Digital identity and payments are two of the cornerstones of digital transformation. Throughout the Americas, businesses are developing innovative new ways to revolutionize customer engagement in the device-first modern world.
To explore these fast-flourishing use cases, Fime recently held two Innovation Days; one in Atlanta, USA and subsequently in Sao Paulo, Brazil. These gave stakeholders a unique opportunity to hear first-hand insights from industry leaders on today’s fundamental technical and regulatory challenges while also connecting with peers to discuss the opportunities that present themselves.
At these two events we heard from global market powerhouses and local leaders alike, giving us perspective into both the similarities and the differences that are faced across North and South American markets.
Modernized digital payment flows.
As the penetration of connected devices and internet availability continue to rise, it’s no surprise that digital payments are continuing to go from strength to strength. In Atlanta, a panel moderated by Honore Afene identified the rise in the adoption of mobile wallets usage in the United States. Digital wallets were discussed as key drivers that enhance the user experience by streamlining the checkout process.
These same digital wallets are proving significant in enhancing eCommerce checkout journeys too. Click-to-Pay was a common point of reference in Atlanta as delegates discussed the need for frictionless checkouts to enhance conversion rates, many of which now leverage the additional security safeguards, like biometrics via the user’s smartphone, that digital wallets can help provide.
Fime CEO, Lionel Grosclaude, echoed this digital shift in his opening address in Sao Paulo a few weeks later, identifying digital wallets as the “new normal” not just for payments, but for tickets, transport, loyalty and a host of exciting new use cases. But unlike in the United States, it’s not mobile wallet providers leading the way with innovative payment solutions; it’s the central bank.
Banco Central do Brasil mandates and manages the second largest instant payment system in the world, PIX. Used by 75% of citizens, PIX is accessed through the app of each member bank, but as it is centrally controlled, the system champions integration over competition as banks look to leverage the capabilities of accessible instant payment rails rather than create their own alternative. This helps boost the utility and adoption of instant payments throughout Brazil, however as was highlighted in the “Payment Technologies” panel session by two global schemes, some users still prefer cards as they offer enhanced chargeback programs, offline services and value-added services.
While both instant payments and digital wallets are helping enhance money movement, a major concern shared by delegates at both events was how to secure these transactions. Frictionless checkout experiences that optimize conversion rates have been prioritized, but can more be done on security? Unlike in Europe, 3DS has not been mandated, meaning that uptake among merchants has been low for fear of impacting conversions. Finding a solution that champions both security with convenience must therefore be a priority.
Creating trusted digital identity solutions.
The prevailing opinion at both Innovation Days was that digital identities with verifiable credentials will bring trust back to the user identity experience. A digital identity can allow the user to present only the necessary information required for a given use case, rather than all personal information every time. This marks a notable step forward in identity solutions that engender security, convenience and privacy.
Speaking in Atlanta, the American Association of Motor Vehicle Administrators (AAMVA) explained how its Digital Trust Program (DTS) provides relying parties with confidence in the trustworthiness of mDL solutions. This is paving the way for mDLs to become another viable option for identity at participating State’s DMVs.
Brazil meanwhile has a national ID system, the Cadastro de Pessoas Físicas (CPF), which is integrated directly into its gov.br digital portal. While there is no regulation for verifiable digital identify credentials as of yet, the system already in place means that the route to mass adoption isn’t as daunting as it first appears. This allowed discussions in São Paulo to center around the multitude of options available once the infrastructure is in place. Marcelo Bellini Garcia of Consult Hyperion spoke on the flexibility and security that digital identity could provide across ecosystems ranging from education to healthcare to access control. The most exciting use case discussed though, was the convergence between digital identity and payments.
The convergence of digital services.
Integrated multi-service digital wallet solutions are a growing trend and, as referenced above, the use cases for this are vast. One of the biggest opportunities lies at the intersection of identity and payments. As explored in a session on Open Finance by Bradesco and Banco Itau, stringent authentication, leveraging electronic identification verification processes, can help fight ecommerce payment fraud with dramatically enhanced KYC protocols. Furthermore, connecting digital ID with digital wallets can also facilitate automatic ID verification when purchasing age-restricted products both in store and online.
Payments and identity are naturally aligned in the digital world. Both systems rely on cryptography and secure hardware to protect the transaction, and both could potentially be accepted via similar user interfaces. However, while payment acceptance terminals are ubiquitous, identity verification terminals are far less common. Institutions that already support secure payment acceptance are well-positioned to extend their role into digital identity verification in what is next frontier that payment terminal vendors should be prioritizing in the coming year.
The value of a trusted partner.
The Innovation Days were a fantastic melting pot of ideas. It was wonderful to connect with so many engaged stakeholders and hear the challenges and opportunities that are shaping the Brazilian and American markets. Integrated device first solutions for payments and digital identity were top priority at both events, but it was fascinating to see how the two nations are taking decidedly different approaches to meet local demand and user preferences.
These trends are mirrored in nations around the world, each with their own nuance and local or regional flair to meet the needs of the people they will serve. There is no “one size fits all”, and so finding the right way to engage with the digital market is key for governments, businesses and citizens.
This is no simple task, but the rapid evolution of these industries is opening up significant opportunities for those that can seize them. Working in conjunction with our colleagues at Consult Hyperion, Fime can help you understand and apply key legislative and regulatory requirements, map the challenges and opportunities that they create and develop secure, convenient and innovative solutions to market.
Contact us to turn challenges into opportunity.
