To the average consumer, payments looks pretty simple and straightforward — especially when paying online. Enter a card number, hit buy and a millisecond later, the countdown to getting the goods begins. For those that use a mobile wallet, it’s even simpler.
And while building all that simplicity for consumers is a good thing, actually making it simple — and secure — is basically what makes the digital commerce world go round. Study after study has shown that long and complex checkouts are also transaction killers, especially when the complexity is the result of connecting disparate systems and protocols that make it harder for legitimate consumers and merchants to meet and make a sale.
“All of the payments industry isn’t as connected as one might think,” CardinalCommerce’s founder and CEO Mike Keresman told Karen Webster in a recent conversation. ”The hardest thing we’ve had to learn is to migrate all those connection points. You can have a merchant with seven or eight pieces of software, or an airline with several different parties to the transaction. The key — and it’s incredibly hard — is to navigate all those connections and plug in to the right place in the right way.”
Mark Nelsen, senior vice president of Risk and Authentication Products at Visa, was also part of the chat and noted that Visa, with its billions of cards in the market and 14K employees, is now turning much of its attention to making all those parts work together in the rapidly evolving digital era of payments.
“The industry is extraordinarily complex with a lot of moving parts,” Nelson remarked. “We learned to harmonize a lot of those parts so that all of the payment world can work together.”
And, as it turns out, working together and harmonizing better was much of what brought Keresman and Nelsen in for the chat — as Visa and CardinalCommerce managed something of a surprise announcement yesterday with the news that the former will be acquiring the latter in Q1 2017.
What Cardinal Brings To Visa’s Table
Cardinal is small player — when you count up its employees, there are only 150 of them. But, to paraphrase Shakespeare, though they may be but little, they are fierce. They also punch well above their weight, as they were one of the early pioneers and global leaders in enabling authenticated payment transactions in the card-not-present payments industry. They also run the largest authentication network in the world.
And that, noted Visa’s Nelsen, made the acquisition a very easy decision.
“Cardinal has done a really good job with 150 or so people and they’ve been primarily focused on the U.S. If you can combine that now with Visa’ s 14k employees who have connections with every issuer globally, with all of our key acquirers and technology providers — we think there is a way to really use the best of our assets to accelerate that adoption,” Nelsen noted.
And that acceleration, both Nelsen and Keresman affirmed, is meant to be a boon to the entire industry — not just Visa.
The goal is for CardinalCommerce to run as a wholly owned subsidiary of Visa — meaning current clients won’t be negatively affected as “we will continue to support the many different payments brands and technology providers” already working with Cardinal.
Which lead Webster to ask the obvious question: Visa and CardinalCommerce have been working together for the last couple of years – and getting the benefit of their platform, so why acquire, and why now?
The simple answer, Keresman told Webster, is scale. Cardinal can punch above its weight — but it isn’t going to get to be Visa-sized anytime soon. And all that size, scope and scale carries with it a lot of narrative power, especially as Cardinal is making its case to merchants around the world.
“We thought that the network effect is key. We know each other’s capabilities — and now we know how to marry this distinct data that merchants have with issuers — now we can take it from a local to a global phenomenon. And using the size of Visa to get that vision achieved — that is just the best possible world for us.”
For Visa’s part, Nelson noted, Cardinal fits in almost perfectly with Visa’s vision for the next phase of commerce in the digital era. Merchants, he noted, definitely don’t want to let fraudulent transactions through — but in recent days and weeks, the real fear that has emerged is turning away the good ones for the wrong reasons — false declines. The acquisition ties the platforms that much closer together — and removes various steps in the smooth flow of checkout.
It all comes back to that surprisingly fragmented and hard to navigate world of payments, Keresman noted, and the reality that doing it teamed up with Visa will always and everywhere be an easier march than doing it without Visa.
“Visa represents issuers, and if our platform can talk to those platforms directly, you are really able to take a lot of that incremental friction out of the equation, ”Keresman emphasized.
The key is speed. As Nelsen and Keresman noted, the world is changing, and the needs of consumers are changing right along with it.
“It took Visa over 50 years to get to the 3 billion card mark,” Nelson told Webster,”in the next five years, pundits are predicting there will be between 20 and 50 billion connected devices in the market. This is really about our ‘Phase Two’ — and making sure we are ready for that change.”
The goal, both noted, is a world without passwords — and one where authentication is good enough that it almost sits entirely under the surface of the sea, not bothering the customer who is transacting on the visible part of the iceberg.
It’s a long road — and one with a whole of competition. But Visa and CardinalCommerce are betting that with the combined power of their data and connections — they’ll travel it a lot more efficiently together than apart.