Payments On Fire

Conferences & Meetings

Episode 176 – Fanning the Flames: PaymentsEd Forum 2022

 

Glenbrook’s Drew Edmond joins Yvette Bohanan on the show to recap his experience at the PaymentsEd Forum in Washington DC earlier this month. In addition to attending the conference, Drew also spoke on a panel about “How collaboration at scale can improve outcomes” with Jordan Kaplan from Groupon and Jonathan Lee from Netflix, moderated by Tyler Heun from checkout.com. 

Tune in to hear more about Drew’s panel discussion as well as the major topics of conversation around the conference “water cooler”. 

 

 

Yvette Bohanan:

Welcome to Payments on Fire, a podcast from Glenbrook Partners. My name is Yvette Bohanan, co-host, along with George Peabody. Today, I am absolutely delighted to be talking with Drew Edmond, one of our partners. Drew, welcome to this episode. I think we’re going to call this a Fanning the Flames, right?

Drew Edmond:

Perfect. Yeah. Happy to be here. Thanks for having me.

Yvette Bohanan:

Okay. So Drew, you were just back a week ago, was it?

Drew Edmond:

It was August 8th through 10th.

Yvette Bohanan:

August 8th through 10th. Okay. So a little over a week ago now. Time flies, right? Payments Ed Forum 2022. This forum has been around for quite some time. For those that are new to payments and aren’t aware, maybe you’ve started your payments career during COVID and you weren’t going to any actual conferences. This forum, Payment Ed, actually started as the Direct Response Forum, DRF, decades ago. The reason it was formed was there were retailers out there, merchants, who were selling over call center, telephone, mail order, catalogers, think of your Lands’ End here in the United States or whatever.

Yvette Bohanan:

Then QVC shopping came in. I remember they were a big merchant who show up and the networks would show up and people would talk about things going on in that card not present environment. It was almost a sideline kind of thing from the point of sale environment, which was huge. It was enormous. Over the years, they’ve evolved. They’ve rebranded to Payments Ed. Tell us what’s going on. You actually went in person.

Drew Edmond:

In person.

Yvette Bohanan:

Live, IRL.

Drew Edmond:

Yeah.

Yvette Bohanan:

Great. What’s the format like these days of the conference? What’s the topics? What’s the agenda look like? Who’s going to it?

Drew Edmond:

Yeah. So yeah, it was great to be in person and be able to run into people in the hallways and between the sessions to talk about variety of different topics. The overall kind of framework for it was I think they really at Payments Ed Forum focus on substantive education for merchants. The roles represented there from the merchant community probably skewed heavily in the payment operations world, fraud operations. Because there are people there that are really trying to get a sense of what are the trends that are happening, whether that’s changes to regulations or laws that have come up in the past year or so.

Drew Edmond:

Or evolutions in rule changes from the card networks, different products potentially the networks are coming out with, or different service providers that are not really selling their services, but trying to introduce a topic and provide some information to merchants to understand what are your options here, what can you do to take back to your company and say, “Hey, this is what I learned from the conference. Here’s some opportunities for us to evaluate for us to add to our roadmap or to incorporate into our product or our checkout flow or how we think about addressing things with different stakeholders across the industry.”

Yvette Bohanan:

Cool. So worthwhile time.

Drew Edmond:

Yes.

Yvette Bohanan:

We’ll get to why you were there in a few minutes, but I’m just kind of curious, what were people talking about? You actually had an opportunity to network, to talk to people to see not just what was on the agenda, but what’s top of mind for people. If you had to name the top three topics around the water cooler.

Drew Edmond:

Around the water cooler. Yeah, absolutely. Yeah. It was fun to be able to go up to people and ask what’s top of mind for you both from an individual perspective, but also wherever they’re coming from as a merchant or a service provider or even a network. I think one topic that’s very top of mind for people now just with the release into the wild is the Durbin-Marshall bill that was introduced a few weeks ago. The second being kind of the evolution of Visa’s Compelling Evidence 3.0 and kind of the impact to merchants on dispute resolution and how it will impact their business. The third one was around the introduction of Mastercard’s Buy Now Pay Later installment programs. Those were the three that really jumped out to me as common themes across conversations of people saying just a lot of questions around all three of those.

Yvette Bohanan:

Cool. So Durbin-Marshall, compelling evidence with Visa, and then Mastercard Buy Now Pay Later. So why don’t we just take a second and kind of go through what were people saying about each of these? So Durbin-Marshall bill, for those whose eyes are not glued regulatory developments, give us the highlights.

