ePay Summit: An Interview with Annmarie Mahabir Principal Payments Consultant, Endava
By Anton Grant · 13 April 2021
Tell us about Endava and your role.
Endava combines high performing agile teams with payments industry knowledge, to design and build platforms and applications. Enabling clients to deliver seamless and frictionless payments, onboard customers faster and help increase payment transactions. From merchant acquiring to real-time payments, we reimagine the relationship between payments, providers, and users. Over 50 clients trust us across 220 ongoing payment projects.
In my role as a Principal Payments Consultant, I am responsible for providing payment expertise, consultancy and thought leadership to drive innovation and efficiencies for global clients. This requires collaborating with our clients to fully understand their needs and challenges and supporting the delivery teams to successfully deliver innovative, agile and scalable payment solutions.
What digital payments trends do you see on the horizon?
In the short term, the Covid-19 pandemic has had a significant impact on the way we pay. Consumers expect convenient, seamless and contact-free payment experiences. We have seen a major shift towards ‘contactless’ payments, which will continue to grow beyond cards to more alternative payment methods. Digital wallets, QR code payments and other app-based payments will become more mainstream. These ‘contact-free’ payment methods will not only reduce contact during the checkout process but will enable businesses to engage with customers in a safer and more secure way. We already see card schemes launching QR code payments around the world, with global EMV QR Code specifications driving interoperability. Perhaps the next 5 years will see an accelerated trend towards making payments truly contact-free, frictionless and bundled in everyday consumer technology centred on mobile phone technology.
Looking ahead; payments is going through an exciting period of change and innovation and there are several trends on the horizon. The next 5-10 years will see aggressive global standardisation in payments rules, messaging and APIs. As technology advances and consumer demand increases, standards will evolve to streamline payments innovation. Microservices will drive API growth and interoperability will force global standardisation of APIs and adoption of ISO 20022. This will streamline development, implementation and integration across organisations and technologies and increase consistency and compatibility. The global adoption of ISO20022 standards will make payments easier, more secure, more interoperable and with more enriched data. With all major global market infrastructures using ISO 20022 by 2025 we may see messages harmonized across payment systems around the world.
Regulators will demand resilience and security in IT systems and banks will prioritise IT investment over the next 3-5 years, either replacing legacy platforms, acquiring fintechs or integrating with 3rd party vendors to innovate.
Technology advancements, regulatory pressures, increased competition and customer expectations will accelerate the momentum for real-time payments. Open Banking and Open Finance will enable real-time access to all financial data and pave the way for ‘FinLife’ products - individualised financial and lifestyle super apps based on a customer’s past behaviour, transaction patterns and predictive future behaviour.
We will also see a push towards more widespread use of AI and complex machine-learning anti-fraud models to help make real-time transaction decisions. Payment players will find competitive advantage in the accuracy and speed of their fraud and risk models, knowing when to allow transactions to pass through frictionlessly, when to step-up for active authentication and when to simply stop the payment. There will also be more focus on addressing the increase in cyber-crime and data theft caused by the growth in eCommerce, digital payments and cloud services.
What factors will define the future of merchant payments?
As Acquirers and merchant service providers adapt to the pace of change caused by the pandemic and prepare for the next decade, they will need to focus on making payments safer, more secure and frictionless for the consumer, with a consistent customer experience across all channels. From a business and technical perspective, focus will be on streamlining and integrating processes and platforms, consolidating the number of PSPs and 3rd-party providers to enable innovation, gain efficiencies, reduce cost and increase revenue. There will be a move towards integrated payments, upgrading of legacy platforms, alternative payment methods and utilisation of rich data to provide customised products and services.
- Integrated payments: For larger merchants, Acquirers must evolve to become omni-channel, integrated payment players offering a full-service platform, of propriety and partner solutions, with competitive pricing models. Acquirers and processors can enhance the customer journey and boost revenue by creating a ‘one stop’ fully integrated payments solution with a unified API platform. For global players, this will provide a consistent experience across all markets and streamline their ecosystems while optimising the end-to-end payments process.
- Modernisation of infrastructure: Legacy platforms make it difficult and costly for Acquirers and processors to innovate and compete with more nimble and scalable players. By building a new API middle layer on top of their core legacy platform, this will drive innovation and enable Acquirers to support merchants more efficiently without the cost of replacing their core platforms.
- Alternative payment methods: As consumers demand more ways to pay with simpler and faster checkout experiences, merchants will be forced to provide a wider range of APMs. Over the last year, eWallets and Buy Now Pay Later (BNPL) have become increasingly popular. This is partly due to the growth of mobile commerce and the ease of APM integration into checkouts. However, a ‘one size fits all’ approach will not work, the type of APM offered will depend on consumer preferences and geographies, for example, Swish is the payment method of choice for over 75% of the population in Sweden, while MobilePay is used by over 90% of the population in Denmark. The same would apply for BNPL, with Klarna being the top choice for Sweden and Afterpay predominant in the USA and Australia. However, the trend among e-commerce leaders lately has been to offer more than one BNPL option to shoppers. Therefore, for large merchants operating globally it would make sense to consider integrating with the preferred BNPL solution providers in each market as part of their overall strategy.
- Rich data: Digitalisation allows acquirers, PSPs, merchants and 3rd-parties to collect a vast amount of rich structured data. Each player in the payment lifecycle can make use of this data to provide customised products and services to their customers. For example, instead of blanket contracts, Acquirers and PSPs can structure their merchant contracts based on current and historical usage data to provide optimal products, services and pricing models. Merchants can also make use of consumer data to provide customised marketing, recommendations and offers to drive loyalty and sales.
Merchant payments will undergo radical changes in the coming years, and this is by no means a comprehensive list. With innovation comes challenges and costs and Acquirers and other players will have to justify IT spend to build new solutions. As a result, we’ll see a lot more collaboration and commercial partnerships with Fintechs.
