Update on the Payments landscape – October 2020

The payments landscape continues to evolve and this blog shares some of the topics that caught my attention during the last month. If you think I’ve missed anything important, do please send an email to technical@treasurers.com.

pay.uk update on Next Generation Standard for UK Retail Payments

Ahead of their full conclusions at the end of 2020, pay.uk released a mid-term update. Key messages are:

• Unique end to end transaction references will be mandated by pay.uk and will enable greater traceability of payments
• Mandated use of Legal Entity Identifiers for bank-to-bank transactions with a view to look at their use across the entire retail payments ecosystem
• Increased use of structured data
• The use of purpose codes
• The benefits and challenges of enhanced payment data (which could support straight through processing of customer receipts and queries)
• The use of the full UTF-8 encoded character set which includes @ and £

EU Commission Retail payments strategy

On 24 September 2020, the Commission adopted a retail payments strategy that aims to further develop the European payments market to fully reap the benefits of innovation and opportunities that come with digitalisation. The strategy focuses on developing instant payments and EU-wide payment solutions that are cost effective and accessible to individuals and businesses across Europe.

The Commission also wants to lessen Europe’s dependency on big global players.

Pay by bank solutions

As a result of Open Banking, a number of merchants now offer the opportunity for consumers to pay for goods and services directly from their bank account – cutting out the need for credit or debit card and allowing the customer to use their own credentials to log into their banking portal. According to Pollinate – the company behind Payit, this has reduced the cost of online payments by at least 25%, based on an average transaction of £80.

P27 Nordic Payments

P27 was launched in 2017 to build world’s first real-time, cross-border payment system in multiple currencies. P27 is a joint initiative by Danske Bank, Handelsbanken, Nordea, OP Financial Group, SEB and Swedbank, exploring the possibility of a pan-Nordic payment infrastructure for domestic and cross-border payments in the Nordic currencies and the Euro. The ambition for the company is to go live with the first transactions in 2021.

As part of this the company signed an agreement to acquire Bankgirot, Sweden’s only clearing house for mass payments which handles SEK 73 billion per day.

FIS issues annual report on global real-time payment trends

FIS has released its 64 page report that identifies 8 key findings:

• The pandemic has accelerated the shift to digital payments and its impact will be permanent
• Real-time payments systems are evolving beyond speed
• Monetization opportunities for real-time payments are increasing
• Cybersecurity attacks and data-privacy regulations highlight weaknesses in aged payments systems
• Big tech companies will leave the financial products to financial institutions
• Banks and acquirers' roles in the ecosystem will shift
• Artificial intelligence will have two core purposes in payments
• Payment providers will seek microservice systems to futureproof

The report identifies four radical changes in the next three years:

1. The influence of COVID-19 has accelerated the need for more collaboration between countries for services like cross-border and supply-chain finance. This will lead to more harmonization of rules and regulation globally and will greatly reduce friction in global trade. Where digital commerce friction remains, governments will start to align on global policy and standards to make a more seamless global economy.
2. The world of payments and banking will become more converged for retail, commercial and wholesale.
3. There will be a stronger emphasis on the distribution and manufacturing of financial products underneath innovative, customer-centric technology from big tech companies.
4. The data economy will mature further, removing the emphasis on financial products or services. Data is the core driver of value.

Updated PCI guidelines for handling payment data

In response to the COVID-19 pandemic the PCI Security Standards Council has provided key considerations and educational resources to help small merchants keep their customers’ payment data secure as merchants that previously only had brick-and-mortar locations move to accept e-commerce and over-the-phone transactions. From avoiding writing payment details down, to using strong passwords and encryption and secure remote access, the guidelines have been designed to help merchants understand the vulnerabilities and mitigate risks associated with these card-not-present transaction types.

Strong Customer Authentication

The way your bank or payment services provider verifies your identity or validates a specific payment instruction is changing. Strong Customer Authentication is designed to reduce the risk of a fraudster pretending to be you to steal your money and the basics have been covered in the Treasurer magazine.

The original deadline was September 2019 but due to concerns over the readiness of the industry and the impact of COVID-19, this has been further extended by the FCA to 14 September 2021.

The European Banking Authority remains committed to a December 31 2020 deadline and an independent global payments consultancy group estimates that this decision could cost merchants €90 billion in lost sales if mandatory SCA is launched without being optimised.

SEPA Instant Credit Transfers update

The European Payments Council provided a useful infographic which includes the following graph.

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