Originally published in PYMNTS
By Bruce Parker
Maybe, just maybe, the glacier that is payments infrastructure is shifting. Even possibly … calving!
A long, long time ago when banks were created they were built into siloed systems on legacy platforms. And that worked! Well! For a while. A very long while, it has turned out. Now, we are seeing the difficulties of working with these closed systems as more folks try to increase the number of methods of payments to add to the checkout (as made obvious by the PYMNTS Checkout Conversion Index), or want to connect corporations to digital payments systems for payouts like BAML is doing with PayPal. As we crest the hump of 2018, we as an industry are making great strides in realizing the need to collaborate and share data (whether that realization came by force from regulation or by the desire to innovate). There has been a major shift in becoming more “Open” in payments. One might even say it’s a push for interoperability. And that’s something I am very, very excited to see as a provider of interoperability.
There are three major ways I’ve seen the shift to Open in the past six months:
- Open Banking, like our friends in Europe doing PSD2
- Payments moving to the cloud, because EVERYTHING else is moving to the cloud
- Digital networks creating new payment features, that facilitate commercial exchange
Although initiated by regulation, Open Banking has opened everyone’s eyes to the value and necessity of sharing data in order to create better user experiences. Third Party Providers (TPPs) are finding the niche in the market to aggregate information or enable ways for banks to connect to one another. Countries all around the globe are now working towards creating Open Banking standards following PSD1 and PSD2. But, the opportunities of Open Banking don’t end with giving customers more exposure to the multiple accounts that hold their financial assets and liabilities. With better insights into customer behavior and connections between banks, merchants, corporations and consumers, we can give customers (of each type) a more customized experience wherever they may be. We can allow them to pay how they want, where they want, and when they want. That will unlock even better innovations between banks, corporations and merchants.
In the past few months, there has been a broader acceptance of moving payments data and services into the public cloud by banks and corporations. Getting software to the cloud means that you get the benefits of all the most modern enhancements and improvements in technology without having to manage the operating systems, security techniques and data management yourself. Not only is that a huge efficiency point, but as we become more Open across the board, we will need more shared connections for data. Being in the cloud democratizes those connections and allows us to begin to function more like a network of networks (similar to the internet). We’re still geeking out about getting our clients to accept the cloud as the basis for our services, including Alliance Data, Bank of America, FIS, Mastercard and Klarna. It’s a thing.
Lastly, digital networks like Facebook and Alibaba have an enormous amount of data about their customers lives and they are constantly looking for new ways to create connections between them. Every payment requires a connection, so it only makes sense that the social networks are seeking to enable payments between users of networks. We have seen this with Alibaba creating the very successful and growing Alipay along with a multitude of other networks now offering payments features like WeChat’s WeChat Pay and WhatsApp’s new payment feature. More recently, Google Pay has announced an open and interoperable approach to checkouts. Payments don’t have to be traditional services of just banks anymore. And in more and more cases, they aren’t. As an industry we have to focus on creating interoperability between systems in order to stay relevant in the ever changing payments landscape.
Modo is totally loving this new age of Open because we enable interoperability between payment systems. As companies realize the need to quickly connect to the different payment systems becoming available, they also realize how difficult it can be to connect new systems with legacy systems. And vice versa. That’s where Modo shines, playing it both ways. We are dedicated to reducing the friction in payments, and we make it simple to create new innovative payments experiences leveraging the payments systems we have and the payment systems that folks are building. We’re looking forward to the collaboration to come!
Check out the full PYMNTS Mid-Year eBook here.