Most ecommerce merchants rely on credit card purchases for their products and services. The industry is rapidly changing, and we asked Philip Beck, the CEO and founder of Planet Payment, for his take on the future of online payments. Planet Payment offers banks and merchants solutions for accepting and processing transactions in multiple currencies, as well as other payment services.
PeC: Ecommerce merchants have historically relied on credit card receipts for payment of their products. As online sales grow, what changes, if any, do you see for the credit card industry?
BECK: When ecommerce became a reality, a way of shopping for many, credit cards were just about the only viable payment option available for merchants needing quick, secure, easy payments that fit within an existing infrastructure. Those same merchants also need to mitigate expenses such as logistics, shipping, fraud and risk management. Seemingly less costly payment alternatives such as PayPal, Google Checkout and Bill Me Later are attempting to erode some of the market share enjoyed by traditional players in the credit card space. Even checks are making a comeback, with the implementation of electronic check conversion systems.
At the same time, the credit card industry is always looking at more international, innovative ways to increase the value of accepting credit cards. My own company, Planet Payment, for example, offers merchant banks and their merchants multi-currency pricing, the ability to price in the shopper’s currency while, being paid in their own currency. This of course recognizes that an ecommerce sale can be around the corner or around the world. Credit Card processors, gateways and the payment card companies have been developing and introducing new tools and enhanced benefits, which many merchants find quite valuable. The bottom line is that credit card companies need to and have been becoming more innovative in the ways they help ecommerce merchants succeed, in no small part due to increased competition. In the end, the ecommerce merchant wins.
PeC: PayPal is the largest private payment company. But there are others, too. What is the future of private payment companies?
BECK: As with any new set of technologies and business models, there will be winners and losers. The challenge is the adoption of those technologies by both merchants and cardholders. Those with the most compelling value propositions will come out on top. Very interesting to watch, however, are acquiring banks’ adoption and support of these companies. An acquiring bank partnering with an alternative payment scheme presents a tremendous advantage to both companies.
PeC: What about credit card fees? Presently, the same fee percentage applies to, say, a $10 transaction as it does for a $10,000 transaction. Do you see credit card fees changing one way or the other?
BECK: The research firm TowerGroup predicts that by 2009 the volume of micropayments will reach $11.5 billion domestically and $40 billion worldwide. The success of iTunes and other digital download products certainly bares this out. Clearly, the payment card companies will need to become innovative and more flexible in their approach to the pricing of smaller ticket transactions.
PeC: Accepting credit card payments from non-U.S. banks continue to pose risks for U.S.-based merchants. Specifically, some U.S.-based merchants simply will not accept credit card payments from certain countries. How will this be resolved over time?
BECK: I don’t think that the non-U.S. bank is the issue. It’s more likely an issue of verification. There are dozens of ways to verify the validity of a transaction, offered by card associations, card processors, gateways and other technology providers. Card verification numbers, such as CVV2, CVC2 and CID help to guarantee possession of the actual card. This is important, since the majority of cardholder fraud is the theft of the card number, not the physical card. Payer authentication programs like Verified by Visa and MasterCard’s SecureCode are also good tools. BIN [bank identification number] verification methods – using the first six digits of the card to identify the issuing country, and other best practices are also available. There are also voice identification services to consider. The bottom line here is that if the merchant has a good business reason to ship to a perceived high-risk area, there are tools available to mitigate that risk.
PeC: What about payments made from mobile devices? How will consumers pay for products purchased from mobile devices?
BECK: Planet Payment believes the killer application for a cell phone is voice. To that end, enabling users of phones, be they cell phones or landline phones, anywhere in the world, in any language to make payments or purchases simply by speaking is the killer product.
The current hype around mobile payments, however, seems to be more about enabling mobile banking from an enabled phone (via software download or specialized chip to the phone), making person-to-person payments, using text messaging to pay money from your mobile account, and more recently, attempts by the traditional phone companies to control card payments by enabling the chip in the phone to be a mobile wallet. Mobile banking seems to be nothing more than web/online banking using a phone browser. Also, software downloads to phones have all sorts of limitations, including limited availability or compatibility with all cell phone types, questions about mass-market adoption rates, high potential for software virus attacks to phones, and possible issues related to network operators needing to participate in the program.
PeC: Other thoughts on the future of online payments?
BECK: User authentication will continue to be the issue of the day whether it is Verified by Visa or MasterCard Secure Code with a pre-registered PIN or a voice authentication from a pre-registered voice print. As the monetary value from transactions increases, so will the likelihood that bad actors will seek to gain unfair advantage.