Mark Ranta, head of digital banking solutions at global payments company ACI Worldwide, has predicted that 2018 will be the seed year for large-scale partnerships between retailers and banks. Together, these entities will drive change in the new payment ecosystem, based on consumer desire to pay with everything from card and mobile to ApplePay and bitcoin.
FierceRetail (FR): Tell us about this growing trend of retailers partnering with large banking solutions?
Mark Ranta (MR): This isn’t a new trend per se; every retailer in the world has a relationship with at least a bank. But the idea of truly partnering—as in offering services from the bank through to the end consumer of the merchant—is a rapidly evolving concept and one that can be attributed to a few things.
One is the “demand” from consumers for things like mobile payments and some of the unified payments concepts such as Masterpass and/or ApplePay. Another is the trend we are seeing in the form of open APIs or banks beginning to offer up development portals to the market.
The idea of being able to proactively partner from the merchant perspective is flipping the traditional banking model on its head. The need to wait to be sold a new service by the bank will no longer exist as the self-service nature of open APIs takes root, and we are just seeing the early stages of this trend.
FR: Thus far, how are these partnerships working out?
MR: Given the newness of this trend, I will have to take the “wait and see” approach. Consumer adoption is very much in the early stages for the older concepts like ApplePay and SamsungPay (both now in their mid-toddler years), and the open API development portals are for the most part still in beta.
However, with PSD2 in Europe coming online in January, I believe we’ll see more and more on this as 2018 rolls on, and next year we’ll have some lessons learned.
FR: What are the benefits for the retailer?
MR: One clear benefit that can’t be missed is consumer choice. At the end of the day, having the most options for the consumer to interact with your brand is a good thing. The worst-case scenario for a brand is cart abandonment at the last mile of the purchase decision due to a payment issue.
I believe there will be solutions in the market that will help the consumer initiate a payment in the manner they want and for the retailer to take and route the payment the way they would prefer—seamlessly, which is really the utopian point of payments we are looking for!
FR: What are the benefits for the bank?
MR: One clear benefit that can’t be missed is consumer choice. If you make your service available to the most merchants possible, that would increase your customers' happiness and use of your service. This allows more payments to come through your system, potentially initiated on your branded solution, which is good.
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FR: Why do you think this trend will continue to grow in 2018?
MR: As noted, I think 2018 is going to be an experimental year for many merchants, particularly in Europe. As this trend gains momentum, we’ll see it proliferate here in the U.S. as well.
I don’t think the trend will slow any time soon, given the ongoing work and digital transformation strategy conversation we’re having with our financial institution clients. I think we are merely at the tip of the iceberg.
FR: What are the challenges that retailers might have to face when partnering with a bank?
MR: One hurdle is the extremely large number of banks out there. For smaller merchants, choosing who to partner with won’t be that easy. However, I think this trend is going to reveal new types of services and new partnership models that may be able to aggregate relationships via new third-party providers (referred to as TPPs in the EU), which make ubiquity of the service a key tenant of the solution.
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FR: Are there any possible negatives for the consumer?
MR: Consumer choice is really at the center of this discussion, so I guess the biggest point I would make is paralysis at the checkout.
There will be a point at which there are too many choices and merchants will all have different options, so the experience of purchasing will vary from one merchant to another. The concern there is that paralysis sets in and consumers default to a payment vs. proactively selecting a payment type. However, I don’t necessarily believe that is a negative as much as it is an ability to transact without thinking about the payment.