29 October 2008

Paul Rodgers, the chairman and founder of Vendorcom

Paul Rodgers, the chairman and founder of Vendorcom, talks about the importance of collaboration from retailers when it comes to upholding standards in the cards and payments industry.

Hard-pressed retailers and merchants take a rightly cynical view when yet another initiative emerges from the cards and payments industry. In the late 90s everyone recognised that something had to be done about card fraud and Chip and PIN was eventually introduced, some might say imposed, in 2004.

The realisation that such remedies do little more than provide some relief is now hitting home and, over the past three years, we’ve seen a plethora of new initiatives. One striking observation is that none of these have been triggered from within the retail community itself; all are the result of the influencing bodies in the cards and payments industry applying standards or introducing new technologies, which are mainly aimed at fraud reduction, with some ostensibly targeted at providing an enhanced experience at point of sale.

Many would say that the roll-out of Chip and PIN should have been smoother and that the way the EMV standard was applied in the UK could have given merchants and cardholders an even more secure infrastructure. Some academics might be lobbying for utopia, but since we already see resistance to even the basic requirements of new standards being adopted, a pragmatic approach is needed to ensure that innovative and market-responsive solutions continue to be developed for the retail community; solutions that can then be implemented and maintained in the big bad world of constant fraud threat, the rigours of retail time-frames and increasingly demanding consumer expectations.

By any measure, the level of consultation and collaboration is improving on cards and payments issues. Recent initiatives such as PCI DSS, SEPA Card Framework, and the rollout of contact-less payments have all seen strong collaborative and consultative approaches. This bodes well for the future of such initiatives, but crucial questions remain around the enforcement of standards and level of adoption.

The value of a more pragmatic and proactive involvement from all stakeholders is now recognised, as is the fact that the traditional power-play is no longer a valid option. There was much talk about a ‘carrot and stick’ approach to the rollout of Chip and PIN; few organisations, whether card schemes, banks, systems vendors or retailers would now seriously entertain this concept. To rely on such a blunt approach would be to deny the fact that the cards and payments and retail industries are inextricably linked and mutually dependent.

And, herein lies a potential problem. When new, so-called best practice initiatives were introduced in the past, enforcement was assured by the application of rigorous sanctions. This had the benefit of ensuring almost universal adoption and a level of best practice that such an autocratic approach would encourage. The world was simple then and undoubted improvements resulted from consistent and cost-effective measures that could be easily monitored.

Now, even those bodies who would want to stand tall, fervently upholding the values of new industry standards are recognising that they are dealing in the real world of tighter margins and more powerful customers and industry bodies who might not see new standards and constant change as being in their best interest. In today’s more pluralist environment, with the backdrop of a more finely balanced economic climate, different values are coming into play.

Imposition is not an option. New value judgements have to be made, regulators are constantly threatening to take a larger role, faster adoption is crucial to meet consumer demands, and certification requirements adding cost, cost-effectiveness and flexibility are always key factors.

The result is that we may now be moving into a world where important practices are not universally adopted, a range of standards co-exist, and it is almost impossible to monitor and maintain a useful level of best practice across the cards and payments infrastructure. We are far from any melt-down in the system currently, but negotiation, mutual understanding, benefits based reasoning, collaboration and a responsible attitude to risk, perhaps driven by the increasing awareness of mutually assured destruction, will be essential if we are to ensure that best practice prevails.

Vendorcom has brought the cards and payments community together to collaborate on the introduction of new initiatives and address the new values that are now in play. It is an active, positive debate that is being pragmatically and respectfully tackled and will benefit from having a more active input from the retail community.

About the author
Paul Rodgers is the chairman and founder of Vendorcom, the cards and payments community. Prior to setting up Vendorcom in 2003, he spent over 15 years in the retail and consumer products sectors with roles in buying, production control and logistics management.

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