fully-thought-out applications, with the help of Visa Europe. Visa helps them build on their ideas by sharing knowledge and skills in the area of payment technology, how payment schemes work and legal requirements, but it does not directly finance them. The idea is to eventually let some of these initiatives grow into commercial proposals, which Visa Europe would then bring into its network. This is a win-win situation: we benefit from the cutting edge new ideas given by the start-ups and they benefit from our size and our network.
- As almost every transaction we make is digital nowadays, the digital world has been the focal point of our organisation’s strategy for years. Because the most significant initiatives will take place here, the digital world takes pride of place in our organisation. The distinction between ‘physical’ and ‘digital’ is actually outdated, as the digital world is more and more integrated in our daily lives.
- Visa Europe is committed to and has invested in innovation to ensure that we continue to provide the best service our member banks and their customers. We realise that innovation is more important now than ever.
Developments and innovation in payments
With geolocation, mobile apps use data on the user’s location. Geolocation is moving forwards in leaps and bounds. There are all sorts of possible uses for it. One example is in the area of security: if a mobile transactions happens from a suspect location, the bank receives a message and the consumer is informed. Geolocation also offers vast possibilities in terms of additional services, for example when you walk into a particular shop, your virtual savings points can automatically be added when you pay at the till without you having to root around for your points card. Another possible example is automatic check-outs for public transport based on location data. Integrating services makes it easier for clients: less hassle with the same level of security.
- Mobile payments
We realise that mobile payments are the future and that in 2020, more than half of all payments will occur through mobile devices. Contactless payments are the forerunner of mobile contactless payments. Terminals use the same technology in both cases. Contactless payments are rapidly on the rise. In June 2015 there were already 143 million contactless Visa cards in Europe, connected to 2.9 million contactless terminals. That is around ten times more than in the US. The number of contactless purchases per month increased by a factor of 2.6 as compared with last year to a total of 176 million transactions; the amount spent increased by a factor of 3.3 to over two billion euros.
- New methods of authentication
Consumers want hassle-free payments and security to go hand-in-hand. Automatic and efficient authentication is the future. Fingerprint ID is another thing we welcome with open arms.
There are two things that have led to an enormous shift recently, one is the cloud and the other is APIs. With APIs, different sources of information can easily be connected to each other, which makes verification considerably faster and safer. The underlying end-user data is already known so it is up to the payment industry to find a way to use these as smoothly and easily as possible without jeopardising security, reliability and efficiency. The plethora of sources of information means that the traditional two-step authentication process will gradually make way for new forms, involving for example location and/or fingerprints.
- Big Data
Nobody can deny that the use of Big Data is on the rise. It is also controversial, especially in the world of payments. The consumer’s privacy and security can never come into question and protection of privacy and security comes first and foremost, with no trade-offs allowed.
Big Data does have the potential to improve the customer experience, for example by coming up with fitting offers. In other sectors, this is already standard. I also expect that the first few careful steps in this direction will be made sooner or later by the payment chain, always with an eye on the principles of privacy and security.
- Convergence and integrated experience
The online and physical world will interact more and more, crossing over in an increasing number of ways. You look at something in a shop and buy it online, or vice versa. The key to this is to be able to pay everywhere through every channel: omnichannel.
The possibilities are endless. For example when ordering a meal through an app on your mobile device from your car, the closest restaurant to you is found by geolocation, and that is where the meal is ordered and prepared, just before your arrival, with payment taken automatically through your mobile. This year we launched a proof of concept for this system at the Mobile World Congress in conjunction with Pizza Hut and BMW. This connected car concept is only one example of what will eventually be possible later on. Simplicity for the consumer is again at the top of the list.
- Security: perception versus reality
There are two different realities in terms of security. On the one hand we have public perception and on the other the actual figures.
Security will always be at the heart of our innovation. We are continually working to evolve the multiple layers of security that are in place to protect consumers. The figures speak for themselves: Fraud is still at less than five Euro cents for every €100 spent.
- Peer-to-peer payments: frictionless payments between individuals
Peer-to-peer payments through a mobile number are on the rise. This is a form of payment between individuals, which makes it simpler and less hassle to transfer funds. Peer-to-peer payments are increasing on social media, but also for example through handy apps. A classic example of this are apps through which a restaurant bill payment can easily be split between all the diners at the table. With one simple action, everyone pays their share without even needing to log in.
It is clear that the world of payments is in a state of flux. It is also easy to see that this is happening at a fast pace because of digitalisation and the rate of technological developments. It is difficult, however, to predict which inventions and applications will eventually win. It is the consumer who has the final say on this. The overriding principles will be convenience, security, and accessibility.