Most people rarely think about payments and how they work. It really only comes up when we need to get up from the couch to get our wallet, type a credit card number with tiny smartphone keys, or some other minor annoyance. That is, if you have a debit or credit card. According to the World Bank, outside of high-income OECD countries less than 40% of adults own a debit card and less than 20% own a credit card. There are alternatives like mobile money but none of them have achieved universal recognition.
Creating a new global payment method seems all but impossible. First, there is acceptance. Visa is accepted by tens of millions of merchants worldwide. Any new payment instrument would have to first convince a significant number of merchants to support it. And that’s the easy part. What’s much more difficult is to change consumer habits such that people actually use this new option. That’s why “Visa” is the world’s seventh most valuable brand estimated at $145 billion. But even this immense hurdle could soon be overcome thanks to a little known new web standard.
Last week, Google posted a developer blog to discuss the new Payment Handler API that will be released in Chrome 68, the next major version of the Chrome browser. Together with the previously launched Payment Request API, this allows your browser to pass payment requests received from websites to a digital wallet for processing. This means everyone, no matter what device or browser they’re using, will be able to enjoy a seamless checkout experience.
The API has come about following three years of work at the World Wide Web Consortium (W3C), the organization that develops web standards. The API allows your browser to mediate a secure tunnel between the website “requesting” a payment, and the wallet or app that you choose to “handle” the payment, for example from your bank. What’s more, the API is not limited to card payments, it’s open to any payment system or network that wants to use it such as unique domestic systems like Brazil’s Boleto and even cryptocurrency and loyalty rewards networks.
Rather than requiring a brand like Visa’s, payment methods can be featured by the browser based on availability.
With this API, the browser becomes a mediator of payment messages between the secure channel to the website and the secure channel to the wallet. As such the browser can detect automatically which payments methods are available and accepted by the merchant. Whereas, previously, users may have been overwhelmed if merchants offered too many payment options, browsers have no such constraint. And rather than requiring a brand like Visa’s, payment methods can be featured by the browser based on availability. It’s the bank or wallet that the user chooses, not the payment method.
For a company like Entersekt, who secure 150 million transactions per month via their mobile-based authentication system, the API will allow them to provide their solution to anyone making payments on the Web. They now have a secure bridge between a user’s online browsing session and the app on their mobile, allowing a direct real-time authentication of the transaction without needing to route it through the card networks first, resulting in a simpler user experience and fewer abandoned payments.
In addition to improving the user experience, the Payment Handler API paves the way for open payment protocols like Interledger, originally developed at Ripple, to come to the fore. By making alternatives more discoverable, this simple change to web browsers might make the payments space a lot more competitive.
With Payment Handler, we are no longer limited to payments via a small tightly controlled group of networks who decide who can pay and be paid. Thanks to Interledger and similar technologies we may soon see payments that originate in cryptocurrency wallets and yet pay online merchants directly into their bank accounts, in real time.
It will take time for mainstream users to adapt to this new technology. But at a time when the number of available digital wallets and mobile-first banks grows daily, we expect that things will change fast.