Let’s face it: Payments are better served staying out of the headlines.
Like baseball umpires, the sign of a job well done is for them to hum along efficiently and unnoticed. Conversely, when they do draw attention it’s usually of the negative variety.
So while 2016 was a busy year for payments (aren’t they all?), the biggest events shaded toward the positive—with some key exceptions, which of course were the highest profile of the batch.
Please note I’ve intentionally excluded two of the year’s biggest headline grabbers—the Wells Fargo cross-selling fiasco and the reversal of fortune for online marketplace lenders—because strictly speaking they were not payments-centric events.
The chaos at the checkout counter many predicted when chip cards were rolled out just in time for the 2015 holiday season turned out to be a non-event. However, the impact of EMV migration and its related liability shift resembled a slow burn.
The distribution of chip cards has gone rather smoothly, and the vast majority of U.S. transactions are now conducted using EMV-capable plastic.
Things get stickier on the payee side. Although most terminals in use now include chip readers (excepting those at mom & pops), many merchants have yet to activate the feature due to back-office software delays and EMV certification backlogs.
As a result, well under half of U.S. transactions are being settled leveraging EMV’s security features.
From there the plot only thickens. Consumer frustration over longer transaction times and point-of-sale confusion became an internet meme, drawing attention to what should be a background process. Whether these complaints are based more on perception than reality is immaterial.
High levels of post-liability chargebacks drew merchant ire and media coverage, particularly given the certification backlogs some retailers blamed for their delayed rollouts.
The card networks eventually revised their rules to limit such returns. Just last week, Visa and MasterCard postponed the October 2017 liability shift date for pay-at-the-pump terminals, which was to be the last step on the migration trail. This story isn’t over yet.
Blockchain hits the big time
Distributed ledger technology graduated from its early pigeonhole as a hacker’s playground, as major institutions placed billion-dollar bets on the technology.
Just as important, financial professionals began to grasp the concept that blockchain’s value extends well beyond cryptocurrency, and that it need not operate in an anonymous “Wild West” fashion.
Most of the in-flight initiatives involve back-office processing and focus on cost savings.
For a customer-facing example, check out Visa’s newly launched B2B Connect, powered by fintech partner Chain.
In late September the ACH (automated clearinghouse) network opened two new clearing windows for same-day settlement of transactions, realizing a service enhancement that was years in the making.
Early results exceeded my expectations: In its first full month of processing the network cleared $5 billion of same-day transactions, with business-to-business and emergency payroll the most common use cases.
To date, only ACH credits qualify for same-day clearing. ACH debits will follow in September 2017, opening up use cases such as consumer bill pay.
It will be interesting to watch how volumes ramp up as more financial institutions actively market the service, which use cases prove most popular, and how they decide to price these offerings.
Return of the retailer wallet
For the past couple of years, digital wallet attention has been focused on the likes of broad-based solutions like Apple Pay and Samsung Pay.
Then, Wal-Mart launched its store-specific wallet, Kohl’s soon followed suit, and a model that had become an afterthought suddenly found new life.
These solutions benefit from two important advantages: tighter control of the point-of-sale experience and the integration of store rewards programs.
Perhaps this shouldn’t have been so unexpected given that Starbucks boasts far and away the most successful wallet app.
Next time we’ll cover the remaining top payments stories of 2016, which feature retailer pushback, developments with PayPal, data breaches, and regulation.