The payments business has undergone a massive revolution. While online shopping technology has surged forward with better shopping cart systems, AI-assisted tools to help you find what you're looking for - even when you don't know what you want, and greatly improved user interfaces, payments have languished. Andy Barker, the head of payments at online commerce shopping provider Magento, and I spoke about this at the recent MagentoLive event.
"A lot of companies have come in and said 'We're going to reinvent payments, we're going to change this infrastructure'. But then they run up against a lot of rich, white guys that don't want their jobs to change. And it's a high regulated industry," said Barker.
One of the drivers has been that while innovation in the shopping experience moved forward, many people thought the innovations in getting people to find products and get them into their shopping cart was the end-point. But, many carts are abandoned because the process of paying is too hard.
In parallel, anyone trying to make significant changes to how payments work is hit with a constrained regulatory environment and other major barriers. This has resulted in people moving away from changing the underlying infrastructure to changing things that can be more easily moved forward.
Barker says Uber's approach with the challenges of payments was solved by removing customers from the payment transaction process completely. When you complete a ride with Uber, or indeed with many other online services today, the payments are handled by someone else, taking the hassle out of the hands of the user.
"As payments continues to move at a sloth speed, you'll see more innovation happen with the users experience. If you're able to service the customer the way they want to pay, then that's how you can grow your brand," said Barker.
While we take the way Uber and others for granted today, Barker said this was revolutionary when the ride-share company made it part of their user experience.
One of the core technologies that's evolved is tokenisation - the idea that a one-time identifier is used to complete a credit card transaction where the credit card number and other associated data is no longer moved around. Platforms such as Google Pay and Apple Pay rely on this technology as it makes it possible for them to more securely conduct transactions.
"It [tokenisation] will become the de facto standard as we use more and more devices," said Barker. "As the networks standardise on that, one of the things you'll see is routable tokens".
One of the criticisms levelled by some against tokens is that they are unique to a specific payment provider. But you can buy tokenisation applications and appliances so you can do your own tokenisation. But when you move payment providers then you have to start over, the old provider has your data and you're stuck. But Barker said many major providers, such as American Express, Visa and Master Card are working towards standards that allow tokens to be routed.
Traditional providers are moving along but they are constrained, often because of antiquated systems running on COBOL, said Barker, that are hard to change. This means they need to find creative ways to overcome the limits of their existing infrastructure. So, no matter what we see at the front-end of systems, messages end up being sent into systems that are constrained by fixed-width fields in systems developed many years ago that are very difficult to change.
Much of the innovation in payments is about providing tools to merchants so they don't have to navigate complex technical and regulatory systems.
Another driver for tokenisation has been the number and scope of many online breaches. By using tokens, fewer credit card numbers and personal details are used so the potential payoff for a criminal is reduced. That also means the risks for payment providers diminish. So, the rise of cybercrime focussing on the payments sector has been a driver to making systems better as well.