What is the impact on innovation of electronic payment players?

Whether it is called Instant Transfer, Instant Payment or Initiating Payment Service, this payment method introduced by DSP2 offers the possibility to initiate a bank transfer on behalf of a third party, provided that their prior agreement is obtained. In fact, an online sales site can offer its customers an alternative bank transfer-based payment experience. Although theoretically it came into force in 2018, instant transfers are far from being imposed on consumers’ daily lives. The main promise associated with DSP2 and instant transfers for e-commerce players is the absence of bank card fees. There is also no exchange, which usually varies between 0.2 and 0.3% of the values. The main expectation of traders is to reduce their costs says Didier Barré, Portfolio Manager of Worldline’s Merchant Services business. But that is not all ! Behind the instant transfer, we also find the guarantee of payment to the beneficiary, the optimized management of the client’s budget or cash flow, the immediate availability of funds… adoption is far from widespread… Thus, according to the latest edition of Zooms of the Cetelem Observatory, for your online purchases, two-thirds of French consumers (66%) prefer the card, while the remaining 34% prefer to use an e-wallet-like application such as Apple Pay, Google Pay, Paypal…

Instant transfer: advantages (still) limited to a few specific uses

Handover initiation remains, so far, confined to niche uses in B2B and B2C. Buying a used car, traveling the world, or even in the B2B sector, where not all professionals have a bank card, and whose ceilings can be a difficulty. In such cases, instant transfer provides a relevant answer. As it can be bidirectional, it can also intervene to quickly refund a customer in case of product returns. The law provides for a refund to the original means of payment, and instant transfer can be used if the consumer has been previously notified that he or she can be refunded by other means. In this context, Instant Payment is, once again, an interesting way because, in less than 10 seconds, the customer is notified of the arrival of the funds. ” The bank card does not offer this immediacy says Vincent Lenglet, head of product at Monext. If the DSP2 transfer has not really delivered on its promises in terms of lower costs, it has also failed to dethrone the bank card in consumer use. The initiation of transference is still very clearly in its infancy. At stake: a complete lack of universality commented Vincent Lenglet.

The beginning of transference is still in its infancy due to a complete lack of universality “. Vincent Lenglet, Head of Product, Monext

Open banking: between security and information sharing

The level of security guaranteed by instant transfer is linked to the double authentication defined by PSD2. To pay your bill, the debtor is redirected to your secure banking area. After a first authentication to access it, he identifies himself again to validate the transfer and the payment is made. Thanks to Open Banking, forget about the ordeal of entering the IBAN and processing paper mandates. ” Instant Payment is also a step forward in the dematerialization of payments confirms Didier Barré. Finally, compared to traditional transfer, DSP2 transfer allows transmitting many parameters such as invoice number, redaction to facilitate and automate bank reconciliation, another advantage that mainly attracts B2B players. Monext, Worldline, Adyen, Docaposte with their BudgetInsight, Younited, Mollie or Stripe solution on the BNPL side…, all electronic payment players are mobilizing. ” The world of payments and fintechs are in turmoil, confirms Benjamin Lang, Mollie’s Country Manager. It was also the regulator’s ambition, with DSP2 and the associated Open banking, to promote competition through innovation. This revealed the technology gap between the banking industry and e-payment players. “. A technology gap that is one of the obstacles to wider adoption of instant transfers…

Obstacles to be overcome… including in physical commerce

If instant transfer struggles to take off, it’s not just because the bank card is culturally embedded in consumer habits. Weak desire to innovate, lukewarm to play the game of a renewed payment experience, the banking industry initially took over DSP2 and instant payment without much enthusiasm.Especially since some banks continue to charge for instant transfers, which is a major hurdle for adoption. “, observes Didier Barré. Eventually, free instant transfer will likely end up being enforced, but until the European regulator bans billing for such a service, more time will pass. Neobanks and online banking, unsurprisingly, are very mature.Some historic banking players are doing very well, others, on the other hand, are far behind and are redirecting the consumer, including on mobile phones, to a responsive design web page. The experience is very degraded… This is acceptable when the consumer buys a car once every 3 or 4 years. For everyday purchases, this is unthinkable “, emphasizes Vincent Lenglet. An issue all the more decisive as physical commerce is also impacted by these new realities. In the case of a “scan and go” carried out at the point of sale, the customer may be faced with a DSP2 challenge, leading them to validate their payment through their banking app, while having an experience in a store. physical. In fact, this type of practice that is developing in many brands creates an automatic switch to a remote payment process.. The multiplication of uses supported by DPS2 means that frictionless is an increasingly critical issue and requires rethinking the payment experience as a whole.All the transformations brought by DSP2 create a new need: the homogenization of the user experience », says Didier Barré. Homogenization still under construction.

Data more central than ever

For the end consumer, DSP2 has yet to have a really noticeable impact. Already familiar with 3DSv1 and later with 3DSv2, the entry into force of PSD2 did not disturb his habits. However, the new directive redefines the contours of interactions between payment players. In fact, until now each trader could create their own scoring rules to decide whether or not to deactivate the 3DS. He relied on anti-fraud mechanisms, of course, but he kept control. With DSP2, the sender is in the loop, so is the acquirer. It is then necessary to combine the merchant, acquirer and issuer scoring variables. “Pthe more a merchant shares their information with us, the more acceptance progresses, specifies Vincent Lenglet. The granularity of the information a merchant shares with their PSP is critical to maximizing the acceptance rate “. The quantity and quality of data are crucial to not degrade the transformation!

The challenge: better data integration, which crystallizes all innovation projects around it. IThe benefits of DSP2 in payment security are undeniable, but data management is more crucial than ever to master risk management without disrupting the customer journey. », says Philippe de Passorio, managing director of Adyen in France and Italy, who relies primarily on machine learning to constantly refine the fight against fraud. If DSP2 has not yet delivered its full potential, all eyes are already on tomorrow. While PSD3 is already being developed, the entire ecosystem is watching. The development of the subscription practice, with recurring payments in cash, the need to automatically update expired means of payment, are new exploratory fields for innovation among PSPs…

BNPL: The big winners of DSP2?

The great advance of DSP2 is the simplified access to the end customer’s bank details. Since 2018, Younited Crédit has been using PSD2 in its instant credit activity. ” Direct access to the customer’s bank details is an undeniable advantage in terms of user experience, as it saves the provision of documents “. This is not the only asset, when giving access to his bank account, the customer demonstrates absolute transparency, the data is inviolable and in terms of depth”, it’s obviously richer than a page or two of payroll. Scoring algorithms can therefore be much more powerful says Pierre-Marin Campenon, Director of Partnerships at Younited. Applied to online payment, DSP2 is a great lever for the development of split payment (BNPL) that was already on the rise!

Leave a Comment