Is 2017 The Year Of Transformation?

Each year starts with a reflection on the past and predictions for the future. In industry and politics, these thoughts are often accompanied by the idea that the coming year will be one of transformation. Everything will change. For once, the political analysts were right. There’s no doubt that 2016 will live long in the memory.

What about the payment industry this year? I’ve read a lot of predictions but I’m not convinced that 2017 is soon enough to see a step change in the industry. However, change often comes from unexpected directions at unexpected times so I say that with caution. From my perspective, we seem to be at a point where we have plenty of initiatives that are ‘good to go’, and yet it’s generally harder to pay anything at all. We are constantly trying to balance the needs of:

Convenience/speed against trust/security

Ideas against the reality rollout

Choice against ubiquity

There are several aspects of the industry that don’t make sense. For example, I’ve got more digital wallets than credit cards, but every time I go for a meal I have to take a card anyway because I don’t know if the restaurant will let me pay on my phone. Technology proven in mature markets such as the UK, with its initiative for immediate payments, is considered unfathomable in others. I was at a conference at the back end of last year where attendees were being asked if they “believed” that immediate payments could actually become a reality!

EMV is still struggling to win fans in the US, because the time the card sits in the machine slows down the queue. Enter therefore faster EMV, with more cost and arbitrary recertification processes to speed things up, and increase adoption at the same time.

What I don’t believe is that the technology is holding us up. It’s how we implement it that’s the problem. The industry “assumes” what customers want and then we shake our heads in disbelief when people won’t adopt it in the way we would like. As an industry, are we providing solutions and then looking for problems? I’ve read 10 books on blockchain this year. I rest my case.

Maybe people don’t care how they pay as much as we think they do. Maybe they just want to pay, no matter how, as I do when I can’t get a waiter’s attention and I’m in a rush. Genuinely useful immediate payment methods are proven, yet international acceptance is painfully slow.

I don’t anticipate consumers ticking the “Yes, I would prefer to wait 3-5 working days” box, given a choice of options when transferring money. Other than coercing banks with legislation, is there another way they can be made to share their consumers’ enthusiasm and update, rather than begrudgingly trying to get their legacy systems to do something else they were never engineered to do?

Something has to give, as people under 30 aren’t very tolerant of “lame” technology, and let’s be honest, waiting five days and paying fees to move your own money is pretty lame. The idea of innovation as we knew it is coming to an end, and we will I think have to be more specific and careful about the user experience.

Change is coming, and it reminds me of the early days of the internet. Everyone in the industry knew how it worked, but no one outside did or cared — until someone bundled it up and came up with usable browsers and content people wanted. Then it took off like a rocket.

Unlike the internet however, a lot of the payments industry is built on 30 years of legacy systems, which organisations still believe can be modified just once more before they bite the bullet and invest in something better. But when the disruptors get their act together and do something really different, a new rocket will take off. Payments will be part of this, but perhaps not in the way we think.

Regulation must catch up too. I shuddered when I read the European Banking Authority’s proposals for “strong” authentication of transactions over €10. Blunt, one-size-fits-all restrictions aren’t the way forward, and while I might be willing to accept some risk to process 1,000 customers in 10 percent of the time, legislation needs to be based on how things work today, not on how they used to work.

If 2017 is not soon enough to see a step change in the payments industry, when will it happen, and what will bring it about? I know of three things that could genuinely kick-start the revolution which people are predicting will come:

1. More care needs to be taken to develop the perfect user experience so that new products are built around highly discerning customers.  There will be no place for procrastination, thinking that something ‘will do for now’.
2. The industry needs seriously needs to consider taking legacy systems out into the yard and putting them out of their misery.  At the moment, executives won’t do this because they’re afraid a migration will go wrong, but improved technology and testing procedures will eradicate this fear.
3. The industry needs to embrace an open and wider payment ecosystem and ensure that technology can efficiently interact with APIs. Organisations linked in this way will be able to develop new applications and uses more quickly, and those which remain guarded, peering over their fence, will be left behind.