5th July, 2019

The development around sharing of banking (customer) data and make it available to non-bank third parties via APIs is being followed closely. As pointed by Edgar, Dunn & Company, one main aspect of EU’s landmark payments regulation, PSD2, is ‘access to accounts’ – this is effectively the ‘APIzation’ of bank accounts. Open APIs play a vital part at the heart of PSD2 compliance and open banking.

With open banking, a new financial services ecosystem is set to emerge. Even as issues related to data privacy and security are being raised and discussed, there is no doubt that merchants need to focus on opportunities from their customers’ perspective. Airlines need to make the most of the new regulation, which is resulting in opening up of the payments infrastructure and liberating customer data assets to offer consumers new options and services. “Open banking is one of the key regulatory changes, and it is going to impact the way merchants like airlines accept payments,” mentioned Pascal Burg, Director, Edgar, Dunn & Company (EDC).

Burg recommends that airlines need to “test and learn” about standards and infrastructure, and also application of the same from B2C and B2B perspective.

EDC suggests a three-phase approach for airlines to identify, evaluate and address payment opportunities and threats –

• 360° payments diagnostic/ audit

• Future state/ roadmap

• Roadmap execution - Interim payment team to support business to launch initiatives

By Ritesh Gupta

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1^st July, 2019

E-commerce companies, including the ones from the travel sector, are gradually focusing on deploying a multi-disciplinary approach, combining different technologies (including both supervised and unsupervised machine learning) to combat fraud.

Unsupervised models don’t have clearly labelled data, while supervised models do.

As a specialist, Nethone asserts that machine learning today is letting companies deal with fraud. For instance, friendly fraud by helping discover which aspects of customers’ behaviour and transactions designate friendly fraud.

Overall, favourable results come from the ability to experiment with various machine learning-based methods, trying variations on them and testing them with a variety of data sets. It is fascinating to assess how machine learning automates the extraction of known and unknown patterns from data.

Supervised machine learning relies on historical data to predict and prevent further possibilities of fraud based on past fraud. The data set is labelled based on previous observations of fraud, and is described as either fraudulent or genuine. Unsupervised machine learning can be used to learn on the fly and identify fraudulent patterns even without having been trained with historical data, i.e. able to identify unknown fraud attacks. 

Rodrigo Camacho, Chief Commercial Officer, Nethone, referred to the role of unsupervised learning in managing friendly fraud and criminal fraud. “(One) looks at the entirety of the dataset (without a label). Then cluster transactions into different bubbles. These clusters are correlated with a type of fraud, for instance, friendly fraud or criminal fraud,” said Camacho. And from here on companies can work on strategies for e-commerce, work on association with key players such as acquirers and issuers etc. for mitigating the risk.

Specialists recommend that merchants should rely on both supervised and unsupervised machine learning to comprehend both the historical patterns of use, as well as identify anomalies. 

By Ritesh Gupta

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4^th June, 2019

Ai Editorial: 3DS 2.0 promises to combat fraudulent online transactions, but merchants need to cut down the possibility of losing out payments when authenticated using the new version of 3DS, writes Ai’s Ritesh Gupta

Transition to the new version of 3D Secure is being followed closely, owing to its impact on the shopping experience and in improving security of a transaction.

More so for high-risk transactions or in a market like Europe as the PSD2 introduces strict security requirements for the initiation and processing of electronic payments, which apply to all payment service providers. In Europe, organizations are expected to upgrade to the new version by September 2019, to be ready for the enforcement of the SCA or Strong Customer Authentication. Since this directive mandates changes in how fraud review must be conducted on intra-EU transactions, critical issues such as cart abandonment need to be evaluated in detail. The SCA aspect of the PSD2 directive can have negative impact on revenue generation, and this is what the stakeholders are concerned about.

It is being highlighted that 3-D Secure 2.0 will pave way for a real-time, protected, details-sharing channel that merchants can avail to send an unmatched number of transaction attributes that the issuer can use without looking for a static password. One of the highlights of 3DS 2.0 is data sharing. This data exchange is relatively richer owing to the combination of certified SDKs in the checkout flow, paired with data sharing APIs.  Authorization rates can be stepped up with no perceivable alteration to the checkout flow.

