The networks' 'button' is a start, but not enough to beat PayPal
Visa and Mastercard have recently announced they will combine their Visa Checkout and Masterpass payment options into a single button. American Express and Discover Financial Services will also join the project, and all companies have agreed with the framework EMVCo proposed.
EMVCo is the standards body for the payments industry, at the forefront of transactional security. This endeavor, dubbed a “shiny new button” or a “new deal," is a step forward for payment systems.
Although Visa and Mastercard lead overall in online payments, in some countries such as Germany, PayPal even surpasses them in terms of transaction volumes. PayPal is also a convenient payment option for the digital consumers, and it provides a unique and fast option from anywhere in the world. However, are all these payment methods secure enough? PayPal and card solutions are more or less equally vulnerable to online fraud. This comes at a time where e-commerce fraud is up by 30% compared with last year.
The ever-growing number of online frauds, and the increased awareness of data theft, combined with the recent data privacy scandals, are pushing consumers toward (even) more secure forms of payments. This might be the ideal time for Visa, Mastercard, Amex and Discover to focusing on providing a seamless and even safer online experience to consumers.
Let’s have a look at what this endeavor by these big payments players could mean, and what would be the requirements to make it a success.
A unified “button” for all companies Visa, Mastercard, Amex and Discover, will help them fight the NASCAR effect, offering a united front when facing other competitors like PayPal, Amazon or Apple Pay.
At the same time, these card giants are the most experienced when it comes security standards, constantly improving their technology. The new proposed method via tokenization, providing consumers with a digital ID, is more secure and is also perceived as more secure. It could simplify online payments for consumers, issuers and merchants.
This unified method of payment would give online consumers the security reassurance they need in order to make online payments confident that they are protected against new cyber threats.
This welcome initiative still has to face a few challenges and would need to meet some requirements in order to be fully accepted by consumers.
Communication and new checkout options: This was a key reason for the failure of Visa Checkout and Masterpass. These companies have massive networks giving them access to more than enough people to make this a success. They just need to promote the new method more proactively.
Offer support to end users: This is key to improve end-user satisfaction, without which this new unified form of payment will fail. Card network usually communicate exclusively with banks and financial institution; they will need to communicate directly with merchants (and card holders!) to make their solution widespread.
Localization: In order to offer a good end-user experience and make sure this solution is relevant worldwide, the card companies need to take into account local brands that have tremendous influence on local markets (Alipay and Webmoney, to name a couple).
Avoiding repeating past mistakes will not be enough. Visa, Mastercard, Amex and Discover need to bring some added value that could trump PayPal’s already end-user-friendly solutions.
Card networks are usually leaders in standards in terms of security (PCI DSS, MATCH, etc.). This solution offering tokenized digital payments would make it nearly hackproof, providing users with a digital ID effectively replacing cardholder information. This would make this solution cutting edge in terms of cybersecurity. It’s true that ApplePay is also using tokenization, which is a plus, but it is network-based and limited internationally. A truly global network could make a difference.
Another plus for this unified payment method would be to fully use EMVco biometrics solutions like fingerprint, voice and facial recognition. Improvements in this area could place this “new deal” from the card companies ahead of the game.
Finally, all companies (Visa, Mastercard, Amex and Discover) should take into account local competitors, as online shoppers may have different needs based on their regional market.
This initiative is a step in the right direction to modernize digital transactions, but there are some obstacles to be mindful of on the way to success.