Drew Edmond:

You mean people aren’t just sitting at home reading introduced bills that haven’t been passed into legislation?

Yvette Bohanan:

Yeah, right.

Drew Edmond:

We do that. We love it. So at the really highest level, many of us are familiar with the Durbin amendment when it comes to the debit card world. The goal was to reduce the cost to merchants associated with processing debit card payments. Now, Senator Durbin and his counterpart are taking a look at the credit card world and trying to find a way to introduce competition into the credit card routing world with the ultimate aim of lowering the cost to merchants. The devil of course is in the details. I feel like that phrase is going to be used a lot when it comes to this.

Drew Edmond:

But when it comes to implementation and downstream impacts or effects on stakeholders across the industry in a variety of different ways, it’s going to be really interesting. I think the questions, again, more questions and answers right now. I think the initial question is is this bill even going to pass? Does it have a chance of passing?

Yvette Bohanan:

Really, just to back it up for a second, what they’re looking at is the competition specifically for credit card routing, is that you’re required to have a second non-Visa, non-Mastercard network on the card for routing purposes.

Drew Edmond:

That’s right.

Yvette Bohanan:

It’s analogous to what they required for debit, but now we’re talking cards and that’s a little bit of a different animal, so. But yeah, first of all, is it actually going to happen must be the top of my question.

Drew Edmond:

Yeah. Are we wasting our breath talking about this or is it realistic? I don’t think we have an answer to that yet. I think it has to kind of go through the motions and see what the different groups have a chance to have an impact on how it passes. But there is a lot of questions around who ends up being those routing options outside of Visa and Mastercard. Of course, we have American Express and Discover. What do they need to do to be able to take advantage of this if it does pass and how does that affect stakeholders across the industry, the issuing banks, the networks themselves, do the PIN less debit-

Yvette Bohanan:

Acquirers, acquiring practices.

Drew Edmond:

Yeah. What do the requires have to do to support it for routing perspective. Yeah. So yeah, a lot of questions. A lot of questions I think. Even from the consumer angle as well, is there going to be any effect on your ability to get rewards? Or do I have a choice of where it routes like we do in some examples on the debit side today where you can do Visa debit, US debit? Am I going to have this kind of list of options for a variety of different payment methods or it just makes it even more confusing for consumers on and makes them think a lot more about how payments work than maybe they need to?

Yvette Bohanan:

Right. What does it do to rewards programs? What kind of sort of intended and unintended consequences might there be?

Drew Edmond:

Right.

Yvette Bohanan:

Which you always have both, right? Particularly with regulations. So there’s quite a few ripple effects there and people… So it was getting some buzz.

Drew Edmond:

Definitely getting some buzz. I think the fact that it doesn’t hard cap rates, it doesn’t set rates like they do in Europe or like they did with debit and it really just tries to introduce competition and let the market do with it as it will, I think that was definitely a point that people were curious about how that’s going to shake out. It’s more simple to just set a rate, but I think it’s probably harder when it goes back to the question of how do we get this bill to pass, I think it might be easier to do it if you’re introducing competition rather than kind of heavy handedly regulating with a set price.

Yvette Bohanan:

Yeah. Well, it’s definitely an approach that’s more aligned to the way the U.S. tends to approach these things, so, than other more centralized regulated groups for sure. So yeah. Well, so more to come. I think we have a colleague, Justin Pituch, who’s been digging into this a little bit more and we’ll bring him on next for fanning the flames and talk about it and maybe do a deeper redux on that one.

Drew Edmond:

Great.

Yvette Bohanan:

But then the next one was compelling evidence. So this is Visa coming out and talking about what people have colloquially called family or friendly fraud and it’s not friendly. It’s actually technically referred to as first party fraud. I think the operating rules are now referring to it as misuse, in some cases, but basically finding the loopholes in the chargeback process and exploiting them. So first party fraud, the victim isn’t the card holder here. The victim is actually the merchant.

Drew Edmond:

Right.

Yvette Bohanan:

In that sense. So what were people talking about? Are people happy? I would assume merchants are pretty delighted with new compelling evidence rules, but what does this mean? What are people saying?

Drew Edmond:

Yeah, I think certainly the view is that thank God we’re at least approaching this problem and trying to find a way to solve it. I think that even Visa themselves will say this is kind of not their first step, but the first new step that we’re taking to address this particular issue. Friendly fraud is a huge issue for merchants. It’s kind of a growing issue where that it causes a lot of problems from underlying costs and operations and merchant experience. I think Visa heard that loud and clear.

