The role of Open Banking continues to evolve at a rapid rate as technology plays an increasingly vital role in global payments.
During the Money 20/20 Europe event, Payment Expert sat down with Paysafe Chief Business Development Officer, Daniel Kornitzer, as he explored the acceleration of a ‘cardless society’ and the expansion of Open Banking technology.
Payment Expert: Paysafe has been making ground in expanding the product in the US iGaming market, can you tell us why breaking into the US is such a significant step forward for Paysafe?
Daniel Kornitzer: I think iGaming is an industry that’s very close to our DNA. When the laws changed in May 2018, we were amongst the first to start working with the operators when states opened up to sports betting. Today, I believe we support 75% of the operators in the US, and we’re presently in 21 states. It’s an area where we feel that we have a great offering, one that adds a lot of value to operators, because we can deliver a whole host of payment methods through single integration. Enabling cards, third party payment methods, even some compliance services all through a unified integration.
In the Canadian market, we started working with them 12 years ago, and we’ve built a very strong relationship. In fact, I think we service the needs of pretty much every provincial lottery in Canada. We’re also working with our partners to help the industry and of course, we bring card connectivity. We’re looking to bring payouts, through Visa direct and MasterCard, and also third party payment methods, including cash, wallets, etc.
PE: In relatively new gambling markets like the US and Canada, could you tell us what are the challenges and the importance of implementing alternative payment methods in those regions?
DK: I think it’s essential, we call it lost in transaction. Last year, we published around iGaming in North America, and unsurprisingly, payments came across as a great tool for customer acquisition and customer retention.
When you can provide a seamless and frictionless experience, you can provide choice. The current acceptance rates are pretty good in North America. The consumer can pay by online cash or by a digital wallet, and still manage to get the deposit into their account. So it’s all about convenience. Providing a seamless, frictionless integration for the players, and of course, a secure environment.
PE: Digital Wallets almost feel like a necessity in today’s climate, but with the customer needs for making transactions even faster, how important are instant payments and one-click solution methods in providing a frictionless experience?
DK: I think that with instant payments, if you look at the evolution of real time, local rails in almost every jurisdiction, Pix in Brazil for example, open banking in the UK, pretty much in every geography that I look, there is an initiative to provide real time payments. There’s a great need for that because people want an immediate execution to their payment instructions.
It also poses some challenges. For example, in the US, when a bank receives a request for an ACH debit the bank reach traditionally has 48 hours. So it will take two days to reject it on the basis of fraud, etc. With real time, maybe the two days are compressed into a few minutes, the bank now has a few minutes to turn it down to reject, once it accepts the money has left the building.
So, it’s great in one way, but it also imposes a greater risk, because you need to be super fast at doing risk management. There is definitely a demand, everyone wants stuff in real time, who wants to wait for a payment to land? Or two, three business days? So there’s no question that real time is the name of the game.
PE: Could you explain the importance AI and open banking has on KYC checks and for the overall payment experience?
DK: So I think that there are two areas where AI is becoming a game-changer. One is on the user engagement side. Before we know it, we’re going to be dealing with chatbots with automated answers. We think we’re dealing with a human, but in fact, we’re dealing with machines and oftentimes, I think the machine is probably going to be better than a human, in most cases.
Because technology has matured, not so long ago you would need a roomful of servers, and the cost was probably in the millions. The power of machine learning, the power of cloud computing, the computing power that we can apply to the quality of the algorithms, and how these have improved our rendering of all these applications viable.
On the fraud, AML and compliance side, the power of AI is that it can detect stuff that’s often not easy to detect. For example, if you are a banker how do you detect linked accounts? Accounts that on the surface appear to be completely unrelated, but upon a more in depth analysis, they are accessed by the same IP address. It’s almost like AI gives you a microscope, and all of a sudden, doing all these correlations it says, ‘Hey, all these accounts, there’s something unsavoury’. Then you can detect something and freeze those accounts. I think it can help us create the best of both worlds, convenience and security.
PE: Do you believe there is any correlation with the rapid rise of instant payments becoming a byproduct of what payment systems will become in the future?
Yeah, for sure. I see our role as not being prescriptive, but rather to follow the customer. In other words, the younger generations, they have been trained by the Apple’s, by the Ubers, you expect everything to be intuitive. My kids will never read a user guide or manual, everything should follow your nose intuitively. So our job as a provider is to meet and exceed those expectations, because let’s face it, your last experience becomes your next expectation.
So the customer base has been trained to expect to maintain the bar, and that bar keeps going up and up. So our job is to provide services that meet and exceed that expectation of ‘ease of use’. The best payments are transparent payments, you don’t even see them. Beautiful, right?
So I think our job is to follow and to more than meet those expectations as they keep changing and going up.
PE: COVID-19 has accelerated the process of online instant payments. Do you now see a future where we become a cashless society? And when do you believe that this is going to happen?
DK: When COVID happened e-commerce went from 15% to 30%, almost overnight. So we got 10 years of acceleration in two months, it was kind of insane. But one thing that struck me is when I looked at the demographics of who was doing online, it wasn’t just the younger generations, it was a lot of the people in the older generations discovering e-commerce.
I’d say roughly somewhere between 20% to 25% of people did their first e-commerce transaction during the pandemic and many people discovered that it works and it works super well instead of having to run to the store.