A Future the Payments Industry Should Demand for Digital

The global networks’ ambition for streamlined e-commerce with a single buy button sounds great—until you consider all the implications and ponder the unanswered questions. Here’s an alternative approach.

As consumers leverage digital channels more often for transacting, there has been a sense of optimism that new technology players offering creative consumer experiences will enhance overall retail commerce. Recently, however, it has become unclear if that optimism is fully justified in light of a new remote-commerce framework being introduced by the global payment networks (“The Shared Checkout’s Slow Check-in,” June).

Late last year, EMVCo, the standards body controlled by the global card networks, announced a new Secure Remote Commerce Framework that promises to facilitate interoperable and secure payments in remote-commerce channels specific to network-branded payment cards. It also promises to deliver security, standardization, simplification, fraud reduction, and increased conversion for digital commerce—all of which are goals shared by the merchant community. Global networks recently announced support for this framework.

Although these are shared goals, merchants have reservations due to the limited details on implementation plans and impact to the customer experience. Moreover, the Merchant Advisory Group has concerns about other implications this framework may introduce, regardless of intent.

Not Forward-Thinking

Visa’s chief executive, Al Kelly, has said the move to the SRC framework and a single buy button (which other networks seem to support) will be analogous to the situation you see in the physical world, where a single terminal processes all network payment products. He describes the current e-commerce world as equivalent to a physical checkout with multiple terminals, which he describes as a terrible experience.

I would agree wholeheartedly that the incredibly confusing and cumbersome list of payment brands a consumer must consider—as required of merchants by network brand guidelines—is quite disappointing. Layered on top of that is each network’s own proprietary buy-button solution, including Visa Checkout, Mastercard Masterpass, and American Express Checkout. Indeed, the networks have fostered the very digital environment in which friction proliferates and which they now deplore.

Although improvements that would provide a simpler and easier digital-checkout experience are definitely warranted, creating a digital experience that replicates the physical experience is not a forward-thinking direction. The SRC framework or single buy-button concept that would support this approach appears to simply port over a network-centric model to the world of digital payments.

The framework and related draft technical specification for SRC are being designed under the leadership and market influence of the major global payment networks. In light of the insignificant uptake for their own digital wallets, these global networks appear to be looking to migrate those products into this new SRC system, enabling the single buy-button experience.

The implementation of this specification will be encompassed in a model with costs, rules, and requirements defined by the networks themselves. The MAG’s concern is this approach may bring into the digital world some of the issues that exist in the brick-and-mortar world.

Limitations

For example, currently any merchant that accepts the EMV contactless specification (also published by EMVCo) must accept all wallets, which is a silent extension of the long-established “honor all cards” network rule.

In addition, there is no visibility provided to the merchant as to the identity of any third-party wallet presented at the terminal, since the wallet-identifier field is an optional but unused field in the technical specification as a result of individual network implementations. I suspect this same limitation would be implemented in this new SRC buy-button model.

Another example is the limitations that payment tokenization, as designed by EMVCo and implemented by the global networks, place on debit-routing capabilities. To date, some networks have made it very clear that merchants must choose between security (in the form of network payment tokenization) and their debit-routing rights should they choose to implement MasterCard Digital Enablement Services (MDES) or Visa Token Service (VTS) for in-app or ecommerce payment transactions.

This inhibition on merchant debit routing is not due to any technology limitation. Rather, it’s due to business practices, commercial arrangements, and inaction with respect to enabling this capability. These are solvable, should those global networks choose to do so.

Recently, one network offered cause for cautious optimism with respect to addressing limitations on merchant debit routing for tokenized transactions. However, until there is clarity on how this functionality would port across all networks and into SRC, respectful concern remains in the merchant community regarding this new SRC “buy button” model.

Other Issues

There are other issues. The network-centric model incorporates operating rules that haven’t progressed as fast as modern-day payment experiences have. Consumers like to shop and transact across various channels, yet the rules merchants must follow to avoid compliance violations do not seamlessly support these cross-channel experiences.

In addition, the network-defined liability and cost models haven’t progressed sufficiently in this omnichannel world to support the blurred lines between physical and digital shopping and transacting. Until the operating rules are modernized and the liability rules become more balanced, I suspect these challenges will remain, regardless of how the SRC technical framework and technical specification are implemented.

In this network-centric model of a single network buy button, what other implications might there be? Will a merchant, on its own e-commerce site, still be able to prompt a consumer with a seamless proprietary payment option such as the Target Red Card, the Kohl’s private-label card, or the Amazon Pay alternative that offers customers a value exchange? Or will that flexibility be sacrificed?

How can merchants possibly integrate into a single network buy button the capability to discount or surcharge (where acceptable), or, more broadly, to prompt for payment alternatives, with incentives that benefit both the consumer and the merchant? These options foster competition, but it is difficult to ascertain what the implications will be in a single network buy-button scenario.

The question of who will fulfill the roles and responsibilities outlined in this framework is still unclear. Who will have the technical capabilities to fill these roles? How do providers understand what is required to participate in any of these roles? How do interested and capable parties onboard? What are the compliance requirements? Who will enforce compliance?

‘A Far Better Approach’

Unfortunately, those parties not at the EMVCo table will continue to have more questions than answers, while those sitting at the EMVCo table are farther ahead in their influence over the design of SRC, and ultimately farther ahead in their own development and implementation plans.

Visa has already announced plans to transition Visa Checkout accounts, and those parties that support VCO, over to SRC, starting this fall. The technical specification hasn’t even been published, yet Visa is able to announce a deployment leveraging the unpublished specification.

By design, go-to-market is much timelier for those parties that co-develop and obtain advance access to technical specifications, leaving those that do neither to just wait and see. This puts competition at an unfortunate disadvantage.

Finally, this lack of cross-stakeholder engagement early in the design will risk a payment product being introduced that once again will not be deployed by the industry. Why? Because the product doesn’t meet the needs of all stakeholders, or the development and deployment cycle is too difficult and disruptive to retail businesses, or the return on investment is not positive or even neutral.

I encourage the global networks to engage all stakeholders now in the design of this solution, without a pay-to-play model, so we can get the digital-commerce experience right in a safe and secure manner.

In the words of the Electronic Payments Coalition, “A far better approach is to encourage retailers, issuers, and networks to collaborate on developing and implementing a holistic, dynamic security strategy that provides real protection for consumers.”

The MAG couldn’t agree more. We have been advocating for this approach for a decade. Let’s create an open forum to collaborate among all stakeholders. Let’s move away from this approach by which global networks are leveraging a standards body where decisions are owned by one stakeholder group. That fosters a “pay-to-be-informed” membership model with stringent confidentiality requirements, limiting even a paying member’s ability to participate effectively.

Our mutual customers deserve a much more collaborative approach.

—Laura Townsend is senior vice president of operations at the Merchant Advisory Group. Reach her at laura.townsend@ merchantadvisorygroup.org.