Drew Edmond:

I think that their order insights product and some of their collaboration that they do with merchant groups and merchants directly to understand the pain points that merchants are experiencing with first party fraud. They’re taking that into consideration and trying to take steps towards a better experience for the merchant. So at a high level, really what this is around is focusing on linking a customer through their previous transactions with a particular merchant and saying, “We’ve seen this customer before. There hasn’t been fraud on those transactions. This is the information that we have associated with those transactions and it matches what we’re seeing with this new transaction.”

Drew Edmond:

So for that customer to come in and say, “Well, I didn’t do this or I don’t recognize this transaction,” or whatever dispute reason they’re using and calling it fraud, but in reality, we have a relationship with this customer. It’s been a good relationship. Now, they’re saying that something’s gone awry. There needs to be a process to say from the merchant’s angle saying, “Hey, we have all this evidence that says this customer is good.”

Drew Edmond:

Now, what Visa doing is they’re pushing that liability over to the issuer to say, “You need to tell us if that’s not the case, if you believe your customer, your card holder, for whatever reason, this is actually a fraudulent transaction, we need you to come back and give us that information then it’ll go back and we’ll have some sort of dispute to mitigate.”

Drew Edmond:

But it gives the opportunity for merchants to gather that data to make sure they have that data in preparation for these disputes in the future, to make sure they’re tracking the right data and collecting it and being able to pass it on through whatever mechanism they might want to pass it on through. It gives that liability shift and it gives that opportunity for those merchants to help reduce that from happening in the first place.

Yvette Bohanan:

Right. Hey, hats off to Visa. They’re working it. They’re working this on a lot of different levels not just with first party fraud, but they’re looking at the whole chargeback adjudication process, trying to help people streamline it, trying to help keep people out of chargebacks to begin with and the ugly chargeback ratio calculation by doing things upfront. So that’s all goodness.

Drew Edmond:

Yes.

Yvette Bohanan:

This doesn’t seem like it’s simple to implement though. There’s probably still some questions around things like the technical. As you were saying about Durbin-Marshall, the devil’s in the details yet again. Here we see if they provide that information, it’s still going to be lodged as a chargeback. Is it still hitting their ratios as the merchant? There’s probably a lot of dangling questions here that people are still trying to sort out, but overall, progress.

Drew Edmond:

Overall progress. I think that’s the major takeaway.

Yvette Bohanan:

We’ve been asking for this for years, so.

Drew Edmond:

Yeah. Yeah. I think there’s some questions around a lot of this evidence and data that has to be sent through is just coming from the merchant. There’s not really a way to verify that this data’s even accurate so that I think there’s a lot of questions around if a merchant’s trying to act somewhat nefariously or play in the gray areas a little bit with fudging the data, that’s obviously going to be a huge problem. That’ll eventually rise to the surface, right?

Drew Edmond:

I mean, if it’s cardholders are going to complain to issuers and say like, “Well, I didn’t have that transaction and the issuer will be able to verify that,” or whatever it might be, I think there’s still some details probably to get hammered out around whether it’s auditing or shared data and some other fashion. But I think there’s some open questions around that. I think that there is kind of a high bar that merchants do have to meet in terms of some of the information that they have to provide in order to shift that liability.

Drew Edmond:

I think that there are concerns probably on the merchant side around how willing will the issuers be in accepting data. Are we going to kind of work together as an ecosystem to help reduce this issue from occurring? Or are people going to kind of do what it takes to protect themselves as an entity as much as possible? So I think hopefully there’s kind of continued collaboration across the ecosystem. Hopefully Visa can play a role as the network to help facilitate that.

Yvette Bohanan:

Yeah. Not an easy job, but-

Drew Edmond:

No.

Yvette Bohanan:

This is progress and probably a topic that has been on the agenda of Payments Ed Forum when it was DRF and maybe even the first DRF. So good progress, early days with progress here. That’s good. You were on a panel and the topic was, I get this right, how collaboration at scale can improve outcomes.

Drew Edmond:

That’s right.

Yvette Bohanan:

That’s pretty broad.

Drew Edmond:

Very broad.

Yvette Bohanan:

But it kind of goes into understanding these perspectives and why people do things in context and then how do you engage. Well, first of all, who was on the panel with you?

Drew Edmond:

Yeah. Yeah. I have to shout out my fellow panel members and the moderator. So I was moderated by Tyler Heun from checkout.com and I was joined on the panel by Jordan Kaplan from Groupon and Jonathan Lee from Netflix, and great group of folks to talk about this issue.

