Why Innovation’s Fast Pace Shouldn’t Slow Down Payments

Every business walks the same tightrope when it comes to processing payments: Convenience versus security. It doesn’t matter if the business is consumer-facing or serving other businesses (B2B); security is top of mind for all of them, yet adding more layers can introduce more friction, and that can scare customers away.

It’s the question that everyone’s asking, many are answering and none have perfectly solved. How does a business strike that perfect balance and live at the sweet spot where customers are both protected and conveniently served?

That’s the question Brian Dorchester, EVP of Operations at First American Payment Systems, explored in this week’s Commanders In Chief series.

Dorchester said the pace of payments and security innovation has picked up significantly over the past five years — and that’s a good thing, as it generates new options for businesses to leverage the best of both worlds. The industry, he noted, was fairly stagnant for about 15 years before the more recent wave of innovation swept over the space.

Yet sometimes, said Dorchester, the very pace of creation creates friction of its own, as consumers struggle to keep up with the changing world. There’s no question, however, that innovation must continue, as security becomes more important to consumers and the businesses that serve them.

In this week’s discussion, Dorchester explained why the frenzied pace of innovation is a positive development and what’s holding the industry back from going even further.

How do companies like First American help clients strengthen security in payments?

Security comes first, said Dorchester. Therefore, First American works with clients to educate them about PCI compliance, customer service, security options — such as point-to-point encryption and tokenization — and merchant fraud and chargebacks, which the EVP said are merchants’ Achilles’ heel.

He said First American also works to help clients understand ongoing trends that are shaping the industry around them to help those merchants understand where they fit into the landscape.

Additionally, Dorchester said he participates in an ETA (Electronic Transactions Association) committee focused on operations and risk, fraud, security, data breaches, securing the Internet of Things and other related topics. Together, participating payments professionals and acquirers are working to decide how to handle operations and manage risk in the changing environment.

What are some of the road blocks in removing friction from current payments processes on mobile and online?

Pacing and fear are the two main factors holding payments back, said Dorchester.

The payments industry is moving so quickly, he said, that business owners and consumers alike are having a hard time keeping up with the technology. On top of that, there are many who don’t want to keep up with said technology due to fear.

Dorchester said this can be the case among older generations, which he said can feel less comfortable using modern payment methods like mobile apps and digital wallets — methods, he noted, that millennials are completely comfortable using.

When major chunks of the population are not ready to move forward, there’s only so far innovation can go, and it puts merchants in the challenging spot of catering to many different types of customers who want to pay in many different ways, which requires different technologies and security components to provide.

Do you have any concerns about the direction the payments industry is going?

Au contraire, said Dorchester: The current pace of innovation is the best thing that’s happened in payments for decades.

“This industry was stagnant for years,” he said. “We’ve seen more movement in the last five years than in the previous 15. The industry is headed in the right direction, with an even brighter future as we continue to innovate in AI [artificial intelligence], the Internet of Things (IoT), et cetera.”

With all that in mind, though, he said data security must remain at the forefront of all these advancements. More touchpoints via the IoT means more potential entry points for bad guys.

Are there factors / outside forces impeding innovation in payments?

“The only boundaries that we have are the ones we put around ourselves,” said Dorchester.

However, he said, the industry will have to be careful about state and government intervention, and innovators must search for common ground: A standard approach to payment methods and acceptance will result in a higher adoption rate.

Dorchester offered Google Wallet as an example of a technology that’s prevalent in the consumer space but is not even close to ubiquity among merchants, which limits its usefulness to consumers. Acceptance by merchants, he said, can drive acceptance by consumers as the industry shapes its new normal.

What advice do you have for consumers to make payments more secure on their end?

Scams are still prevalent both by telephone and by email, so consumers must think before sharing sensitive info, said Dorchester. People have gotten smarter about protecting their own information. This vigilance is their best weapon when trying to protect their sensitive data, such as birth date, address, Social Security number and credit card or banking information.

Other simple but important measures include having firewalls in place on computers and following guidelines for passwords. Any devices or platforms using default passwords should always be changed, Dorchester said, and customers should avoid using standard passwords that are easy to guess, including using the same plain-text password across sites and platforms.

On top of that, the executive said it’s important to check bank and credit card statements regularly. If preventative measures fail, he said, that’s the first place where unauthorized activity will show up.