With cashless and contactless becoming more important in the context of COVID-19, ACI Worldwide’s Lu Zurawski examines the evolving future of payments.
When something of the magnitude of the COVID-19 outbreak sweeps the world, systems are forced to change, to adapt. Global crises, whether economic, military or biological, serve to expose society’s structural weak spots, which experts swiftly rally around to engineer future-proof solutions.
It’s through this process of evolution that systems develop immunity to future challenges. Yet, with much crisis reporting focussed on the threat of system collapse, there’s glaringly little analysis of its flipside: system fortitude. How many, for instance, could have worked from home two decades ago, or shopped for groceries online, or used a digital NHS portal to arrange treatments? Or when, in March, the World Health Organisation (WHO) advised extra caution around handling cash, been able to pay by contactless card or phone? Of course, digital payments were developed without consultation with epidemiologists – but that’s what future-proofing looks like: devising solutions to unforeseen problems.
It’s what ACI Worldwide, with its vision of enabling ‘any payment, every possibility’, was built to do. Founded in 1975, the world-leading payments solutions provider can confidently claim to have all bases covered when it comes to facilitating global transactions.
Indeed, with a client base of more than 6,000 organisations worldwide, including 18 of the 20 biggest banks, ACI Worldwide has done more than most to design, support and implement many of the payment options we take for granted in 2020. Its offerings support more than USD $200billion in consumer transactions per year, in well over 100 countries.And, just as the collation of global data concerning COVID-19 will provide experts with a better sense of what they’re dealing with, ACI Worldwide benefits enormously from its involvement in so many high-volume facets of payments – insights its customers need to adapt to fast-changing patterns of behaviour. The company’s solution practice lead for retail banking products, Lu Zurawski, explains ACI’s positioning.
“We set ourselves apart with the number of endpoints, or connections, we have,” he says. “That’s in terms of the traditional endpoints, card schemes, new real-time payment networks, and even local schemes around the world.
“We’re also well connected and stocked with the services and functions – the individual component services – that can be assembled to create appropriate payments products with easy accessto those connections. So, we’re quite privileged, in the sense that we see the pain of merchants, we see the problems faced by issuers, and we see the opportunities. When combined, we probably have the most extensive combination of endpoints and services of any other software provider in the payments world.”
With that knowledge comes a certain amount of power – and corresponding responsibility to prepare smaller merchants and consumers for emerging modes of payment. You only need to scroll through your average millennial’s smartphone wallet to appreciate how demanding that side of ACI’s work has become over the past decade.
Observing the changes and problems in an evolving payments ecosystem, and getting new payments implementations right, has been part of Zurawski’s remit since he assumed his role at ACI.
“In the short term,” he says, “some new payments initiatives can mean some confusion and pain, particularly if they have not been planned events. For many merchants, a new payments instrument or a government-suggested scheme like open banking may just mean yet another set of things they need to deal with. Longer term, though, new payment methods create savings, particularly if a new alternative allows money to come more effectively from a bank account and be credited to a merchant’s account without incurring fees associated with international card schemes.”
Understandably, merchants need customers who are able to pay, so adopting payment methods that drive conversion and loyalty, and those with the highest acceptance, is key. But few merchants survive without seeking out cost savings, including reductions in payment fees. So, retailers will nudge consumers towards lower-fee options, and financial institutions and processors with the right, agile mindset can support them with the systems needed to facilitate novel payment methods.
The height of fashion?
Convenience, the buzzword of the digital age, is an important factor in the choice of payments. It’s why it took less than a decade to transition from chip-and-pin, via contactless cards, to phone-tap transactions. Consumers have institutions like ACI to thank for the seamlessness of these changes.
But a third factor is also influencing modern day payments; certain methods have achieved ‘fashionable’ status. Even though Zurawski quotes the adage that ‘nobody wakes up excited to make a payment’, he has perceived a decisive shift in how consumers see the moments in which they formalise a purchase.
“Payments have been perceived as boring,” he says, “but in the past 10 years, people have become genuinely interested in the process of paying, particularly if it comes from some whizzy new app. They will show off how they can pay each other or split bills. The idea that payments are dull is a bit of a myth now. That said, people don’t want to pay for them. So, there is a challenge to find added-value services that customers and merchants want, that merchants see as helping them to give a better customer experience and are therefore willing to pay a premium for. It’s the industry’s job to make them aware of the opportunities. In fact, it’s almost a policy issue. Governments are pushing electronic payments, moving towards cashlessness – or, more accurately, ‘less cash’ – and must educate people about how to use digital, including payments.”
When new payment methods catch on, they can go viral very quickly. Zurawski admits he didn’t see the popularity of QR (quick response) codes coming. “I remember, embarrassingly, four or five years ago, saying at conferences how awful they were – obviously, I’ve been proven slightly wrong by the advent of more than a billion active users of WeChat Pay, Alipay and other forms of QR code payments!” he laughs. But, in fact, ACI accommodated the QR contagion for its customers.
“QR code use is expanding, particularly for smaller retailers and previously underbanked parts of society and geographies, where cards and card infrastructure don’t exist,” says Zurawski. “They are becoming an acceptable way of handling payments for those who use tap-and-go, which is also impacting on card-based retail banking businesses.”
Alongside China, where QR payments really took off, India’s uptake is spiking, thanks to helpful nudges from Indian policymakers pushing for greater financial inclusion as well as the lower commission on QR code payments over credit cards. When the two most populous countries adopt a payments technology, merchants in the West need to keep an eye on how this may impact business – particularly if vast numbers of foreign buyers expect to pay with their preferred QR code instrument. So, ACI is busy preparing the technology to facilitate such payments in Europe, the UK and the US.
“As a company, we support acceptance of mechanisms like QR codes for retailers and the payment service providers servicing them,” Zurawski confirms.
Long term, he sees the convergence of payments and data accelerating to eventually allow individuals to curate their own payments experience. “Those sorts of personalisation systems are already out there and there’ll be more,” he says. “As citizens become more aware of the value of personal data, there’ll be a shift, not just to do with value-added services around payments, but around preferences, data and how it is shared.”
An evolving response
In a prescient move, given the surge in COVID-19-related phishing attacks, ACI announced the launch of a novel anti-fraud technology in March.
The Incremental Learning tool promises to be an industry-changing upgrade to ACI’s current anti-fraud protocols. Instead of ‘retraining’ anti-fraud systems each time a new strain of fraud is detected, it adapts, learning in real time how to flag, protect and counter emerging fraud. It’s the algorithmic equivalent of an antibiotic for viral mutation.
The economic repercussions of the COVID-19 pandemic are, as yet, not fully understood. But, between hand washes and anti-bac gel squeezes, we can at least appreciate payments technology advances have allowed us to shop safely and seamlessly during this crisis – and prepare for
the next, inevitable evolution.