Yvette Bohanan:

Yeah. So a lot of different perspectives coming here. How did you break this question down and how did you address it generally speaking here?

Drew Edmond:

Yeah, I think it’s thinking about the roles of the stakeholders in the ecosystem is really important to just have that framework for understanding the perspectives that each of those will have and how it impacts how communication happens in the ecosystem today and how it’s changed over time. So we have the users of the system with merchants and consumers that really just want to use the system to facilitate their business. Then on the other side, we have the providers, so we’ve got the acquirers, PSPs, networks, third party solution providers, things like that, that are the system and our trying to make it work for all parties as much as possible.

Drew Edmond:

So I think when it comes to how communication has changed and improved over time in the ecosystem, we’re coming from a place where the network rules weren’t even published, right? We had merchants signing up for agreements where they didn’t know necessarily what they were truly signing up for. I think now we’re in a world where those rules are published and people have access to it today and that’s been good. That’s been a positive change for the ecosystem.

Yvette Bohanan:

Right. Oh, a huge one. Yeah.

Drew Edmond:

Right?

Yvette Bohanan:

Absolutely. Lots of other things too, right?

Drew Edmond:

Yeah.

Yvette Bohanan:

So industry groups have a rule.

Drew Edmond:

Industry groups, I think that’s an example we can kind of call back to the Visa compelling evidence where they’ve worked with industry groups as they’ve thought about how the rules should change, how merchants will react to them, getting merchant input as they build the tools and as they change the rules to try to incorporate that feedback as part of that process. Is there more that can be done? Is it done every single time at the same level? Probably not and there’s probably room for improvement there and we can always improve. But I think that they’re taking the steps, I think it’s evident that the networks are taking the steps to try to do that which is helpful.

Drew Edmond:

Then on the flip side, thinking about it from the merchant angle, I think there was a lot of discussion in the room around we had Groupon and Netflix on the panel and they have these direct relationships with the networks where they have an account manager and they can pick up the phone and they can get certain data reports and have conversations directly with the networks. But that’s not the case for everybody. Not everybody has that contact. We have to think about how scalable that is and how far down the long tail of merchants that would work for the networks too in terms of fairness of just operating at that scale, it can be challenging to allow that level of relationship I think with merchants.

Drew Edmond:

But to that point, thinking about what are the categories of topics that you may need that kind of relationship, and as a merchant, how do you prepare for those conversations, whether that’s through an acquirer or through a third party solution provider where for whatever reason you need that interaction with the network and you can use the other partners that you have in the ecosystem to help facilitate those conversations.

Drew Edmond:

It’s really important I think as a merchant to over time and through those conversations build your reputation and trust in the ecosystem to be seen as a merchant that has ownership over their payments data, especially understanding your data, making sure it’s accurate, being prepared to build the business case that you need to make for whatever outcome you’re looking for, whether that’s, hey, we’re having extra trouble with approval rates with this particular issuer, or hey, our chargeback rates are getting above this threshold, we need to find a variety of different ways to mitigate these things, including things like the compelling evidence, right?

Drew Edmond:

So being aware of your data, being aware of the tools that are available to you in the market, whether that’s directly from a network or acquirer or third party, understanding what you can do to take advantage of those opportunities to improve your business and overall ecosystem, whether that’s cardholders or whatever it might be.

Yvette Bohanan:

Yeah. So really it’s a huge merchants out there have this opportunity to pick up the phone, talk to the networks. Medium, small merchants, they don’t. But what’s sort of very prescriptive in operating rules that the merchant’s supposed to go through their acquirer or their payment service provider that goes to the acquirer. It’s the acquirer and the issuer that are the direct members. So the network’s point of view is we’re really here to serve our direct members. We rely on them to serve their customers.

Yvette Bohanan:

I think merchants have gotten to the point where they’re savvy enough that they’re trying to have those conversations more and more. But like you’re saying, it’s not going to scale. Not every merchant in the world can call a network and expect to get customer service. So as the point here, they need to be prepared. They need to be cognizant of their business and how payments work enough to have a good conversation and really think of their payment service provider that’s getting them into the network connectivity wise and business wise as more of their ally and then know when to ask them to escalate to the network because they have their ducks in a row.

Drew Edmond:

Yeah, I think that would help from a scalability perspective for sure. I think also can be a point of differentiation for acquirers to say, “This is how we advocate for our merchants.” I don’t think you hear that that much in terms of when you’re having these conversations with the acquirers, talking about accessibility to the networks and advocacy on behalf of the merchants. I think that’s an area probably to focus on because it is so important for a lot of merchants and a lot of them don’t know what they don’t know.

