Are Card Payments Getting Simpler Or More Complex?

Throughout the year, there has been plenty of discussion around frictionless payments, and reducing complexity for both consumers and for merchants. So, are card payments getting simpler, or more complex? The answer seems to be… both.

The processes and IT systems needed by a retailer to send card payments to a bank for authorization, and subsequently to settle them, are simple. Many retailers have their own payments systems in place to do this, whilst others use payment service providers (PSPs). In both cases, the interaction between those systems and the banks have not changed much for many years. They get updated occasionally to cater for new requirements like contactless, but these are relatively minor technical evolutions, rather than large-scale disruptions.

However, things are more complex is on the customer side, where the shopper uses a card and interacts with the retailer.

Retailers now see payments as a means to compete for shoppers and show that they are up-to-date, modern and relevant – to appeal to millennials and their shopping behaviors.  Contactless helps in this endeavor; as do Apple and Android Pay. But retailer wallets, integration with loyalty schemes, order ahead, click-and-collect and other shopping behaviors all need to be accounted for in the context of payments.

So how do simple and complex come together to enable retailers to deliver these shopping and payment services to the customer? Once the transaction gets to the payments system – the retailer’s own platform or the PSP’s – the authorization and settlement of that transaction is easy. But getting the transaction there can be the complex piece. There are various customer channels to consider: store checkouts, self-checkouts, kiosks, customers’ mobile devices, tablets, call centres, and traditional desktop. The more progressive retailers look to integrate these channels as best they can to deliver an omni-channel strategy, but each channel is subject to its own payment requirements, its own technology, often sourced from different IT vendors and operated by an independent division. To get each of those systems to be able to offer payment processing means integration with the retailer’s payment systems or with their chosen PSP.

It’s the flexibility and agility of those payment systems and PSPs that become either the enabler or the blocker to retailers’ ability to deliver the next generation of shopping and payment services. The payment platform should be seen as a card payments hub, allowing each channel to consume payments services. Send it a transaction, let it deal with it and get the response back – irrespective of whether the customer is transacting from the store, online or from a mobile device. The payments hub should be agnostic in this regard.

For a retailer’s payments strategy to be fulfilled with relative ease, a payments hub should allow disparate systems to consume the payment services through a range of means – whatever is the simplest in the circumstances – be it web services, APIs or even legacy protocols. Retailers need to ensure they have the right payment systems or the right PSPs available to them that can effectively deliver the simple bit, as well as offering a means to deal with complex integrations.

It has been said by others before, but the best solution to complexity really is using simple systems.