The top 10 things to watch out for in payments in 201804th January 2018
As 2017 comes to a close, we’ve paused to reflect on what has been an incredible year for payments. There have been highs and lows, mergers and consolidations, but one thing is certain – the payments arena remains a fast-paced and constantly evolving space. Below, we take a look at what the future holds and highlight the top ten things to watch out for in 2018.
1 | Scheme fee increases
A recurring theme for merchants every year, 2018 promises to bring much of the same – more scheme fee increases. Visa’s announcement that its European scheme fees will increase as of April 2018 is the latest in a series of significant fee increases that impose higher costs of payments acceptance on merchants. The schemes are signalling that further increases are also in the pipeline. CMSPI estimates that average fee increases will increase by 50-60%, which is an addition to the estimated 30% increase following Visa’s January 2017 announcement. If history is anything to go by, it is likely that more increases will follow and merchants need to be aware of this in 2018.
2 | Honour All Wallets
The true extent of the capabilities of mobile wallets are staggering and could cause a huge disruption on the European payments landscape following PSD2 in 2018. Digital wallets and card payments are materially different products – card payments are merely transactional devices, whereas digital wallets enable a two-way flow of competitively sensitive data such as geo-location and customer purchasing habits. Access to this level of information leaves merchants exposed to highly targeted marketing initiatives from a competitor.
3 | Alternative payment giants WeChat Pay and Alipay
After dominating the €4.7tn domestic Chinese mobile payments industry with their lifestyle apps, WeChat Pay and Alipay are now targeting international opportunities by supporting the lucrative Chinese tourism market. This expansion will result in a smoother travelling experience for their millions of active users who holiday abroad every year, and presents an exciting opportunity for merchants to revolutionise their own alternative payment solutions.
4 | Market consolidation
News of mergers, acquisitions and players entering new markets has been flooding our inboxes throughout 2017, and the same will remain true for 2018. Industry changes like these can often mean uncertainty for all players in the supply chain, and merchants are no exception. The recent merger between Vantiv and Worldpay is being presented to merchants as a way for both to generate synergies by amalgamating their knowledge and products and offering a better service to their international client base. Whether this comes to fruition for merchants affected by the merger remains to be seen, but merchants partnered with any merged or acquired organization need to be cautious and closely monitor invoices and SLAs in the coming months.
5 | Cash office technology
Despite a gradual decline, cash volumes remain high and cash continues to be a widely used form of payment by consumers. A combination of rising interest rates, increasing labour costs and reduced banking options mean that now more than ever merchants need to focus their attention on lowering their cash handling costs. In 2018, trends towards online banking, digital wallets and contactless spending will continue to rise, and merchants should carefully consider whether a cash office technology (COT) solution could help.
6 | ATM interchange
The UK’s ATM network, LINK, has proposed a reduction in ATM interchange in addition to a plan to encourage retail cashback in replacing traditional ATM transactions. This significantly affects the business case for merchant ATMs and it is likely that ATM deployers will look to mitigate their own loss of income by recouping a larger revenue share from merchants. In 2018, it is important that merchants negotiate the best revenue split for on-site ATMs and remain aware of any further industry updates.
7 | Interchange litigation
2017 delivered blow after blow to merchants fighting interchange litigation battles against the schemes. So far, the results are 2-1 in favour of the schemes with the last merchant win happening all the way back in 2016. That being said, appeals are expected and the story is far from over. In 2018, merchants actively pursuing a claim against the schemes need to stay aware of the results case-by-case, and learn from the mistakes of unsuccessful claims.
8 | PSD2
The PSD2 directive, set for implementation in January 2018, is targeted at increasing competition within the payments industry, as well as enhancing the protection of consumers. It could have a dramatic impact on technology, security and the market framework of the traditional acquirer and card scheme environment. PSD2 will be beneficial for merchants that take full advantage of competition in payments processes from payment initiation service providers (PISPs), but could represent a challenge in terms of navigating surcharging bans and SCA compliance – definitely one to carefully consider in the New Year.
9| Inter-regional interchange fees
In August 2017, the European Commission issued a formal objection against Visa in relation to Visa’s inter-regional interchange fees. The formal hearing, which was originally scheduled for the end of January, has been deferred to the first week of March 2018. Any outcomes or actions from that hearing will be important to all merchants who accept card transactions.
10 | Effectiveness of Interchange Fee Regulation (IFR)
The effectiveness of the IFR will be analysed during a formal review by the European Commission in 2018. There is speculation that the IFR2 could be extended to include scheme fee regulation, but at CMSPI we would also call for the inclusion of commercial cards within any new regulation framework. The findings of this review, and any eventual additional regulation, will affect all merchants and merchants need to remain aware of any updates in the industry.