Ahead of Merchant Payments Ecosystem 2023, Finextra caught up with Neira Jones, independent advisor and chair of the judging panel for the MPE Awards. The event, held from 28 – 30 March in Berlin, Germany, will also welcome startups to pitch their products at the Innovation Hub and Jones will moderate discussions on innovation in technology and how experience is reshaping the payments business.

Below is a Q&A with Jones ahead of MPE where she discussed how the payments industry continues to shift to the digital, whether payments can compete with the gaming, film and music industries when it comes to success in the metaverse and augmented reality, and whether e-cars and e-mobility will help drive the payment revolution.

How can the industry best shift to digital? How must new technology and infrastructure for omni commerce be approached?

Not everybody is created equal. The shift to digital may be more difficult for some players than it is for others. Traditional payments or ecosystem stakeholders, for lack of a better term, may find it quite difficult because incumbent players have been in this game for a very, very long time. They have invested a lot in technology and infrastructure and their substantial investment overtime may slow their pace of technology adoption.

Incumbents are lumbered with lots of legacy systems, which is fine, most of the time, but it may be difficult for them to shift to a digital mindset if its culture is not conducive. Because the digital mindset is very, very different to a traditional mindset, trying to obtain the right skills, retain them, and foster innovation, and really understanding what can be achieved with technology and investing accordingly, is crucial. As is preserving the integrity of the ecosystems, whilst understanding that the customer needs to be put at the centre of any digital strategy.

If you haven't got the ear to the ground and don’t understand what your customers want, you may be missing the mark. Neobanks and fintechs, for example, have been very good at that because they've been born digital and they're all about the user experience. Shifting to digital is not a simple matter. We saw that with PSD2 and open banking since 2018. It did two things: first, it asked traditional players to open their infrastructures, use open standards and develop APIs, aiming to create a level playing field for innovators.

Secondly, it brought previously unregulated third parties under the fold of the regulation, which may have been construed as introducing more constraints on innovation, but in fact was a bid to preserve the integrity of the ecosystem. If you recall, there was a huge controversy when screen scraping was banned as part of PSD2.

As a result, we had a more level playing field and we saw lots of new business models appearing such as API aggregators. Banks were slow and adopted various strategies, starting with minimal activity to comply with the regulation in a “wait and see” defensive stance. Banks were, after all, forced to develop and invest in digital infrastructure, such as open APIs based on open standards.

As the models were more understood, banks started to capitalise on that infrastructure to generate more revenue, and expose products and services beyond simple payments, but this was still a defensive strategy. As the years went by, the mindset changed from defensive to offensive. Banks then realised they could start becoming ecosystems. We're not completely there yet, but by all accounts, if you look at all the statistics, everyone is moving in that direction and essentially trying to mimic Amazon by enabling everyone to develop on top of their own infrastructure.

Video game companies are generating more money than movies and music combined. What's the potential for payments?

We can learn a lot from gaming companies because they've been around for quite a while, and they have made a lot of mistakes. When you look at this push towards standardisation, I believe that the metaverse presents a lot of opportunities. First of all, we must learn from gaming companies as they will give us clues on how we should approach the metaverse. It's about looking at the differences between traditional gaming (Web 2) and Web 3 gaming.

New business models are coming to the fore (e.g., Play-to-Earn), but let's not forget that the concept of a metaverse is not new. It's been around for a very, very long time. Defined as a virtual reality space in which users can interact with a computer-generated environment and each other, we can immediately see how this particularly applies to gaming. If we look at traditional gaming, these virtual universes are popular, some very famous such as Second Life, Fortnite and World of Warcraft.  

For Web2 games, when we look at payments, you will play the game, you will most probably use your credit card to purchase assets (e.g., a sword) or in-game currencies (e.g., V-Bucks). On Web3, games (e.g., Axie Infinity) and universes (e.g. Decentraland). You may remember the massive hype over Metaverse Fashion Week in March 2022 on Decentraland. Every fashion company was on it and selling NFTs.

Asset ownership is different between Web 2 and Web 3: when you buy a sword on World of Warcraft, you can only ever use it on World of Warcraft. If you buy an asset on Decentraland, it is most probably an NFT, which by its nature, is transferable.

Similarly, currencies are different on Web 2 games, these are private (e.g., V-Bucks), whereas on Web 3, these are crypto-currencies. The concept of identity is different too: on Web 2, your avatar is specific to that world, whereas on Web 3 your identity could be self-sovereign and portable. We can imagine a future where interaction between old and new worlds will become essential.

How will e-cars and e-mobility help drive the payment revolution? Should other verticals be inspired?

10 years ago, the industry was already talking about payments in cars and the ability to pay for your fuel; this was around the time when we had lots of hype around IoT. Fast forward to today, are payments in cars going to drive the industry? I don't think so unless the customer experience becomes so compelling that drivers themselves clamour for it. The real question is: what will drive consumer adoption, and will people warm to it and use it?

So yes, the technology is there when people feel safe enough to use it, when they find it more convenient than other ways of doing things. Again, the opportunities for businesses is about putting the customer at the centre of their digital strategy. There is no doubt that the adoption of technologies such as biometrics, machine learning and behavioural biometrics, for example, will actually help in that respect, but I think we have a longer a long way to go yet.

It is inevitable that we will continue to become more and more digital. It is inevitable that there will be more and more fraud and cybercrime as a result, which regulations will try to address. The silver lining is the technologies are there to enable us, not only to provide the seamless customer experiences that we all crave but also to preserve the integrity of ecosystem, and we must not think that regulations are the enemy of the customer experience.