How Closed Loop Makes Payments More Transparent

Sea change abounds in payments— not just tied to how those payments are done, but also re: who does them and where. And where there is sea change, navigation is paramount, as is a sense of the big picture.

In an interview with PYMNTS, Shaunt Sarkissian, founder and CEO at CS Platform Technologies, stated at Innovation Project 2017 that “particularly everyone has been talking about tokenization,” replacing the card data with something else.

“This year you finally saw it come to fruition in a way that drove a lot of mobile payments solutions that had been pent up,” said Sarkissian.

And within the mobile space, recent events have seen new entrants into the United States, with firms like Alipay coming in, “and that is going to become much more prevalent this year,” he added.

And looking back on the year, Sarkissian noted the PayPal and other deals struck with card networks. People knew that PayPal would either partner with the networks or continue to compete with them.

“I was very surprised at the level of collaboration that happened this [past] year,” said the executive, who added that the result of the combined efforts will be one that is “better for the consumers and better for the merchants.” 

A missed opportunity can sometimes be as noteworthy as what did indeed happen. Another event that Sarkissian thought would happen that did not in fact materialize: greater competition in the hardware space from entrenched incumbents such as those centered on point of sale and other technologies — smaller competitors came to market in a way quicker than Sarkissian would have guessed, he said. 

And looking ahead, Sarkissian said that U.S. companies in the payments space, especially as dealing with merchants and processors, need to be cognizant of international competition, with an eye on companies such as Alipay and Tencent. Those firms might once have been viewed as ancillary to the domestic market, but no more, he said. The U.S. companies “are going to have to look at how to partner or do other things.” 

Looking at the consumer side of the payments equation, Sarkissian noted that “we’ve had six or seven years of very aggressive innovation that has created a lot of shakeout, and I think that out industry needs to be a bit clearer about its value proposition to consumers and then consumers bringing that value and product to merchants.” 

Among headwinds in the payments industry, he said, companies must look beyond mere disruption and seek to collaborate. In terms of innovation, designing and developing a payments solution that does not use existing rails means that “you paint with a blanker canvass.” 

Building from scratch, so to speak, has been a bit challenging for CS Platform and for other firms: “While it’s a green field,” he said, “a green field has no roads.”

Speaking to the embrace of digital payments, Sarkissian stated that digital offers up benefits that cash does not, chief among them transparency. This is useful to industries where federal regulation abounds, he said, where there is state regulation, or where “you need reporting and compliance built in” to these transactions, which he termed “sequestered markets.”  

Even if cards become accepted, say, in the cannabis industry, there will always be the need to manage that ecosystem in a way that traditional merchants do not need to embrace.

In a closed-loop system, he added, “you can track every single dollar in that loop.” 

Closed-loop, he said, “means you can create rules and embed them into the payments system and in particular to some of those regulated markets we are going after at CS — this works very well.”         


Featured PYMNTS Study: 

With eyes on lowering costs to improving cash flow, 85 percent of U.S. firms plan to make real-time payments integral to their operations within three years. However, some firms still feel technical barriers stand in the way. In the January 2020 Making Real-Time Payments A Reality Study, PYMNTS surveyed more than 500 financial executives to examine what it will take to channel RTP interest into real-world adoption. Here’s what we learned.

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