The honest answer is I do not know but I do not think it is any of the seven things I have mentioned. But of course, I have to at least take a guess, right? The most challenging market to make this prediction is here in the US where cards, cards, cards continue to dominate and IMO will for my lifetime. Note - I have put my money where my mouth is, I own Stripe, Adyen, Fiserv, Visa, MasterCard, Block, Google, Apple, etc. In other markets like Asia, Latam, and Europe, there have been massive transformations such as Alipay, UPI, PIX and Open Banking.
AI itself is a tool so the question is what truly transformational change can it be utilized for and when I say truly transformational I am not talking about a tenth of a percent uptick in authorization optimizations or fraud reduction.
OK, since success in payments, for all parties, is about risk management, I would say that the winning opportunity to really change the paradigm would be for the industry to fully embrace PassKey/Fido authentication across all channels. Combining this with full Network tokenization that is already nearly fully deployed would truly be a game changer. Authentication rates would skyrocket, fraud would be mostly eliminated, the Interchange premium for CNP "could" be eliminated albeit that might require Durbin like legislation, and many associated costs for Merchants, Issuers and Acquirers could disappear.
Thoughts?
3 comments:
I think you're on the right track. One of the biggest limitations to innovation at the physical point of sale (still the majority of commerce) are twofold (1) terminal integration issues and (2) disadvantaged interchange for cloud authorized transactions. If we had "perfect authentication" with Passkey/FIDO we can engineer all the cool experiences in the cloud (dynamic loyalty, receipt storage, optimized rewards, payment method selection, PIN on my device etc) and turn every mobile phone into a point of sale terminal. All that becomes possible of the networks lean into new authentication models and encourage their use by modifying the incentives (eg, interchange)
Spot on Steve. I'm literally writing about Tokenization as we speak and agree that Network Tokenization is an actual game changer that cuts through hype and solves real problems rather than generating uncertainty
The real game changer is the combo of tokenization and seamless identity verification. However until this is combined with the elimination of the 50bps Penalty on online transactions the benefits aren't complete.
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