The Shared Checkout’s Slow Check-in

Sky-high abandonment rates, PayPal dominance, and a new online standard are pushing the major card networks toward a common buy button. But don’t look for that to emerge any time soon.

When the major card networks in April started talking about what they called a common buy button for e-commerce, observers of the payments industry could be forgiven for wondering what was up.

After all, Visa Inc. and Mastercard Inc. had made heavy investments in time and money trying to establish Visa Checkout and Masterpass, their respective digital wallets. Master­card, indeed, reintroduced Masterpass only two years ago as part of a brand refresh. And Visa in 2014 did much the same for Visa Checkout, which had been laboring under the name V.me.

Yet none of the network checkouts has been measuring up to PayPal Holdings Inc., which claims a much larger share of the top 10,000 Web sites globally (chart, page 19). For that matter, even Apple Pay and Alipay are ahead of Visa and Mastercard.

In that context, orchestrating a shared button consolidating online checkouts may seem to make some sense, regardless of the sunk investment in the individual brands. “It doesn’t appear they’ve gotten traction on their own,” notes Thad Peterson, a senior analyst at the Boston-based consultancy Aite Group LLC. “It’s smart for them to consolidate to compete with Amazon and PayPal.”

‘Sketchy Half Statements’

But there’s one big cautionary note: Whatever shape this unified checkout takes, the end product will be a long time in coming. With each week that passes, the concept takes on more definition, but despite all the discussion, the idea of an online checkout shared by multiple payment networks remains too vague—and too futuristic—to suit some expert observers.

“I keep looking for confirmation that they’re actually working on this,” says Rick Oglesby, principal at payments consultancy AZ Payments Group, Mesa, Ariz. “I keep finding sketchy half statements.”

Moreover, questions abound about branding and who will—and will not—be allowed to participate. Will the debit networks, for example, be invited in? If not, will merchants’ routing rights be respected?

A few tantalizing hints about Visa’s thinking on the matter emerged last month when chief executive Al Kelly confirmed that there are “a lot of meetings going on, on things like branding and what will the actual button look like.” But he also said experts at Visa are “still going through the technical specifications to make sure we understand exactly what we have to do to implement it,” according to a transcript of the session.

Kelly made his remarks during a question-and-answer confab with a JPMorgan Chase & Co. analyst at a technology conference sponsored by the bank.

The “technical specifications” mentioned by Kelly refer to the Secure Remote Commerce (SRC) spec recently drawn up by EMVCo, a standards body controlled by six global card networks, including Visa as well as Mastercard, American Express Co., Discover Financial Services, Japan’s JCB, and China’s UnionPay.

A technical framework for the spec was released Nov. 1, but the spec itself so far is available only to subscribers. The framework spells out a structure that calls for tokenization of online transactions, cooperation with EMVCo’s new 3-D Secure protocol to prevent fraud (“Securing the Future of 3-D Secure,” July 2016), and a simplified online purchase process for consumers.

One objective, for example, is “[r]educing shopping cart abandonment by decreasing repetitive manual PAN entries.” The PAN is the primary account number printed or embossed on each card. Consumers continue to walk away in huge numbers from online sessions at the point of buying, a point of major frustration for merchants and payment providers alike.

And the problem only promises to get worse. Abandonment rates for mobile phones, which are accounting for more and more online commerce, were 13 percentage points higher than for desktop machines over the busy Black Friday to Cyber Monday weekend last year (chart, page 20). Yet mobile phones are expected to generate $295 billion in worldwide volume by 2020, up from $79 billion in 2016, according to Aite (chart, page 20).

‘Very Streamlined, Far Less Friction’

But relief is likely some time off. While TS Anil, global head for payment processing products and solutions at Visa, said publicly last month that the card company will begin moving its digital wallet, Visa Checkout, to the SRC standard late this year, some observers estimate full implementation of a common checkout will take much longer. Aite’s Peterson, figures the effort will take three to five years. “It’s not going to be fast,” he says.

Why so long? The details to be worked out are many and complex, and that working-out process depends on agreement among EMVCo members that entertain conflicting interests and competitive agendas.

For his part, Kelly ventured some general speculation at the JPMorgan conference on how the common button might work with respect to branding. “It’ll be … like in the physical [point-of-sale] world where there’s a number of networks represented on the same decal, it’d probably be something similar to that,” he noted.

As for the common button’s interaction with consumers, Kelly had this to say: “They don’t have to look at all the various options and buttons they see, some kind of buy button yet to be defined and branded. It’ll open up a wallet. They’ll have probably a card preselected. They can override that, select their product and confirm their purchase. Very streamlined, far less friction …”

The question is, says Oglesby, who will control that wallet that opens up? And if it opens access to any wallet enrolled by the consumer, he asks, who controls that enrollment?

Other parties, too, are waiting for more definition of the networks’ unified-checkout approach. Merchants, for example, fear the big card networks may shut them out of the development work and possibly disregard their routing rights when it comes to debit checkouts.

The very fact that the SRC specification is available only to subscribers on the EMVCo Web site is disturbing in the face of Visa’s statement that it wants to act before the end of the year, says Laura Townsend, senior vice president of operations for the Merchant Advisory Group, a Minneapolis-based trade group for major retail chains and airlines.

“It’s a speed-to-market challenge for merchants that have their own pay buttons,” Townsend says. And yet, she says, “We don’t have access to the spec.” Rugged as the road to a common buy button may be, the big networks have one key advantage, she argues. “Those who own EMVCo have the advantage of being best prepared to roll SRC out quickly,” she says. “Anyone who’s not a major brand is at a disadvantage.”

At least some debit networks, too, view the move to SRC and a common checkout with skepticism, having recently battled the big card networks over chip-based debit card transaction routing. “We are seeking to understand what EMVCo is going to allow, who they are going to allow” under a unified checkout scheme, says a spokesman for the Johnston, Iowa-based Shazam network in a prepared statement for Digital Transactions.

‘The Experience Stinks’

Regardless of how long it takes to create a streamlined, online checkout that serves for all or even some interested payments parties, the networks concede they must act soon, before cart-abandonment rates become even more dismal and PayPal and Amazon.com Inc. open up an even wider market-share gap over Visa Checkout and Masterpass.

The proliferation of acceptance marks online doesn’t help, especially on small mobile screens. “What we have today is the moral equivalent of having to ask a face-to-face merchant to have a different terminal for each network,” Kelly said at the JPMorgan conference. “Imagine the confusion at the point of sale if you had seven or eight terminals.”

Summing it up for merchants and consumers, he added, “the experience stinks.”