Bringing Open Standards to Online Payments

Posted on April 9th, 2014

 

In an era of unprecedented global economic growth and technological advancement, it’s In hard to understand why mobile and online payment systems seem limited and cumbersome – especially with regard to global, person-to-person transactions,

The majority of global e-commerce transactions today rely on time-tested Visa and Mastercard networks to get the job done. However, when it comes to person-to-person transactions, there are fewer options for secure online payments, especially in developing nations. This need for such payment systems has led to the growth of new online and mobile payment networks, many of which are not tied to legacy banking systems.

Some of the more innovative systems are spinning out of developing nations that are seeing exponential growth in mobile adoption due to Information and Communications Technology (ICT) expansion, like Africa. In this post, Jeremy Malcolm cites the M-PESA system as one of the early success stories for mobile transactions. The M-PESA system was birthed in Kenya, but has today been replicated in a dozen countries around the world. It allows payments to be exchanged using simple SMS messaging, even from simple-feature phones that remain the most ubiquitous communications platform in Africa today.

Google Wallet offers a similar experience for smartphone users in the United States, using NFC (near-field communication) technology. Although innovations like PayPal, M-PESA and Google Wallet have made great strides in facilitating Internet and mobile transactions around the world, there are still challenges to overcome.

“PayPal and Google Wallet are still linked with legacy banking networks, and generally still require users to have a bank or credit account, which many consumers, especially from the developing world, don’t have,” said Malcom, “Whilst M-PESA and the like don’t require that, they are still closed systems – access to the M-PESA network is only available through one mobile phone provider, and if you want to make a payment overseas, you are out of luck.”

This is where the development of new, open standards for online and mobile banking may play an important role. As we pave the way to the future, open standards can help establish a set of interoperable service protocols to enable global, mobile commerce through mobile networks and email programs. These protocols could make it possible for individuals to quickly and efficiently conduct financial transactions, regardless of geographic location.

The Web Payments Community Group at the W3C has taken on the challenge of addressing such standards. Manu Sporny, the chair of the current Web Payments Group, predicts that the development of new interoperable service protocols for financial transactions will be taken up as an official global standardization project by the W3C after the March Web Payments workshop in Paris. The Web Payments Community Group is creating a set of universal payment technologies to make sending and receiving money over the Web as easy as sending an email. These technologies include: product descriptions, transactions, receipts, verifying the identity of sellers, security and APIs.

Perhaps most importantly, says Malcom “ standardized online payments won’t require you to use a single intermediary such as Paypal, or indeed a cartel of intermediaries such as the Visa or Mastercard networks,” Instead, he continues, “The standards would allow you to use any funding source, and any currency – including virtual or crypto-currencies such as Bitcoin.”

The potential of new, open standards to redefine the future of commerce and business is amazing – and open, global participation will be key. We hope you will join OpenStand as an advocate for the creation open standards of tomorrow. Please show your support today by signing your name on our Stand With Us page or adding a Site Badge to your website!

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