How Merchants Should Place Bets In Cross-Border Commerce’s Future

KW: Let’s talk a bit about the trends that are driving payments – and in particular, payments around the world. Certainly, one of those trends is mobile. But with all of the many competing schemes in the market, Apple Pay, Samsung Pay, Google, PayPal, Alipay and others, how are you advising merchants to place their bets and why?

RB: Great question. Long story short, bets are tough – there’s no question about it. But if we’re going to go down that path, we believe that the best bet you can make is on the consumer. Consumer choice will absolutely win in this space. We see that consumers continue to gravitate toward payment methods that are convenient, secure and that add value to their commerce experience. There’s no question that the consumer will continue to influence where mobile payments are going to go.

It’s really interesting right now – I think we’re seeing a real tipping point that’s happening in the industry. Not just in the U.S., but also across the world. Mobile devices are continuing to grow in penetration and adoption, so much so that even Forrester cites research indicating mobile commerce surpassed desktops in retail traffic just last year. That’s a real tipping point. Mobile wallets are growing in popularity – every day there are new developments happening, and we’re reading about how consumer adoption is continuing to evolve. Technology is advancing, making it much easier for consumers to adopt mobile payment capability. Finally, an interesting trend is the widespread swap of all of our current POS technology to this new, convenient wallet-capable technology. It will really make it easier for consumers to use their mobile payment capabilities. We’re seeing in the retail space this impetus to change technology.

So those four key points are critical, and will really help make sure all of this is becoming adopted. It’s really an exciting, emerging time for mobile payments. We’re at the threshold.

KW: I’d agree, we’re at the threshold. Someone has said we’re in the first inning of the first game of the World Series – so it’s going to be a while before the consumer preference becomes clear. Consumers have to process all of this too – it comes down to the devices they choose, the capabilities of the wallet apps, and then what their favorite merchants have and can enable.

But, thinking about the BRIC countries, that’s certainly a very attractive basket of consumers for merchants looking to create incremental value for themselves. What’s the consumer preference with respect to payments in those areas, and how does a merchant respond to those choices and capture that consumer momentum?

RB: The BRIC countries are emerging – you’re absolutely right. Speaking from an infrastructure perspective, mobile technology is absolutely positioned to leapfrog any sort of land-based technology. From that perspective, it’s also important to recognize that the BRIC markets are also really talking about four different countries, all of which will exhibit different capabilities. So when we talk about payment methods, for Brazil – it’s cards, installments, Boletos. Russia: Yandex, cards, wallets. India: Interestingly, cash on delivery is a dominant player there. Also debit, but not so much credit. And for China: Alipay and Unionpay are emerging as the primary payment methods.

KW: So how does a merchant that’s trying to enable the acceptance of the basic types of payment that are consistent around the world, and then adapt to payment types in these local markets? That seems like a complicated thing for them to sort out.

RB: I agree, there is a lot of complexity in these emerging markets. How I tend to think about it is in two categories – one is the payments process, and two is the commerce business model. Successful commerce is conducted by the payment method of choice. For the payment method of choice, while still emerging in these markets, we’re starting to see more and more dominant players. They’re different by market.

So if you’re a merchant emerging into these markets, you need to be prepared to understand that market, understand consumer choice in that market, and ensure you’ve got payment methods that support that. At the end of the day, commerce is not commerce unless you can close the loop with your payment transaction.

So I think that’s critical. Let’s talk about the business model, too. From a merchant’s perspective, local is critical – local sites, local languages, local payment methods. All of that is from a commerce perspective, but close the loop from entire consumer experience. You have to have the ability to manage returns, provide customer support, and that end-to-end commerce experience that meets their needs.

KW: Let’s talk about how that influences the direction and the trends that will drive payments over the next couple of years. I agree that payments will become a large part of the broader commerce experience, but that suggests a lot of other things will emerge to create momentum and move payments forward.

RB: So, the crystal ball. I think there are a handful of trends we’re going to see. Those include virtual wallets – those have been around, but haven’t been mainstream. You see them in the gaming space, occasionally in the online space. They’ve come and gone, and attempted to get traction but haven’t succeeded. I think that is changing. Virtual wallets are absolutely here to stay, and some of the technology we talked about earlier supports them. With the Internet of things, things will pay. Right now, they communicate. But things will migrate toward payments. That’s the ability for these things to communicate and now conduct commerce transactions.

Wallets are also cool, but at the end of the day, what will tip them are payment methods that add value. That’s coupons, or transactions that are unique to the individual commerce experience. Just accepting cards or accepting payment methods from your wallet won’t be enough to fully get consumers to adopt. And at the end of the day, consumers will migrate to wallets of their choice, and that will vary by region and will ebb and flow in the states.

KW: What’s interesting, if you think back to how payments has evolved, initially acceptance was a real differentiator. If merchants didn’t accept cards, consumers found that to be unusual, and demanded that they did. Once everyone accepted cards, then it became something else that drove preference, use and adoption.

It’s very similar now, because a lot of these cross-border requirements are initially acceptance – you have to accept as a merchant the method of payment that consumers want to use at that particular merchant. Then it has to be about more than just that. It’s not necessarily history repeating itself, but it’s instructive to see how things may evolve going forward, and how critical it is that the future be about more than just enabling payment. 

RB: I absolutely agree with you. And I think history is a fair predictor of where payments will go. Remember with PayPal was considered to be an alternative, obscure payment method? That’s no longer. We’re seeing that again in the wallet and gaming space – that’s going mainstream now.

KW: You mentioned the Internet of things and commerce of things, and that reminded me about a conversation I had recently about tokenization and how that may in fact help to propel the commerce of things because it enables the distribution of secure identity, not just secure card credentials.

RB: Tokenization is an interesting conversation. It’s been around for awhile – this is not a new technology. However, what I find interesting is that it’s becoming much more at the forefront to the consumer experience. They are now talking about it and understanding it, but 4 or 5 years ago, it was never discussed. I think that the reason that’s so critical is, again, we go back to what makes the consumer comfortable? That will drive payment methods. And now that consumers are actually acknowledging, talking about, recognizing and understanding what tokenization is all about – and making that part of their buying decision and decision around what payment types they’ll use – I think that tokenization is now becoming a dominant force in how consumers are choosing to pay.

KW: Thanks for reminding us that tokenization isn’t new – that’s hard to believe these days based on the prominence that tokenization is getting. But there are new things about tokenization, especially as it’s been developed by the networks and embedded in Apple Pay and other schemes. What about tokenization today is new?

RB: I think tokenization has been around forever from a PCI compliance perspective, the back-offices, the hardware technology, and the concept of separating data elements from one another. What’s new is that now you’ve taken that concept and one, made it mainstream, two, put it in the hands of the consumer, and three, explained it to the consumer. While the technology continues to evolve, at the end of the day, it all evolves toward making sure that useable transaction devices are tokenized, the consumer knows that, and has the comfort level around it.