5 key themes from The Retail Payments Conference 201813th November 2018
The first, annual Retail Payments Conference took place in London last week. Over 150 delegates from Europe’s leading retail organisations registered for the event, which boasts the highest level of merchant representation of any such conference in the world (over 90% of attendees came from retail organisations).
There were several strong themes that surfaced as being at the forefront of merchants’ strategic considerations. The following are some of the key points raised and discussed throughout the event.
1. Payments are no longer a commodity, they are becoming a differentiator
Brendan Doyle, CEO of CMSPI, spoke about the seismic shift in merchants’ view of payments, detailing how payments are traditionally viewed as a burden, a necessity or a cost-driver, but that this has been changing over the past few years and will continue to accelerate. Payments – through innovation such as omni-channel sales, alternative payment methods and self-service kiosks – is fast becoming a revenue-driver, an asset, and a source of competitive advantage for merchants grasping the opportunity with both hands.
2. All the ‘bells and whistles’ are not necessarily right for your business
Unfortunately, merchants are increasingly being oversold omni-channel and other services well above their required use cases, at a cost premium that negates any benefit the service may have delivered. Similarly, pan-European acquiring and the consolidation of arrangements has the potential to be oversold, with key, local processing benefits being lost in the noise of ‘a single European acquirer’. For these considerations, individual use cases and markets must be analysed both in a global context as well as a local one to ensure optimal delivered value to your business.
3. Costs are still plaguing the retail community
Further, although common standards such as nexo are driving the costs of changing supplier down, the cost remains high as certain acquirers have not yet committed to adopting these standards, and this can put merchants in an awkward position where they are forced to continue with their incumbent supplier at non-competitive prices. In addition, falling cash volumes and the increased dominance of the card schemes threaten to significantly increase merchants’ costs of accepting payments across the board. Even though payments are moving from being a cost-driver to a revenue-driver, the cost element is pivotal in assessing the value to a merchant of investments in payments.
4. Open banking has the potential to revolutionise payments, but there is still a lot of uncertainty
Open banking – that is, the opening of customers’ bank accounts to 3rd parties – has, through the introduction of PISPs, the potential to drive more competition, shorter settlement timescales, and lower costs. The opportunity is not – as with most new solutions – without its issues, however. Of particular concern to merchants are the risks in terms of customer experience and additional supply chain complexity, as well as whether consumers will embrace the technology. The problem appears to be of the ‘chicken and egg’ variety: why should merchants accept PISP payments when consumers aren’t demanding it? Conversely, why should consumers download PISP apps to their phone if merchants aren’t accepting PISP payments? The answer lies in incentives, and it is up to merchants to provide those incentives for their customers if they wish to enjoy the promised benefits of open banking.
5. There is a real need for merchant collaboration regarding strategic issues within the payments industry
With ever increasing scheme fees in Europe and the US, the benefits of regulation are quickly being eroded. The most important thing to do now is to educate regulators as it is vitally important that they understand the merchant point of view, and this comes from ensuring that information about scheme fee increases or changes is shared promptly. The IFR is currently under review in Europe, and a ‘whack-a-mole’ situation (where one fee is struck down and another pops up in its place) must be avoided: we need to fight for regulation that is robust and future-proof.
In order to ensure that merchants’ voices are heard by regulators, banks and other influencing bodies, it was made clear that collaboration and collective action is key. Joining and engaging with merchant groups such as the MAG (Merchant Advisory Group) in the U.S., EuroCommerce in the EU, and the BRC (British Retail Consortium) in the UK is vital in enabling these groups to present and promote merchants’ interests in all areas of payments. Merchants themselves need to be:
- communicating issues with other merchants;
- voicing concerns to regulators, and;
- sharing information promptly and openly between all parties.
The IPRF (International Payments Regulation Forum) brings together interest groups globally to address these 3 main areas of improvement that were highlighted at the conference.
The changing perception of payments from burden to opportunity is clear, but it must be harnessed at an appropriate cost in order to fully realise the benefits. Additionally, collaboration between merchants, merchant advocacy groups, and regulators is key to ensuring full and fair regulation, and thus a fair payments system for all players involved. We look forward to The Retail Payments Conference 2019, where we suspect the landscape will have experienced many changes: as the payments industry so often does.