Subject to the sort of data being provided by merchants and their respective payment services providers, the issuer is expected to act in a couple of ways to decide on the course of action related to the payment. In case, the information provided is considered to be apt to assess the authenticity of the buyer, then the particular transaction is eligible for a frictionless flow, and authentication isn’t interrupted from a shopper’s perspective. In case the transaction isn’t in line with the normal purchasing pattern, then it ends with what is being called a challenge flow. Accordingly, a requirement crops where one-time password from the buyer is needed to authenticate the payment. This is where the efficacy of the new version comes in, as the challenge flow is blended into the mobile checkout experience without redirects. Visa states that merchants can embed 3DS 2.0 into a web page or native application. One can customize the user interface elements (e.g., buttons, fonts, inputs) for all content for any challenge method used. The mobile SDKs will set up flows within apps. This indicates that a shopper won’t be required to finish the payment in a separate browser-based flow.

Assessing the impact

Merchants need to be alert about the fact that a refined 3DS 2 user experience alone won’t pave way for optimal acceptance rate. Merchants need to be clear about which transactions require authentication and which don’t.

Rodrigo Camacho, Chief Commercial Officer, Nethone, says merchants shouldn’t push 3DS for all transactions.

“At Nethone we have found that 3DS typically costs merchants anywhere between 2% and 3.5% in conversion rates in Europe and upwards of 15% in the Americas,” mentioned Camacho in a company’s blog post. “Typically we have seen that it’s only necessary to push 3DS to less than 8% of your traffic which will lower the impact on your conversion rates by more than 90%.”

According to another analysis, Ravelin’s data indicated that 3DS with improved user experience still lost 19% of payments.

Being prepared

When customers are asked to verify transactions, they are presented with a challenge flow. The challenge method that's used is determined by the issuer. 

Visa’s recommends 3 UX principles:

• Keep it clear
• Think human, not robotic
• Be trustworthy

As explained by Visa, three verification methods are as follows:

• One-time passcode (OTP) - Customers verify transactions using a secure code sent by text or email. Issuers can choose which delivery channels to make available for the customer. Both are recommended.

• Knowledge-based authentication (KBA) - Customers verify transactions by answering knowledge-based questions.  

• Out-of-band (OOB) - Customers verify transactions by entering a passcode or a biometric feature.  

Also, a customer's purchase can be verified on the existing issuer app by entering sign-in credentials. Visa also states that since many iOS and Android users already have the ability to use fingerprint scanning to access their phones, it recommends using the same method to authenticate customers. Also, the team advises any biometric authentication is used in addition to a passcode. So if biometric authentication issues arise, the customer may switch to a passcode. Other methods of authentication are face recognition and voice recognition, which can be done directly via issuer app or via a connected device linked to an issuer app, such as a digital watch. 

Other than UX, there are technical details that also come into play. According to Adyen, these are the front-end libraries (to securely collect and transmit device information, as well as to display authentication flows) and the 3D Secure server. Both work together to exchange information and request authentication.

What to expect

Sasha Pons, Product Director at Ingenico believes that the deployment of the new version of 3DS is going to be an iterative process, shaping up as version 2.1, version 2.2 and so on.

“Such a huge shift in the way merchants collect and share data will not happen overnight. There will be a period of adjustment, and you can take some comfort in the fact that many merchants like you will be going through the same thing,” Pons mentioned in a recent blog post. “What 3DS v2 asks of merchants will change as the practical realities of the new standard become clearer.”

He expects the particular rules around the format, and quality of data needed will evolve as the time progresses.

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30^th May, 2019

Ai Editorial: As consumers look to control their digital experiences, the ease with which one can complete a transaction in a secure environment is extremely important. Ai’s Ritesh Gupta assesses how open APIs are playing their part in this context.

Real-time payments and open banking, along with the opening up of customer banking data to 3rd parties and streamlining of digital payments via regulatory measures, are the main trends that are shaping up the future of digital payments.

Regulations like PSD2 are paving way for new services and faster payments. A lot of areas are being probed today, and one of them includes how open access and application programming interfaces (APIs) are going to impact real-time payments. Are individual banks going to make their data available through different technical standards or a regulation is going to pave way for common API standards in a certain market? Importantly, with open APIs and the implementation of payment hubs, there is going to be support for new networks and hence there will be competition for existing rails.

Open APIs

There are multiple ways in which APIs are playing their part:

• Streamlining payments as per travellers’ comfort: For instance, a cardholder shares travel plans online or through a mobile banking app, a company like Visa stores the cardholder’s travel details for future matching. A travel tag in real-time within the authorization message is provided. Issuers act on the same, and eventually the possibility of false declines goes down.

