Year-end holiday spending for 2023 reached a record $964.4 billion, according to the U.S. Census Bureau, and Klarna noted that 96 percent of its BNPL users paid off their holiday purchases on time or early. Meanwhile, U.S. banks indicated they intend to maintain or increase tech spending this year, focusing in particular on faster payments.
However, fraud is on the rise, and new attack schemes are empowered by AI. Plus, J.D. Power found that SMB merchants are increasingly dissatisfied with service providers, particularly those offering credit and debit card payments but not newer options such as QR codes, paying with points and BNPL.
With that in mind, we asked members of The Green Sheet Advisory Board for their perspectives on the following questions:
Following is the first set of answers featuring Lane Conner, president of payments at ParkHub, Allen Kopelman, CEO of Nationwide Payment Systems Inc., and Jeff Shavitz, CEO at ToolBox Payment.
1.To remain relevant to today's younger generation of merchants, payment companies must prioritize digital payments, enhance user experience, support omnichannel payments, personalize offerings, prioritize security, embrace emerging technologies, and foster collaboration and partnerships. By staying attuned to the evolving consumer preferences and market trends, payments enterprises can continue innovating to deliver value-added solutions that meet the diverse needs of today's merchants and consumers alike.
Younger generations value personalized experiences and customization options. Payments enterprises can leverage data analytics and machine learning algorithms to gain insights into consumer behavior and preferences, offering tailored payment solutions, loyalty programs and targeted promotions that resonate with their target audience.
4. One challenge that the payment industry faces with faster payment implementation is ensuring the security and reliability of transactions in real-time. Faster payment systems, by their nature, can increase the risk of fraud, errors and system vulnerabilities. To overcome this challenge, payments industry stakeholders must prioritize robust security measures, including encryption, tokenization, biometric authentication and real-time fraud detection algorithms.
Additionally, investments in advanced fraud prevention technologies, such as machine learning and artificial intelligence, can help identify and mitigate fraudulent activities in real-time. Collaborative efforts between payment service providers, financial institutions, regulators and cybersecurity experts are essential to establish industry-wide standards and best practices for securing faster payment systems effectively.
Another challenge is ensuring interoperability and connectivity between different payment networks and platforms. Faster payment systems must seamlessly integrate with existing infrastructure and support interoperability between diverse payment systems, banks, merchants and payment service providers. To address this challenge, industry stakeholders should collaborate to develop standardized protocols, APIs and messaging formats that facilitate interoperability and enable seamless communication between different payment systems.
Additionally, investments in modernizing legacy infrastructure and embracing emerging technologies can help overcome interoperability challenges and create a more interconnected and efficient payments ecosystem.
Furthermore, regulatory and compliance considerations pose challenges for faster payment implementation. Regulatory requirements, such as anti-money laundering (AML) and know-your-customer (KYC) regulations, data privacy laws and consumer protection mandates, must be carefully navigated to ensure compliance while maintaining the speed and efficiency of faster payment systems.
Payments industry stakeholders must work closely with regulators and policymakers to develop regulatory frameworks that strike the right balance between innovation and risk mitigation. Investing in robust compliance programs, conducting regular audits and assessments, and providing ongoing training and education to stakeholders can help ensure adherence to regulatory requirements and mitigate compliance risks associated with faster payment implementation.
Overall, addressing these challenges requires a coordinated and collaborative effort among payments industry stakeholders, including financial institutions, payment service providers, technology vendors, regulators, consumers and lawmakers.
By prioritizing security, interoperability, and compliance, and leveraging advanced technologies and industry standards, the payments industry can successfully overcome the challenges of faster payment implementation and unlock the full potential of real-time payments.
Friendly fraud is a huge issue, and merchants need to take fraud seriously by checking shipping addresses for large orders or orders that seem too big. Shipping to UPS stores and other places will usually result in a chargeback.
The business is changing at a rapid pace and payfac-style boarding and software companies adding payments are growing at a rapid pace.
Having spent 25 years in the payments industry, of course, a lot has changed but candidly as I see it from my perspective, still much has NOT changed. Merchants still want a good solution at a fair price from a reputable ISO salesperson. With that quick preamble, here are my direct answers to the GS's questions.
While launching my new ISO, we have adapted by expanding our payment solutions to include these options, ensuring that our merchants can offer the flexibility that modern consumers demand. We've also focused on enhancing the user experience across various channels, including mobile apps and online platforms, to meet the expectations of tech-savvy consumers and consumers in general.
As I write this, I think about airline travelers who get upset when they don't have Wi-Fi on the plane, as just a few years ago, you would be offline for the duration of the flight. Now, we as a society are so used to fast/fast/fast for quick transactions.
Additionally, we are investing in customer analytics and market research to better understand evolving preferences and behaviors, allowing us to tailor our services accordingly and maintain a competitive edge. Big data is no longer only for the big companies, and entrepreneurial ISOs and salespeople must provide an enhanced user experience to each merchant to create that long-lasting relationship, which doesn't only reflect how many basis points above interchange you're charging.
During our monthly calls, we continuously ask about new functionality and feature sets regarding fraud. Additionally, we educate our merchants with quarterly webinars about best practices for secure transactions and provide tools and resources (even if third-party companies) to enhance their awareness and vigilance against fraud.
While the transition to faster payments may take time, it is indeed a growing trend, driven by consumer demand for instant gratification and seamless experiences. As faster payments become the norm, they will revolutionize the way businesses operate, enabling quicker settlement of transactions, improving cash flow management, and fostering innovation in products and services.
We wish to thank the industry leaders who took time out from their busy schedules to offer their insights, helping us in our mission to empower and connect today's payments professionals.
The Green Sheet Inc. is now a proud affiliate of Bankcard Life, a premier community that provides industry-leading training and resources for payment professionals. Click here for more information.
Notice to readers: These are archived articles. Contact names or information may be out of date. We regret any inconvenience.
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