New payment methods such as real-time payments, initiatives such as open banking, and technologies like biometrics, all contribute to a constantly evolving ecosystem. The potential for innovation and optimization is clear.
But if this value is to be realized, players must first ensure the security and interoperability of new products and technologies. A robust certification process is one way to achieve this.
With the global digital payments market set to be worth some
Certification bodies are independent organizations which work to ensure the security, reliability, and ultimate functionality of a product. With participation from actors across the ecosystem – in a payments context, banks, regulators, fintechs, vendors and others – the main goal is to agree on a technological standard, then ensure compliance with it. Third-party testing laboratories complete the process by testing and confirming a product or service’s compliance.
Through this standardization, it is then possible to ensure trust, interoperability and the security of products, even across vastly different instruments and form factors.
When managed effectively, certification bodies can coordinate industry-wide solutions to otherwise significant challenges, easing pain points and ultimately driving innovation. There are several key issues in today’s payments market which a dedicated certification body could ease.
The rapid evolution of the digital payments market is a case in point. Digital transactions soared beyond 700 billion by the end of 2019, up from just over 400 billion in 2015. The downside, however, is the resulting rush to keep up with consumer demand, which can lead to poor implementations. Certification has a clear role to play here, establishing standards which ensure control and confidence.
Other examples of ecosystem-wide challenges where certification has particular relevance include market fragmentation, market commoditization, and market exclusivity. But to understand how certification can support and advance specific projects, let’s look at two unique areas of the ecosystem in more depth: open banking and regional payments initiatives.
Few areas of the payments landscape demonstrate the importance of a standardized, certified approach better than open banking. Despite the almost unlimited potential, many stakeholders are still struggling to stick to open banking rollout schedules more than two years after PSD2 came into effect. The lack of a standardized approach is acknowledged as a key factor in this, and one the ecosystem is trying to right through initiatives such as STET and The Berlin Group, which are working to establish open access APIs.
If standardization is essential, certification also has an important role to play. It can enforce standardization, ensuring implementations’ interoperability and security, while bringing clarity and stability to a complex environment.
It can also ensure harmonization of the secure data exchanges between banks, fintechs, and schemes and would answer challenging questions around industry competition by creating a level playing field for new entrants.
