Before the pandemic, many businesses did not even think about shifting to e-commerce, but then went online and completely automated their processes in a matter of weeks. I asked Mike Shafro, xpate CEO, what role paytech partners play during the transition, which payment solutions are here to stay and how the shift to e-commerce affects the safety of funds.
Which industries in your opinion were affected the most by the recent pandemic?
— We experienced a spike of interest from the industries we rarely heard from before. DIY and home appliances were looking to connect to their customers while the stores had to close their doors. Veterinary clinics needed infrastructure to settle bills and make appointments online. The restaurants needed to reshape to accommodate food delivery requirements and growing amounts of online payments. Entertainment and Ed segment as well as conferences completely moved online. All these companies were looking for a reliable paytech partner that would allow them to focus on business development leaving acquiring, accounting and mutual settlement related headaches behind.
Many new marketplaces started operation during the pandemic. As with any other boom in the past the best projects will remain standing, yet the overall amount will decrease. What will significantly help new marketplaces to stay afloat is a fine-tuned financial supply chain.
— Of course, a part of the industries will go back offline after the pandemic is over. There are still some tactile experiences people aren’t ready to give up. But it is important that the current situation influenced consumer behaviour and forced business to change.
Will the payment industry have to change to accommodate this growing demand?
— Not only payment needs are changing, but the payment technology itself as well. Contactless forms are the future. It’s no longer just about cards, Apple or Google Pay. We’re talking about a more improved payment experience. For example, QR-code payment is already very popular in Asia. Many other options, face recognition for example, are being tested in different parts of the world. It’s difficult to predict which one will become mainstream in the future.
One thing is certain though, the classic format of user-bank interaction will be reshaped, especially in Europe.
— The banking structure out there is fairly old, and many transactions that are still made offline. You have to go to the bank to pay utility bills, to make local and international money transfers, to manage your account.
Fintech companies will step in to fix this. Projects like xpate will create convenient interfaces, focusing on building a payment user-experience, and will interact with banks through an open API. Big companies will replace classic interfaces with convenient applications. Monopolists, such as VISA and Mastercard, will also adapt to new technical requirements. More and more data will be stored online, so fintech companies will be able to operate faster and in a more flexible manner. All these innovations will take place in the next 2 years. Banks will be involved in more complex business processes such as lending and factoring. Of course, they will remain centers of funds storage.
Sooner or later, people will give up paper money. Contactless forms of payments encourage the shift, but the need for cash still stands. We support the opportunity for merchants from developing countries to accept cash from customers through automated IT processes. This is a matter of loyalty.
Whenever new tech enters the scene there’s often safety concern. Will this be the case?
— In the long run, these changes will have a positive impact on the safety of funds and will contribute to vulnerability reduction in terms of data compromise. Fintech companies focus on technology. A great example is Threat Matrix, one of our partners that forms a payer profile. The service analyses hundreds of parameters, including a device fingerprint, IP-address and geographical affiliation, Internet provider’s data and many other aspects. This gives 100% confidence that the person making a transaction is the actual card holder or account owner.
3D-Secure protocol, used by VISA and Mastercard, plays a big role in the security of card transactions on the Internet. But it also negatively affects transaction conversion rate, since a large number of payments are rejected. We are looking to solve security problems in an alternative way. Thanks to our entrepreneurial mindset we've managed to reengineer 3D-Secure processes to increase conversion up to 30-40% and yet achieve an even higher security level than industry standard average.