I see significant shifts in eCommerce today and in next 5 yrs. This short blog will lay out a few predictions and assess their impact across the payments sector.
New Payment Experiences
Topics today (pardon the typos)
- Are US payments still an attractive area for investment and growth? If so, where are the opportunities?
- High level view of the payment landscape and areas of friction
- Consumer Journey – how to unlock new consumer experiences
- Where will innovation come from?
- Core areas for improvement?
- Who are the best providers? Wallets as the new metaphor
- Challenges with Issuer-led innovation (ie PAZE)
The top questions coming out of Money 2020 were: is the US payments environment maturing? Are there still opportunities for break out growth? Where? Who is best positioned and why? Today I will be taking part of that on.
This week I was invited to speak at the Merchant Risk Council’s (MRC) – Santa Clara event. As a former banker, I never gave much throught to retailers. Fraud was something I worked to manage with Account Opening/KYC as a core focus because of the potential for regulatory hot water and NCLs as #2 because it drove reserves, profitability and investor scrutiny. Card transaction fraud was something we worked to keep under a threshold.
It’s hard to believe I’ve been writing about payment tokenization for 11 yrs. Tokenization is an overloaded term with multiple definitions. Last week McKinsey wrote a fantastic article on crypto tokenization, this note is about the tokenization of card numbers (PAN to DPAN) performed by network tokenization services like Visa Tokenization Service (VTS) and Mastercard Digital Enablement Service (MDES).
This week the US DOJ opened a probe into network tokenization services (Bloomberg). The specifics of the probe are not known
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Over the last 5 yrs I’ve written 9 blogs on PAZE/SRC, and over 20 on the TCH’s 13 yr effort to own mobile payments. Today is my update and latest best guess at what they are building. This is a 70% confidence guess based upon my discussions with Merchants, Early Warning alumni, former bank execs, and previous releases (ex Authentify).Continue reading
15 pages (summary is 4)
Follow blog from Payment Authorization – Under the Hood (ie working on a car engine), Trust Assertions – Identity will Define the Future of Payments and Role of Identity and Trust in eCommerce.
Today’s blog is one of my personal favorites, not only because of the topic but because of the leading experts in retail, identity, networks, and payments that collaborated and provided editing (thanks all). While I’m no longer the tech expert, I do have a unique view on the “inside baseball” incentives and realities of what is actually happening (behind the rules). Payments are not like a brand-new Ferrari operating to spec, they are a very messy business with complex rules, worn-out systems, unresponsive drivers and a broke racing team with no sponsor. This is a get-your-hands-dirty blog. Note that I’m open to feedback in case I’ve missed something
- Survey of global identity initiatives
- How identity works in eCommerce today
- Technical example
- How identity improves CX and eCommerce payment flows
- Four future scenarios of identity and payments
- What should investors track
Today it is going live in a limited rollout. Summary points
Retailers should tread very carefully in direct issuer connections
My focus over the last 18 months has been identity, trust, authorization and assertions. Today I thought we would get under the hood a little on the technology of authorization and the current operational issues with a key network service: 3DS.
Per the WSJ Article this AM, US banks have launched a new wallet (again). For frequent readers of my blog, very little new news. Also, I’m just wrapping up a 15-page part 4 “Innovation in Networks” that will be out very soon.
- TCH Banks have been contemplating a mobile wallet and a new network for 13 yrs (I have over 20 blogs on topic, see overview here).
- Today we gain clarity that Banks gave up on their latest Authentify Wallet launch and jumped on board a “white label” SRC wallet led by Visa (See 23Jan2023 WSJ). I outlined this in my SRC blog (Sept 2022) and TCH RTP Update.
- Inital pitch for this wallet was not well received by big retailers at Money 2020. It entailed a liability shift if wallet was offered and all COF were tokenized (see blog)
- The wallet is not owned by EWS, but a new payment network led by James Anderson. The ownership of this new network is the same at EWS (see blog ). Lets call this wallet EWS SRC to shorten the name.
- Competitor is Apple.. the banks want to own the mobile payment experience. Google is working with the TCH banks and is also working with FedNow (long blog coming on this one). It is likely that Apple is not involved in any of these activities, yet Google is working to pilot both FedNow and TCH RTP to leverage their India UPI success.
- Now that the largest TCH banks have jumped on board SRC, the TCH RTP effort focus has shifted to commercial flows and bill payment.
- i provided a detailed strategic discussion on the reasoning behind this move in Part 2 – The Power of Bank Networks.
Short Blog – Chrome AutoFill
I missed a key development 6 months ago: Google’s Chrome autofill began using network tokens in May 2022 (see article) after the Google Wallet relauch which was announced as part of Google I/O. Google now allows issuers to provision cards to the mobile device and to the browser desperately (see Web Push Provisioning) using network tokenization services (VTS/MDES). I discussed this in detail in my 2016 post Browser Tokens.
A Correction to previous blogs. Google’s Chrome autofil has network tokens, but (within the US) does not obtain a liability shift. For Google autofill to get a liability shift (within network rules), they would need to enable the 3DS 2.2 authentication features. Exceptions to 3DS 2.2 are where Issuer has provisioned card with Cryptogram (ie ApplePay card provisioned into wallet by bank). See Mastercard API doc for detail.Continue reading