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Comment: The big identity and authentication debate

For a long time I have said that when it comes to payment solutions providers offering value, there are really only two top level criteria against which the essential value to merchants will, in practice, be benchmarked:

Where solutions providers don't have these two criteria at the core of their solutions development process, they can be no more than sideshow players. They may have an important part to play but will only, in practice, be measured against secondary criteria. If you are uncertain about this assertion, it's worth thinking about how American Express, China UnionPay, MasterCard, Visa, and some of the other national and international card schemes have got to where they are now. They've achieved their dominance by tackling both of these two crucial value-measures head on.

Now, we're not here to talk about attracting new customers in this article – I'll deal with that on another occasion but let me just mention two pertinent points in passing. Firstly, I believe that only organisations who have an intimate relationship with the citizen/consumer will be able to create consumer demand through their understanding of buying behaviour and, in particular, by presenting a value proposition of their own directly to the consumer. In this regard, organisations like American Express and Global Blue are arguably in the strongest position. Second, with regulators (in both the UK and Europe) now threatening to interfere with the very organisations that have both focused on enabling growth in the wider economy and have built the rails to help merchants connect with consumers, I predict a very constrained payments landscape for the next couple of years.

Getting back to the topic of identity and authentication, we find ourselves at a seminal moment where there is increasing acceptance that traditional authentication methods are no longer adequate. We’ve known this for some time but we’ve been content to paper over the cracks of what looked like a finite problem.

There are some interesting ideas emerging but I think that it is still too early to predict the winners. Instead, in true Vendorcom style, I believe that we should be collectively considering the dimensions of the authentication debate and collaborating to find the right answer for the merchant market as a whole. Some of the key questions that our members have been posing and wrestling with in recent months are:

What, and who, are we trying to authenticate? Up to now it’s been a bit one-sided; it’s the consumer/cardholder who has to offer up some recognised credentials. I think we’ve got to move quickly to mutual authentication where a consumer can be confident about the credentials of the merchant.

Who are the key players in the authentication debate? Banks, merchants, mobile network operators, social media hubs, and consumer technology players look like the main influencers but there are certain to be others.

Are traditional tokens of our identity adequate? Almost certainly not! Activities encouraged by one influencer group (social media) has completely undermined another (banks). My date of birth and mother’s maiden name are public and other traditional credentials are easily deduced on social networking sites.

Will citizen/consumers be happy about 'giving away' their data? I think not and the power balance will slowly but surely change in favour of the consumer – either through legislation or people power.

Will there ever be one authentication method that operates across all merchant-consumer channels with all payment token types in all geographies? I think the answer, again, is probably not – we’re already seeing the weaknesses of existing authentication methods being applied outside their originally intended field.

Why are we trying to identify/authenticate? Up to now the focus has been on simply authenticating the payment transaction and, of course, that’s essential but there could be so much more value if authentication could be put to much more merchant-centric benefit such as targeting the merchant offering in order to create a more personal and relevant offer to the consumer.

There are dozens more big questions that will shape this debate. I’ve expressed a few opinions on the ones listed above based on Vendorcom’s unique perspective of the European merchant payments landscape but I fully expect that, as the debate gathers pace in the coming months, all opinions will be challenged and that out of the melting pot will come some ground-breaking concepts with the power to revolutionise economic growth.

In the rapidly expanding world of consumer driven, multichannel retailing supported by highly tuned omnichannel processes, identity is king, not just to authenticate payments but to ensure relevance. The citizen/consumer will increasingly ignore anything that does not directly address their needs and if you can’t demonstrate relevance, you’re not relevant!

Vendorcom's Paul Rodgers writes a monthly column on the payments industry for Essential Retail.


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