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 | PINless debit routing opportunity
PINless debit routing, technology that allows merchants to route transactions away from the main global brands (Visa and Mastercard) as well as providing an alternative to PIN transactions, offers potential total savings to U.S. merchants of over $2 billion. These savings, previously only available to the largest merchants, will be a real game changer for merchants who implement a PINless routing solution correctly. One large potential obstacle to overcome is issuer adoption, which remains relatively low despite growing interest from the merchant community. However, with market innovation and development at an all-time high, merchants need to consider PINless routing now to reap the huge rewards on the table.
2 | Alternative payment giants WeChat Pay and Alipay
After dominating the $5.5tn 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 traveling experience for their millions of active users who visit the U.S. every year, and presents an exciting opportunity for U.S. merchants to revolutionize their own alternative payment solutions.
3 | Durbin repeal fight continues
As always, the repeal of the Durbin amendment remained on the minds of many in the merchant community this year. We don’t expect that to change in 2018, as the threat of repeal by the Trump administration remains on the cards. This will undoubtedly present challenges to merchants who have campaigned for fairer regulation, but one thing remains clear – repeal or reform, changes are on the horizon.
4 | Real-time payments, the future
Payments routed through a real-time payments (RTP) infrastructure, that give end-users instant access to funds, could reduce costs for merchants and change the way the payments arena operates. Our concern for 2018 is that low government involvement in RTP implementation could mean that these cost savings are not fully passed on to merchants. The decision by the Fed’s Faster Payments Task Force to pursue a market solely driven by competition, with minimal government involvement, could pose potential problems and merchants should be aware of these developments.
5 | Card fraud levels
The U.S. continues to have amongst the highest levels of card fraud in the world. Despite the implementation of EMV in October 2015, this remains a huge issue for merchants. In-store fraud levels have decreased after the introduction of EMV, but merchants must now turn their attention to protecting eCommerce transactions as EMV-deterred fraudsters turn their attention to online and mobile payments. In 2018, merchants must ensure their fraud arrangements are robust, regularly reviewed and cover all aspects of the transaction, including user registration.
6 | Impact of EMVCo frameworks
As EMVCo continue to release frameworks to aid the interoperability of the payment system, merchants should closely follow all announcements and consider the full impact on their acceptance rates and any limitations to their choice of accepting payment methods. This includes payment tokenization, EMV 3D-Secure and Secure Remote Commerce (SRC). In 2018, CMSPI will continue to follow the progress of EMVCo to fully understand what these frameworks mean to merchants and inform our clients.
7 | Market consolidation
News of mergers, acquisitions and players entering new markets has been flooding our inboxes throughout 2017, and the same will likely 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.
8 | Changes within the armored transport industry
In 2017, we witnessed increasing prices across the armored transport industry, along with a focus on additional service offerings such as cash office technology and cash processing. Going forward, merchants should review their options to optimize their cash processing procedures and schedule arrangements, while also considering whether consolidating their own cash supply chain or taking advantage of new individual offerings is best for them.
In 2017, the banking industry was dominated by news that bank branches are closing faster than ever before. The Wall Street Journal highlighted the drastic reduction (1,600 closures) in the number of Bank of America branches since the financial crisis. While this creates some problems for merchants (less bank branches can often mean having to travel further to deposit and process cash) it also offers a unique opportunity. In 2018, we believe merchants should be reviewing their ATM arrangements as an additional revenue source, increasing footfall in their own brick and mortar outlets and providing innovative cash experiences for their customers.
10 | Interchange litigation
In March 2017, the U.S. Supreme Court rejected a $5.7 billion settlement offer from Visa and Mastercard to retailers who claim the networks improperly fixed credit card swipe fees by over $40 billion. In 2018, CMSPI hopes to see ongoing, robust regulation of credit card interchange fees and new, fairer settlement that sees merchants compensated for historic charges. The result of this ongoing litigation battle will affect all U.S. merchants, not just those directly involved in the lawsuit, and is definitely one to keep an eye on.