• Processing of payments: The use of open APIs to simplify back-and-forth messaging that takes place during the course of a transaction is coming to the fore. API calls are coming into play to ascertain the payer details. Be it for domestic transactions or cross-border remittances, APIs are helping in making progress. Another area that is being discussed is cart abandonment. The Payment Request API is about cutting down the number of steps needed to complete a payment online, potentially doing away with checkout forms. This API facilitates the exchange of a user’s stored payment, address and contact details between the browser and a site.

• New products: Open APIs promise to fundamentally transform the experience of payments for end-users. An open API can be accessed under specified conditions by the 3^rd party developers. Recently Visa came up with a new platform with a set of beta APIs, specifications and development tools for issuers and issuer processors. These can help in creation of new digital card accounts on demand; set up rules/ limitations around use of digital cards, such as by merchant type, geography etc. 

“Open APIs are all about consolidation of data and processes that sit in different domains and systems. On one side there is more data than ever that helps to understand the context of the payment and on the other, once decisions on purchase are made – one can execute them easily across multiple platforms since they are connected,” mentioned Vojin Rakonjac, Head of Payment Solutions, Voyego.

“Devices or systems that are connected to these open APIs (no matter if it is chatbot or voice conversational agent/ banking chatbot or Siri) will learn more about our decisions and ultimately “know” what we want at a given time and their job is to understand the intent and automate most of the process in the backend so it looks seamless to the end user. There is a great example from Google’s assistant where haircut appointment is booked by voice. Assistant talks in human voice and negotiates timeslot with the local barber shop while on the other side of the line is real person. We should expect things to move in this direction more as long as device knows what are the boundaries that it can work with (time slot, budget etc.) and as long as payments are always performed with proper authentication,” added Rakonjac.

Going forward one area to watch out for is standards and guidelines for open APIs. This is going to be the deciding factor in the effort required for collaboration or integration.

Open banking

Considering that in a region like Europe it is becoming mandatory for banks to open up access to accounts, payment flows and end-customer data to 3rd parties, it is vital for the industry to dig deeper. All these developments are going to impact banks, as the rising role of APIs in retail banking is considered to be a recent phenomenon. Banks are beginning to expose their data for use by third parties, in particular fintech companies, through open APIs. APIs enable banks to expose their in-house data and application functionality to approved apps and services, while monitoring and controlling the flow of data. And by allowing for new digital experiences on mobile apps, 3rd party services etc., banks are potentially opening up to risks, for instance, fintech firms tapping into a bank’s financial data.

“With PSD2 we have banks aggregating a lot of data and opening their APIs so some of this data is available to 3rd parties (transactional, account data etc.). But banks are not using it to the full potential. Banks worry about loans/ credit cards it could offer – where they are sitting on top of data that would be very valuable for merchants or fintech’s and where this context can be fully utilized,” said Rakonjac. He expects innovation/ services around this space where data collected by banks is not used only for risk scoring (3DS 2) but is provided to the other companies where it can provide real benefit to the consumers.

“We already have aggregators that link into European banks and leveraging PSD2 (e.g. Figo). But, as digital identity advances and becomes more mainstream, we might have companies that will aggregate one’s account details for all of the payment methods. This way you will no longer need to have separate credentials or authentication mechanisms but only one. By doing so, customers won’t have to distinguish between payment methods – there would be only one option, Pay. To the customer, we are going towards one payment and one commerce – there will be no difference between physical store and e-commerce and there will be only one pay option.” 

Other than authentication, another area to watch out for is improved security. It has to be guaranteed that data is secure, and external services have access only to the controlled data that the consumer has permitted and that the bank has assigned.  

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28th May, 2019

Merchants, including ones from the travel e-commerce sector, need to diligently assess their respective mobile-order fraud-review systems.

According to Riskified, the behaviour of consumers when they shop via mobile and what makes such devices risky has to be ascertained. If not then merchants would continue to grapple with the highest rate of cart abandonment during the checkout process and above-average false-decline rates when compared to other shopping channels.

Sophia Miller, Business Development Manager, Riskified, who was recently in Brighton, UK for Ai’s ATPS (13th ATPS Worldwide Event), underlined that nature of users, the kind of transactions, unsuited fraud review measures, and the device being ATO or account takeover friendly make mobile risky.

