Payments is a Gateway to Other Opportunity: Discover's Offereins

PALM BEACH, Fla.—Handling transactions is secondary for the tech giants now entering the payments industry, says Diane Offereins, Discover Financial Services executive vice president of payments.

Apple Inc., for example, is introducing Apple Pay primarily to sell more smartphones and other computing devices, Offereins suggested in a presentation at the Electronic Transactions Association Strategic Leadership Forum.

Google also harbors secondary designs on the payments business, Offereins said. Its forays into payments, which have yet to gain traction, were designed to further one of the company’s goals of selling advertising, she said.

The Merchant Customer Exchange, or MCX, counts the nation’s largest merchants among its members. It intends to launch a mobile payments wallet to lower its interchange fees and enable it to control the data it gathers.

Amazon Inc., another aspirant to the payments business, wants to promote commerce and enhance its position as a small-business marketplace. For them, payments constitute completing the purchase chain, she said.

PayPal, which prides itself on security and its early tokenization effort and dominates online payments, wants to expand that business even more, Offereins told attendees. At the same time, PayPal continues to work at expanding its offline business.

All of those companies—as well as players such as Softcard, Square and LevelUp—sometimes feel threatening to established payments companies. But all could become collaborators instead of competitors, she maintained.

The challenge for established firms lies in finding ways to help the newcomers operate in the industry, Offereins said.

“Trying to keep competitors out forces them to work around you,” she warned.

Apple Pay, in particular, presents opportunities because Apple built its entry into payments world by working closely with the industry’s large, established players.

The collaboration seems likely to help popularize mobile payments and bring Near Field Communication into the mainstream, she noted.

If Apple Pay gains enough momentum, it could also set de facto industry standards for mobile payments, Offereins said.

Apple has also designed Apple Pay to guard against hackers, Offereins said. “Security is the main problem Apple is solving,” she noted.

Security concerns have come to the forefront lately because of frequent massive data breaches that are costing merchants money and undermining public trust in payments.

But even that problem can present opportunities and help the industry achieve its goals.

For example, the Target breach during the holiday spending season last year convinced many merchants of the need to switch to EMV-chip cards, Offereins said.

And the advent of EMV brings with it other technologies, such as contactless, she noted.

Stronger focus on EMV and other aspects of security, such as tokenization, also require independent sales organizations and sales agents to become more familiar with technology so that they can present it to merchants, Offereins maintained.

“You, the acquirers, have to make sense of that landscape for your customers,” she advised.

It’s a changing landscape because the convergence of mobile capability, biometrics and location-based technology may make payments disappear into the background, Offereins said.

If payments become a smaller part of the decision merchants make when choosing processors, ISOs and agents should respond by becoming consultants instead of salespeople, she advised.

Acquirers should master the new complexity of payments so their merchant clients don’t have to deal with it, Offereins said. ISOs and agents can work with mobile providers and other tech companies to do the “heavy lifting” that will finally bring about the long-awaited new era of payments, she said.