The ever-evolving world of payments is probably one of the most exciting fields in the fintech industry. Technologies and regulations are constantly changing to keep up with consumer demands and new regulation – impacting all areas of the payments value-chain.
Payments expert and CEO of the Aarhus-based merchant acquirer, Clearhaus A/S, shares his views on the current and future trends that could potentially shape European fintech.
PSD2 will be a catalyst for change
Whether you see it as an opportunity or a challenge, the new Payment Service Directive (PSD2) will shake things up. One of the PSD2 topics, Strong Customer Authentication (SCA), will become mandatory in September 2019 – forcing all entities involved in a transaction to implement SCA, e.g. using 2-factor authentication. Payment service providers will turn to 3-D Secure features such as Verified by Visa and Mastercard SecureCode, as they are the easiest ways to fulfil the new requirements.
“Back in early 2018, when PSD2 had just come into force, we foresaw the challenges it would create for our partners and other PSPs across Europe, as it requires heavy manpower investments. That’s why we developed a modern SaaS 3-D Secure MPI for all PSPs to use. The 3-D Secure MPI is acquirer agnostic, which means a PSP or payment gateway can use it no matter who their acquiring partner is.” says Claus Methmann Christensen.
“Just like we opened up our solution for all to use, we expect more collaboration in the industry the closer we get to the PSD2 deadline. There will be more funding and partnerships between fintechs and traditional banks – creating better, more competitive solutions for consumers.” he adds.
The fight against fraud will heat up
Although the new SCA requirements set by PSD2 will make it extremely hard for fraudsters to misuse stolen cards or card information, we shouldn’t expect them to hang up their boots anytime soon.
Fraudsters will simply find new ways to make money. “Since defrauding consumers will become increasingly difficult, we believe that cyber-criminals will turn their attention to payment companies and merchants. They will resort to other tactics like AML, tax fraud, sanctions evasion fraud – like Mastercard’s MATCH list -, regulation and law enforcement” says the payments expert.
Payment Institutions & PSPs will need to have sophisticated BI systems in place as a standard offering going forward, to remain competitive in the marketplace.
He adds “as a merchant acquirer, we’re doing everything in our power to protect our merchants against fraud. Our in-house risk-mitigation system ‘Riskr’ has saved our merchants 2.3M EUR in fraud-related losses, by blocking cards associated with a history of fraudulent behaviour.”
Mobile will take over
Consumers’ back-pockets are getting lighter, as they continue to replace physical cards with digital wallets. Mobile payments aren’t just another fleeting fad, they’re growing in usership and they’re here to stay. “Just look at Denmark’s own MobilePay. It’s usership grew from nothing to 4.1 million in 6 years. As we process thousands of Danish transactions everyday, we soon expect one in every four online transactions to go through MobilePay Online.”
Big tech also wants a slice of the “payments pie”, and they pose tough competition for local bank-led European players. The world’s second-most valuable company – Apple – has strengthened its roots in Denmark as 18 Danish banks recently announced their support for Apple Pay.
Apple holds roughly 50% of the Danish smartphone market and Apple Pay is integrated in all new iPhones. This gives the American wallet an edge over its local counterparts. “Apple Pay’s smart typing-free, biometric identification makes its checkout the fastest in the market today and also fully compliant with PSD2’s SCA requirements. We strive to be on the forefront of payment technologies and support not only Apple Pay, but also Google Pay – which we are currently beta-testing”, says Claus Methmann Christensen.