Christian Walter ist Geschäftsführer und Redaktionsleiter von swiss made software. Bis Ende 2010 arbeitete er als Fachjournalist für das ICT-Magazin Netzwoche, publizierte zuletzt aber auch im Swiss IT Magazin, der Computerworld sowie inside-it.
While much media attention is devoted to mobile payments, the real growth in payments is happening online. Here credit card companies are battling against security and usability problems. Netcetera wants to change this with Tellwa.
E-commerce is reported to have grown 22 percent in 2014; in Switzerland this figure is reported to be around 10 percent. Payments are requested via invoice, transfer, direct debit, debit and credit cards, PayPal, or local online solutions. Good, old-fashioned invoices are still leagues ahead in many places. Market research agency Carpathia reports this figure to be 90 percent in Switzerland. But things are changing, for example in Germany: 2015 was the first year in which PayPal had a greater market share than traditional invoices. Direct debit and credit cards came third and fourth, according to a study by the business research institute EHI and the Aschaffenburg University of Applied Sciences.
Above all, this is expected to worry the credit card industry, as many experts predict a medium- to long-term shift towards online native solutions. These are far ahead of other payment options in two key aspects: comfort and security.
Netcetera wants to catapult credit cards into this league with its new solution, Tellwa. The concept can be reduced to a relatively simple idea: the abolition of credit card numbers – in cooperation with credit card companies.
User-friendliness and security
Problem no. 1: User-friendliness. Online, there is currently nothing simpler than PayPal. Clicking on the PayPal symbol takes the customer from the shopping cart to the payment service. Account holders log in with their username (email) and password and confirm the payment. And done. Tellwa takes a similar approach. Once the desired items are in the shopping cart, the customer just has to click on the appropriate checkout symbol. The customer then logs in just like they would on PayPal – with their username and password. They then verify their identity via smartphone, similar to using mTAN. And done. It is not even necessary to enter an address, as the card issuer already has this on record. This also offers the advantage that the data does not have to be shared with a third party, like PayPal.
Tellwa discreetly works behind the scenes throughout the entire process. The symbols that matter to customers are the recognizable symbols for MasterCard, Visa, or other credit cards, while the digital wallet only serves as a vessel for electronic standards used by credit card companies. Tellwa is implemented on the card issuer side and that of the shops. At present, only MasterCard’s Master-Pass standard is supported. More are set to follow. According to Netcetera CEO Andrej Vckovski, “Nearly all the credit card companies are developing their own form of MasterPass.” Tellwa is vendor-neutral. The solution is designed to be compatible with different standards. This is a plus for card issuers, who have a range of options open to them.
The MasterPass standard also allows payments via Visa and American Express – a clear signal that credit card companies have observed the signs of the times and taking a more cooperative approach. Tellwa’s clear goal is to make card payments easier. For one thing, customers will never have to enter their credit card number again. This, in turn, is central to the other issue – security. It is no secret that credit card numbers are traded online like sardines at a fish market. Except that they are cheaper than sardines, and available almost everywhere.
The end of credit card numbers
Tellwa takes this problem out of the equation. No number? Nothing left to steal. Aside from that, the customer always verifies their identity through a second channel, i.e. two-factor authentication. For a fraudster to be able to purchase something in someone else’s name they would need to steal the victim’s cellphone and know their username and password – and do all of this in quick succession. As soon as the victim becomes aware of the loss, they can prevent abuse through two channels: their phone company or their credit card issuer.
All of this could bring a little bit of sexy back to credit cards. But will that be enough in the battle against internet upstarts? Finally, there is a third problem: credit card companies’ version of highway robbery, charging traders two to three percent of the value of every transaction for the privilege of processing the payment.
Fortunately, the credit card industry regulator is stepping in and forcing innovation. A directive from the European Parliament is placing a cap on fees for credit cards and other bank cards in the future. The new regulation stipulates that the currently vastly different fees charged in different EU states will be capped at 0.3 percent of the payment amount. Something similar is happening in Switzerland, where the Swiss Competition Commission effected a reduction in credit card fees in August 2015. The interchange fee was reduced from 0.95 to 0.7 percent, and will be reduced even further to 0.44 percent on April 1, 2017.
These conditions secure a level playing field not just in e-commerce. Tellwa is hoping to one day allow mobile payments in shops – similar to the much-discussed Apple Pay, TWINT, or Paymit. TWINT in particular is beckoning to Swiss traders with its low fees.
Tellwa is a solution that allows the old-timers to catch up with the next generation of payment services providers – and not just online. It simultaneously opens the door to mobile payments. However, the publication of US Black Friday figures proved somewhat sobering: according to a study by Infoscout, only 2.7 percent of all purchases were made using Apple Pay – but the mid- to long-term outlook remains positive. When we talk about switching to mobile payment, we are ultimately talking about changing human habits in a place where they already have numerous options. This kind of thing takes time. It took 18 years for PayPal to get where it is today. But even the complete withering away of mobile payment solutions is unlikely to pose a problem to online payments. After all, it is quite conceivable to make online payments in shops. “I think that the differences between mobile and online payments will disappear over time,” says Vckovski. He might be right, seeing as almost a quarter of all online payments are processed using a cellphone nowadays. Whether a customer in a shop is paying online or via their cellphone is a bit inconsequential. Tellwa ensures card issuers can still choose the approach that is right for them. They do not even have to persuade their customers to download an app: they only need to send them a letter with their login information.
The first step has already been taken in Switzerland. In a joint venture with Netcetera, card issuers Aduno and Swisscard AECS have been offering the Tellwa solution under the name Swiss Wallet since the start of 2016. With three million cards, these companies currently hold a 50 percent share of the Swiss market. On a global level, the MasterCard system is already integrated into more than 250,000 online shops. Additional payment solutions, like Visa, will later be integrated into Swiss Wallet, while customer data will continue to be stored safely in Switzerland.