Guest contributor Ross Musgrove explores the conflict between consumers, their banks and retailers.
I was at the Emerging Payments Association’s Retail PayTech Forum event last month. A good chunk of time and focus went on PSD2 and what it means for retailers. As part of that, the potential negative impact of two-factor authentication on customer journey was mooted.
That got me thinking about a possible conflict between the needs of consumers and the needs of retailers – the two parties at either end of a retail payment – particularly in the context of mental health.
About a year ago I went to a FinTech event at The Trampery. Someone from the product team at one of the challenger banks was talking about developing products that factored in the needs of customers with mental health problems.
Specifically, he was talking about engineering friction into the payments-out process, as it provided protection for those suffering bipolar disorder. When someone suffering with bipolar disorder has a manic episode, one of the things they can do is spend all their money (and/or run up credit debt). Best case scenario is they get refunds on purchases by returning those items. Worst case scenario is they have no items to return, perhaps having spent and lost all of their money through a gambling site, for example. The latter has wider implications, as the individual with no recourse still needs money for food, heat and shelter. This bank wanted to help avoid that outcome.
I don’t think these guys were suggesting they would develop one set of protocols specifically for those with bipolar disorder. I mean, how would you identify who to apply that protocol to? So these protocols have to be baked into the payments-out process for all account holders.
Now, these guys are a retail bank and, based on the above, have decided to engineer friction into their payments-out process to protect their customers and the funds they hold on deposit for them. At the other end of the process, you’ve got a retailer, that wants a completely frictionless payments in-process (or rather, as frictionless as possible given the various risks and constraints). To me, a truly frictionless payments in-process can only be so if the payments out process at the other end is also frictionless.
Additionally, behind the scenes, you’ve got a number of other organisations involved, all doing their specific bit to move money from consumers to retailers.
My points are:
Tony Craddock, Director General at the EPA, adds; “The EPA is developing something that should enable everyone in the value chain to add appropriate friction to payments. Friction is always necessary and in place already for some payments – you can’t buy a house using a contactless card, for example. But a more intelligent approach for everyday payments that reflects the individual’s circumstances is definitely warranted. If someone has a history of swings in payments behaviour, this could be identified and an additional step or a delay could be inserted in the process. Funds could be allocated to a ‘secure pot’ where savings and protected money could be safe and only used with the permission of a third party, too.
So our Project Inclusion team is developing a tool that enables companies across the value chain, not just those that serve payments’ users directly, to find out how their capabilities to deliver financially inclusive products and services compare with others. The EPA Inclusion Accreditation Service aims to lift the tide by highlighting how inclusive each company’s capabilities actually are, and work towards enhancing them so they play their part in serving users of payments better.
The first step is for us to produce a syndicated research report, written by Antony Elliot of the Fairbanking Foundation, in the next few months. This syndicated approach is a great example of how through collaboration, we can help to improve lives through payments everywhere.”
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