Openness is changing the future of payments

Openness as a business and technological concept has been changing the world since the advent of the internet.The impact of Openness is more noticeable in technology-based industries, but the trend is spreading, and today a growing number of businesses are built around Openness. The payments industry has joined the Open revolution and is becoming defined by the Openness of payment technology, business models, and communities of trust.

Openness has three attributes: accessibility, flexibility, and transparency. To be accessible, services must be publicly available and in standard formats; flexible services can be combined and do not limit users; and transparency requires interactive documentation and clear commercial terms.

These three attributes of Openness must be applied to the three dimensions of payment services: technology, the business model, and trust. If they are not, or are only applied haphazardly, a business will not receive the full benefits of Openness. For a business’s technology to be Open, it must find the balance between accessibility, interoperability, and security. BBVA is a payment provider that illustrates how to find such a balance.The Spanish banking group has a number of forums – an online developer centre and the app market- place BBVA 4U are examples – where it is experimenting with technological Openness. BBVA and other payment providers are already differentiating themselves and gaining market share through superior Open technologies.

Open business models and strategies should be non-restrictive, leverage partnerships as a foundation for growth, and encourage transparency. Square embodies an Open business model in payments. While Square offers several successful products, the company’s success stems from their business model, which is focused on transparency and simplicity. Partnering with Square is straightforward, which is important because partnerships, even among competitors, can result in win-win situations in Open business models.

Trust, especially in the payments industry, is easier said than done. Traditionally, trust was created in payments through security features, rules, and accreditations. But Openness is changing the nature of trust. Rather than tightly restricted access, trust is being formed by data transparency and sharing. Visa Ready and Visa HCE (host card emulation) are both examples of trust built upon Openness. Both act as umbrellas of trust over relatively Open products.

Today’s payments marketplace is only partially Open. Payment services are not yet truly easy-to-use, global, and omni-channel. Legacy systems need to be replaced so free-flowing competition and innovation can flourish. Yet the industry’s progress towards Openness over the past 20 years is considerable. Before the internet, payments were defined by proprietary standards, closed domestic marketplaces, and restrictions rather than possibilities. Today’s market is increasingly defined by new technologies, new business models, and a general “can do” attitude. In the current environment, access to payments is broader than ever before, as areas that were generally restricted to banks are now open to payment institutions. The number of payment channels has exploded and payment infrastructure is more internet-based than before. These, and other developments, have moved payments towards Openness. Now, the market leaders are global operators and innovative start-ups that quickly obtain billion dollar valuations. Payments built on Open technologies and business models are a reality that will shape the future of the market.

Openness is redefining payments for all participants. For consumers, payments have become nearly frictionless and invisible, as payment services integrate with technologies such as smartphones. Payments are also simpler for merchants who now often procure their payment services as part of a broader commerce package. For payment providers, Openness means faster time to market, more efficient and automated operations, and partnership-based business models. This undoubtedly all sounds good, but only for those that become more Open. Those that do not risk being left behind.

Embracing Open payments means embracing the attributes of Openness: accessibility, flexibility, and transparency. Companies are accessible when they have easy sign-up processes, open and modern technical interfaces, global and local capabilities, and effectively balance security with convenience. Flexible businesses offer services that are modular, open to various technologies, multicultural, and adaptable for uptake by partners. To be transparent payment providers must offer clear terms, utilize feedback loops, and follow standards that stimulate interoperability and competition. In many cases, being Open will require a sea change across all aspects of a payment provider. Yet they are changes better started now, while Openness is still nascent, before it becomes the entrenched global standard. Actors that maintain legacy technologies, closed business models, and restrictive methods to build trust will fade away. Those that embrace innovation and Openness will be positioned to achieve historic success.