Retailers are showing signs of reluctance to the payment innovations enabled by Open Banking according to Nick Kerigan, managing director of future payments, Barclaycard.
“I think they [retailers] are being cautious and prudent in the sense that they want to explore the benefits, but they also have clear incumbent payment methods, which they work with and that work well, and are able to handle the volumes like those during Black Friday,” said Kerigan speaking at an retail banking conference in London this week.
“There is a reason why retailers are very comfortable with card transactions running through Visa and Mastercard. It’s not actually about the technology, many people could reinvent a scheme system with different technologies but the whole surrounding that comes with the scheme rules in terms of refunds and chargebacks, all of this kind of infrastructure and with ubiquitous acceptance is actually really hard to replicate.”
The regulations represent new challenges for retailers, meaning many in the industry are less experienced when it comes to compliance procedures, according to Lana Abdullayeva, director of Open Banking & PSD2 at Lloyds Banking Group, speaking at the same conference.
“Financial services in Europe and the UK have been quite significantly regulated for years and have tools to be compliant and embrace new regulation, it’s challenging but at least we have some experience, retailers are probably less experienced in that field,” said Abdullayeva.
Later in the conference, Steve Tigar of Money Dashboard said unless there is a reconsideration of payment convenience by payment initiation service providers (PISPs), it is unlikely that there will be any more innovation in that space.
“The idea that a third party could initiate a payment but unfortunately through secure customer, or strong rather customer identification, I don’t think we are going to see much innovation in the PISP space for a little while,” said Tigar.
For Husayn Kassai, CEO of Onfido, payment opportunities provided by Open Banking for retailers lies in invisible payments.
”It depends on how you define the retailers. Amazon, for instance, are all over this. It’s not just that businesses are taking the opportunity to manage more invisible payments, they are facing the fact that customers don’t necessarily want to think too much about how it all works – as long as it’s as seamless an experience as possible.”
Ultimately, those that can make payment transactions as frictionless as possible will win out, according to Kerigan.
“Yes, we have talked about the end customer, but we also need to think about the more complex eco-system that exists in terms of retailers who are trying to sell directly to their customers,” said Kerigan.
“These pieces have to be fitted together to deliver that much more seamless and frictionless commerce experience. Otherwise, it is simply going to be banks trying to push services rather than customers driving that and having demand for those services because it gets them to what they want to do quicker, easier, and cheaper.”