Drew Edmond:

The acquirer can be that point of knowledge and that conduit of information throughout the ecosystem to the different stakeholders on behalf of the merchant, because they have a good broad perspective because of their diverse portfolios of understanding these merchant needs. But it comes with having that proactive kind of account management customer support function that truly does understand their businesses and truly does anticipate merchant needs that are evolving and thinking about what do we need to do from not just our own services capabilities perspective, but also how is this going to impact our merchant portfolio as a whole and what can we do to help ensure that those needs are heard for any changes that might need to be made.

Yvette Bohanan:

Yeah. It’s certainly not a one size fits all. I think some payment service providers, some acquirers do this better than others. It is a point of differentiation. Service is always a point of differentiation no matter what business you’re in, right?

Drew Edmond:

Yeah.

Yvette Bohanan:

But the interesting thing here is one acquire, one payment service provider can be signing up a whole slew of merchants, of shapes and sizes and verticals and domestic versus multinational, card present, card not present, all of these different ways you can segment your portfolio and kind of knowing how to bring those clients together, those customers together in the portfolio and understand their common pain points, maybe, kind of have an approach that scales, right? And helps advocate and get the right results and helps educate them so that they’re doing a better job as the merchant in terms of what’s going on. So there’s a lot of meat to that to sort of sort out, right?

Drew Edmond:

Yeah. I think from a merchant perspective, it’s a multi-pronged approach as well. I think it’s certainly taking advantage of those relationships, but also going beyond that and attending things like the Payments Ed Forum, other industry groups that are collections of merchants that have those conversations with the networks or with third party providers, whoever it might be, to just continue those conversations as often as we can. It can’t be just this one time thing. It’s a constant evolution that we’re all going through as things change in the ecosystem with technology and regulations and all sorts of aspects.

Yvette Bohanan:

MRC is another great example, right?

Drew Edmond:

Right.

Yvette Bohanan:

Lots of examples out there, so. Cool. So sounds like a very productive panel.

Drew Edmond:

It was great. It was great. Yeah. A lot of people attended, so it was good discussion in the audience. So we had a good time.

Yvette Bohanan:

Cool. So the key takeaways if you weren’t in the audience, the top four things that came across big from the panel, what were they?

Drew Edmond:

Yeah. I think knowing your data and being prepared for those conversations. I guess acquirers continuing to differentiate and provide as good as service as possible when it comes to advocating on behalf of their merchants. One that we haven’t really talked about a lot today was around, as a merchant just kind of developing your own network. Again, going to conferences or reaching out on LinkedIn or having conversations on Twitter, however you want to do it, find merchants that have similar problems.

Drew Edmond:

Yeah, you might not want to talk to your direct competitor because that’s sensitive, but there’s a lot of merchants out there that are very different in terms of your product or your business, but have the same issues that you’re going through. I think having a tight network to be able to bounce ideas off of is really important. So being able to go to conferences and meet people and go to dinner and whatever it might be is really helpful for all merchants. That was something that came up a lot, especially with the merchants that were there. I’ve been a merchant in my past lives and having people to call on is super helpful to do that.

Yvette Bohanan:

That gives you insight into what are best practices.

Drew Edmond:

Exactly. Exactly.

Yvette Bohanan:

Gives you insight into what changes are coming down the pipe like this Visa compelling evidence, the work Mastercard’s doing with buy now pay later, discussing things, kind of opening your eyes and ears and thought process to how this might apply to your organization, knowing your numbers, keeping track of them and engaging in those dialogues when you have the opportunity. So yeah, absolutely. Communication’s a good thing.

Drew Edmond:

That’s right.

Yvette Bohanan:

It’s a good thing. So Drew, sounds like you had a great time. Sounds like a really productive conference for people. Thanks so much for taking a few minutes out of your very busy day to just share with us what you were hearing and what the buzz is all about for those folks that were not able to join in person.

Drew Edmond:

Of course. It was my pleasure.

Yvette Bohanan:

All right. Take care. Thanks everyone for listening. We look forward to getting your feedback. If you have ideas or thoughts or comments about any of the topics we cover on Payments on Fire, or any of our Fanning the Flames topics that you would like to hear about, you can always reach out to us at paymentsonfire@glenbrook.com. We’d always love to hear your feedback and suggestions. Thank you and having you listen to a future podcast with us. Take care.

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