The payments industry, like pretty much every other industry, is wrestling with a digital transformation. In this case the transformation has been brought about by a seemingly never-ending number of new payment "disruptors" that are causing both consternation and change.
Many of you are familiar with digital wallets, NFC payments or virtual currencies, at least as terms. We have also seen new hardware unveiled such as retina scanners, palm readers and wearable technology. And all of them, as standalone items, are very cool and the idea of using them to pay for goods is an appealing idea.
But whilst the hardware and concepts are relatively easy to understand, putting them into practice is a far more difficult exercise. One such question would be; who ultimately pays for this kind of technology to be rolled out in stores? If you are a supermarket operating tills up and down the country and one of these payment terminals costs £100 per unit to buy and install, it's a huge investment in something that potentially may never provide a return on investment.
Changes in how we purchase
Look back at how payments have changed in recent years. The past decade has seen more adoption of chip and pin terminals, with some now offering contactless payments (something that has been over a decade in the making). We have also heard a lot about digital wallets and mobile payments, but how many of us are currently using our smartphone to pay for things on the high street? I would wager not many.
And why is this? The payments industry is a multi-faceted, complex market. When you look at it from the retailer's point of view, there is no real upside for them in handling the payment from the customer. Of course they want the money to be transferred from one account to their own, but how that is done is not necessarily important to them. Indeed the more friction points along the way when making the payment, the greater the risk for them.
This year alone we have seen retailers fall victim to fraud where customer information has been taken after a payment has been made with a retailer. Adding more steps to this payment path is simply adding in a potential opportunity for a fraudster to strike.
Real time payment
We believe retailers would benefit from real-time payment transactions. Funds transferred from one account to the other in the speediest, safest way possible. This minimises the potential for fraud to take place and reduces the various friction points along the way. A direct route, rather than going around a spaghetti junction.
That is not to say these disruptors in the market will not play a big part in the future of payments. If smartphones end up being consumers' preferred method of payment, and the software is such that it can protect them, then that becomes the channel by which the payment is made. If we end up going for retina scanners to make a payment then, as long as those details are properly encrypted, a system can be built around it.
However, with all of this disruption, the core considerations should always be the same: does real time payment transfer funds in the safest, most expedient way, and can it be implemented with a business model that allows it to be viable? Where options are failing at the moment is when steps are added in the payment chain or require an exorbitant cost to implement.
What can be said for sure is that payments are in a state of flux and no one can predict where the balls going to land, or due to the influence of technology, it will ever truly "land".
For consumers on the high street, retailers' catering for their needs or banks servicing the payment, the choice of payment options is a conundrum. One thing's for sure; there will be an evolution of the market rather than wholesale and definitive change.
Paul Thomalla is the senior vice president and general manager EMEA of ACI Worldwide