For instance, Sophia highlighted that relatively younger travellers are more likely to order travel products using mobile devices, and tickets booked by this audience are 3.5 times more likely to result in a chargeback. She also shared that last minute travel orders are riskier plus mobile orders provide data points that don’t exist in desktop orders (and vice versa). “Fraud measures that are not device-sensitive can lead to 50% drop off rates,” indicated Sophia. As for ATO, she mentioned that mobile devices tend to contain all account, payment information and rewards and mobile apps are a “fraudster’s gold mine”.

By Ritesh Gupta

Ai Team 

24^th May, 2019

Merchants, including airlines, need to take a collaborative route to combat fraudulent activities such as financial fraud, account takeovers etc.

Jan-Jaap Kramer, Founder and CEO of FraudGuard highlighted the same during an interaction with Christopher Staab, Managing Partner, Ai Conferences at the 13th edition of Airline & Travel Payments Summit (ATPS) in Brighton, UK, held earlier this month. 

“I believe in collaboration (for fighting fraud) at every level,” said Kramer. He indicated that fraud prevention as a discipline has come a long way, considering that a fraud analyst used to be isolated from other departments within an airline. And now various sectors have realized the significance of jointly fighting fraud since one fraudster can have access to a customer’s credentials. And these can be used across a variety of retail sites or in other ways to commit a fraudulent activity. “So it is imperative for merchants to cooperate and fight in unison,” said Kramer.

No point in just passing the fraud liability to another company or garnering data to enable real-time risk assessment but just for one’s own benefit. Rather wherever organizations can share best practices and even data they shouldn’t restrict and go for a join effort to fight this complex problem. This way merchants would be better aware of live and recent fraud transactions, chargeback monitoring, what to do when fraud is identified etc.

20th May, 2019

Voice commerce is transforming the way travellers search, browse and buy online.

Travel brands have been focusing on the utility of voice features/ assistants, keenly evaluating those aspects of a trip that are tedious, and how can voice make the experience better.

“We have witnessed great advancement in the manner in which one can communicate with voice assistants, their context being understood and being helped out (in various tasks),” said Rodrigo Sánchez Prandi, VP Product, dLocal, who added that the e-commerce sector is witnessing progress on the payments side, too. So from checking the status of a flight to amenities in a particular flight such as Wi-Fi to checking in etc., one can buy trip essentials as well.

Companies like Google acknowledge that designing conversations is quite tricky as human conversations are complicated.

Prandi fittingly referred to the significance of understanding the specific use case of voice search, and counting on contextualization to deliver the best possible experience. “If a traveller is looking for Madrid to London flight, it is important to come up with only a couple of options, rather than giving a user 20 options. There is a need to know the customer really well,” he said. Progress is rapid owing to the fact that these offerings are always getting smarter, delivering new capabilities. The more one uses Alexa or Google Assistant, the more they adapt to a speech type/ pattern, lexicon/ jargon, likings etc.

Some of the considerations that travel e-commerce need to dwell upon:

• Creating a specific voice app like capitalizing on Alexa skills

• Difference between direct voice buys and open-ended voice searches

• Streamlining UX (for instance, Amazon Alexa recommends that enable users to initiate checkout on the website or mobile app, and complete the purchase via Alexa, or vice versa)

13th May, 2019 

PSD2 or the payment services directive in Europe is being associated with a major change in payments and data protection. It is aimed at regulating payment collection and payment services in the EU and EEA. The PSD2 legislation came into effect last year, with full operational compliance to technical standards required by September this year.

It is a challenging phase for the entire payment ecosystem, says Laurie Gablehouse, Global Head of Travel Solutions, Ingenico ePayments, who was in Brighton, UK last week for Ai’s ATPS (13th ATPS Worldwide Event).

Laurie pointed out that the standards are still evolving, with grasp over “80% - 90% of what needs to happen”. “(So) the timing is quite late from a technical perspective for everybody to be ready by September.” She recommended that merchants, including airlines, need to assess where this directive is going to be applicable and accordingly, what are the requirements for the SCA (Strong Customer Authentication). The SCA requirement is for transactions between cardholders whose payment cards have been issued in the EEA and merchants located in the EEA. Exemptions include low value payments at the point of sale (to facilitate the use of mobile and contactless payments).

Ritesh Gupta

Ai 

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