With the increasing demand for Mobile Point of Sale (MPOS), what is your advice to better overall mCommerce experience for customers?
Gone are days when MPOS was only used for queue busting in banks, retail establishments and for mobile small businesses. The use of smartphones has rapidly changed the MPOS landscape while the pandemic has transformed the way we pay with our mobile phones.
From an mCommerce perspective, as this demand continues to increase, the merchants who win will be the ones who can provide a seamless and fast checkout experience with a choice of payments methods, be it via their website or retail mobile app. For mid-large merchants, having an integrated payment platform, that links the full purchase lifecycle (ordering, loyalty, paying, inventory, delivery, returns, etc.), would provide the best customer experience. For small merchants, it may be more difficult to justify the cost of a fully integrated solution so a standard MPOS solution may be best. Large merchants who provide their own fully integrated mobile app with loyalty integrated so that customers can also collect and spend points, get offers and discounts and have access to a range of membership rewards, can enhance customer experience even further.
During the pandemic, ‘scan and go’ apps revolutionised supermarket shopping and provided a convenient and fast way to use our mobile phones as an MPOS device using QR code technology. This provides a great customer experience with convenience and flexibility to shop on the go. Our mobile phone is fast becoming the tool to manage all aspects of our personal and financial lives and mCommerce is certainly here to stay.
What are the most effective ecommerce customer loyalty strategies?
Ecommerce customer loyalty strategies take various forms but, in my view, the most effective are the ones that increase retention and encourage spend. This may not necessarily be the one with all the ‘bells and whistles’ but the one that satisfies a customer’s unique needs. For instance, a loyalty programme that offers points for spend will be more attractive than a more sophisticated programme that offers car breakdown cover, to a person who does not own a car.
Loyalty programmes, such as Nectar, which is widely used in the UK, operate on the simple principle of offering a certain number of points based on the size of the purchase, e.g. one point per pound spent, along with discounts and special offers. These points can be accumulated and used to make future purchases or redeemed for some sort of reward. This is probably one of the best types of basic loyalty programmes used in ecommerce because it offers a reasonable number of points and there is no use-by date so can be accumulated and used as needed. In addition, it integrates with partners and allows points to be collected when purchasing from these partners.
Tiered programmes are also good for merchants as it encourages more purchases as customers are motivated to spend to attain higher rewards. Paid VIP programmes can be attractive but only if it offers benefits that are of value to the customer.
The best loyalty programmes, however, are the ones that use customers’ historical shopping data to suggest purchases, provide special offers and provide a more personalised experience. Having a data strategy like this will lead to more satisfied customers, stronger customer retention and potentially increased revenue.
Since mobile devices are now handling an increasing volume of transactions, the question of security has become paramount to businesses looking to step into e-commerce. How can you ensure the security of sensitive data to win the trust of customers and build a solid reputation?
The explosion of ecommerce has seen a significant increase in payment fraud globally, as a result, cyber-security and protecting sensitive data have become paramount. Research by Merchant Savvy shows that Global losses from payment fraud has tripled from $9.84 Billion in 2011 to $32.39 in 2020. Payment fraud is expected to continue increasing and projected to cost $40.62 billion in 2027 – 25% higher than in 2020.
To protect sensitive data and build trust with customers, merchants and their processors must have sound risk and fraud strategies. This includes complying with the various regulations, such as GDPR, PSD2 and PCI DSS as well as employing solutions such as Tokenisation, 3D-Secure 2.0 and biometric authentication.
PSD2 with its Strong Customer Authentication (SCA) is aimed at protecting the consumer and making ecommerce safer and involves the use of two-factor authentication for online payments. Improved authentication is key and the use of biometrics - whether it is fingerprint, facial, iris, pulse or voice recognition – is a fast and accurate way to authenticate a customer while providing a frictionless customer experience and gaining trust.
From the General Data Protection Regulation (GDPR) perspective, it is best to only collect the relevant data required to serve customers and ensure that data is not kept any longer than needed.
PDI DSS compliance is also critical to ensure systems are secure, passwords are properly protected, card data is encrypted and only shared on a ‘need to know’ basis. Being PCI DSS compliant creates customer trust, which leads to customer confidence and repeat purchases.
Tokenisation is also a great security measure to manage online and digital fraud, create smooth customer experiences and gain trust. This process creates a string of numbers called a ‘token’, which is algorithmically generated from the card’s PAN, and has no intrinsic value. As a token is used in place of the card details in transaction processing, it means there is less danger of the card details being hacked or exposed to fraudsters while the payment is being processed. Today all major ecommerce payment providers offer tokenisation, so do the major schemes, Visa and Mastercard. Using a tokenization service is essential in helping to build and maintain digital payment experiences while protecting consumers’ sensitive information from fraud.
As more consumers use their mobile phones for shopping, retail apps are becoming more prevalent. Provided they comply with all the relevant regulations and integrate directly with token management and fraud tools, ecommerce businesses would be well placed to build trust and a solid reputation.
What does the future hold for Endava in terms of expansion plans, tech advancements, or possible partnerships? Key elements for successful global expansion.
Over the past 20 years Endava has been helping Banks, Merchant Acquirers, PSPs, Corporates and Card Schemes to modernise and accelerate their payment products and technology programmes. Although we see this work continuing for us in the financial services area, we foresee the next great growth opportunity to be in leveraging payments expertise in other verticals outside of Financial Services. For example, payments in Insurance to speed up claims, payments in the connected car in Automotive or Retail taking on more payment responsibility themselves.
Finally, what would you like to learn from the EPAY EUROPE participants this year?
It would be great to hear about exciting innovative projects people are exploring.