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MPE 2024: What’s new for merchant payments and the role of digital wallets?

At the annual Merchant Payments Ecosystem conference in Berlin, businesses and leaders in payments come together to exchange ideas, perspectives, and visions in the merchant payments industry.

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MPE 2024: What’s new for merchant payments and the role of digital wallets?

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The conference’s aim is to discuss the latest trends in merchant payments and explore how established businesses and new fintechs are looking to revolutionise the space. The conference openers, chairpeople Anna Maj and David Birch, teased that the conference would explore open banking, generative AI, cross-border payments, and more.

The first panel of the event consisted of experts: Atze Faas, payments adviser at Eurocommerce AISBL, Kenny Ebanyat head of payments and fraud at the NBA, Chris Reid, head of identity at Mastercard, Martina Weimert EPI Company, and Killian Thalhammer, head of payments at Deutsche Bank, moderated by Birch.

Reid mentioned that he is not interested in payments per say, but commerce: “What we do brilliantly in this room is enable economic exchange, and I think our focus is remembering what we're about: the merchant wants to sell something, the consumer wants to buy something, payments is just the value that gets exchanged.”

Thalhammer stated that Deutsche is already spending funds on the digital euro, and what they are focusing on when it comes to investment is open finance and open banking capabilities and how they can make a difference on the instant payments end.

Ebanyat explained how the NBA, though not considered at such, is a merchant that sells monthly and seasonal subscriptions of game content. He detailed that what they are trying to accomplish is to grow the game globally and deepen the connection with their fans.

Birch contemplated how digital wallets are a space of growth currently, and that they are not far from a smart wallet, to which Reid responded how that aligns with the consumer desire for convenience and how financial organisations are going about enabling it.

When questioned on how consumer behaviours are being influenced and where the demand is, Weimert stated: “I think that consumers want to have the control. At least that what is coming out of all the research. Consumers are even looking for more control than what they have today, so I think there's definitely a big advantage of being directly linked to an account.” She continued thar the service package is important for the consumer and merchant.

The panel discussed who else could provide a wallet other than the major tech companies, Apple and Google, and if anyone close to developing an alternative wallet. Ebanyat described how the NBA provides a personalised experience for subscribers which can create a more connected relationship with their customers by offering new services. Thalhammer commented how brand loyalty is different from people’s relationships with their banks. People often feel genuine attachment to brands, and thus their payments will likely be used, but only for specific purposes, and are unlikely to become an ‘everything’ brand, but there is no emotional connection to your bank which is used daily for all sorts of transactions.

Shifting subjects to new technologies, Thalhammer noted the cycles of new technology that has yet to be implemented in the industry, such as blockchain: “The industry is still has a large backlog on implementing all the new technologies, and I think the a more important decision is which one should we use and which one should be ignored.”

Reid responded to this by saying that he sees risk in the constant search for new technologies when existing technologies have yet to be optimised, and that there should be a balance between innovation and development to fulfill potential.

On AI, Faas said that there are pros and cons to its implementation: “There is going to be a disruption; AI can help consumers to become customers, help them through the buying process with augmented or virtual reality and similar interactions. Yet, on the fraud side is where AI can be very powerful in tricking people into all kinds of fraud, or even to the extent where AI can break cryptography. I don't know how powerful AI will be.”

Thalhammer concluded the discussion by stating that Deutsche Bank was going to focus on one of the most important players in the ecosystem: the merchants. Their main focus for the future will be taking a merchant’s view of the payments space.

Digital wallets and their importance in creating efficient public spaces

Later in the afternoon, BPC director sales and business development Michalis Michaelides, presented a keynote address on digital payments strategies for public services. In the keynote, he detailed how digital payments are especially relevant in the context of financial inclusion and digital transformation.

He described how digital payment strategies are critical to the digitization of public services, and that digital payments can enable disbursements for social programs, refugee programs, used in public service strategies. One of his main points was how SMB (small-medium businesses) enablement can boost the economy by forming digital marketplaces and reach out to the financially underserved.

“Whether SMB enablement happens to the private sector, or in collaboration of the private sector together with the public sector, finding the way to bring SMB enablement into the mix is hugely important. They generally form a huge percentage of the global market, they provide easily over 50% percent of employment, and in many cases they comprise a huge percentage of a country’s GDP. So, making sure that you have a strategy that involves SMEs into your planning of a digital infrastructure is hugely important.”

Providing case studies in Latin America and Nigeria, Michaelides demonstrated how financial inclusion gaps can be bridged by providing digital wallets and cards to farmers that can create a new online marketplace and also generate revenue.

What is the next step for digital wallets?

Gary Munro, technical director at Consult Hyperian, moderated a panel on digital wallets, featuring experts Simas Simanauskas of Connectpay, Erik Cicilla from Regional Card Processing Centre, and Michalis Michaelides from BPC. The panellists discussed the challenges and opportunities presented by digital wallets and what next steps are for incumbents and smaller companies in payments.

Simanauskas explained his stance against digital wallet giants Apple and Goolgle Pay: “We as industry experts carry responsibility for consumers to build products that will actually create better customer experience. Apple Pay will surely want to lead the way, they have huge infrastructures and people that are already using their networks. And it will be pretty convenient for them. If as industry will not do something fairly quick, we will see it will be more and more difficult to attract new players that don't look already at Apple Pay or Google Pay at the checkout experience.”

On the development of challengers to Google Pay and Apple Pay, Simanauskas spoke on the development of super-apps which are growing in China, such as Alipay. He explained that these solutions create a frictionless, super easy platform for consumers to operate and make all their transactions.

Michaelides agreed, commenting: “I think we need to also remove ourselves from the world in we are used to, and take a couple of steps back to see how some of design and planning can actually be implemented. Then we can move beyond the big companies barging in, taking it, and owning it all over again.”

He continued tat identification and biometrics are vital, and next steps can be taken for a frictionless payment system where biometrics can be used for identification, which is a higher level of security.

Cicillia commented on how Raipay is operating and the need for open banking: “We're looking into two sides. First of all, we want to make it that our features are made publicly available to different applications. So not only to arrive the application, but also to have the possibility to stream it over to mobile banking applications of banks. On the other hand, we also have implementations where we are making a direct application available to banks, which process directly, so we do not have their data and that we need a way to openly communicate with us. We have this open API protocol, and then different types of messages and ways to communicate or use these open rates.”

Simanauskas emphasised that frameworks are critical at this stage, and that the European open regulation has created space for development, however new frameworks need to be implemented to allow room for further innovation and opening up of banks.

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