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IBS Journal November 2016


19


because it hasn’t worked. Whereas if you’d used something from a reputable, commercial supplier, that would generally give you a bit more confidence upfront that it will do what it says.”


But that’s not to stop large corporates from dipping a toe in the water when it comes to open source components of the payments infrastructure. At a time when margins are increasingly squeezed, substantial cost savings are not to be sniffed at, says Suzanne van der Kar, Commercial Advisor at Dutch firm K Consultants. Even when the costs of supporting an otherwise free open source platform are taken into account, the savings are considerable. “An open source yearly support subscription is always at a bargain price when you consider the price of a maintenance fee for a six-figure software. Open source will always be cheaper, even when securing a production system with a 24/7 support contract,” she says.


But for most, the biggest attraction is the flexibility it offers. Groupon’s 2014 blog, written by one of the company’s engineering team, speaks of the “successful” integration with Kill Bill and a planned wider roll-out. “[WKill Bill] offers a framework for handling recurring subscriptions as well as unified APIs to support virtually any kind of payment gateway and payment method in the world, from wire transfers to credit card payments, as well as cryptocurrencies and even Apple Pay,” wrote the engineer.


Open source software offers companies a platform to start working from but with the flexibility to mould it to their business needs. “You can make changes to it if you need to and people have an incentive to keep it leading edge and up-to-date in terms of functionality. Yet it avoids reinventing the wheel: if you’re building something new you really don’t want to be focusing on reinventing stuff that’s already out there, you want to be focusing on the value-added USPs of what you’re trying to do.”


One of the challenges for lots of companies is that they don’t have the necessary skills in-house to make decisions. “Do you have the right skills by which you are assessing that provider or that vendor?” asks Simester. “I don’t think a lot of payments businesses do at the moment.”


But we are approaching a tipping point, says Burrows, who predicts that open source will play a much bigger role in the payments systems of the future. This is largely thanks to new regulation, specifically the introduction of the second Payment Services Directive (PSD2) which will come into force in January 2018. The Directive will make it much easier for new and innovative players in the payments space to make their voices heard. “Up until now, banks have had a stranglehold over your bank account; only they’ve been able to interrogate your bank account, tell you how much is in it, or move money from it. That will all change under PSD2.”


This will breathe new life into the payments industry, making it easier for new market entrants to peddle their innovative new open source solutions. “Lots of companies (everyone from FinTechs to payment processors to big corporates like Vodafone) are going to wake up to the fact that they can do new things with payments. They’ve obviously got to have the technology to do that,” says Burrows.


The impact on traditional payments providers will be monumental. “PSD2 will definitely challenge the way payments are made for banks,” says van de Kar. “It will prove costlier for them because they need to open their customers’ accounts in a secure way and allow the use of APIs. This, in turn, will give opportunities to open source providers, as many startups will try to harness the wave of demands from merchants and corporates alike.”


So what will the vendor market look like in a post-PSD2 world? The traditional players such as IBM, Dovetail and Fiserv, aren’t likely to be quaking in their boots just yet, says Simester. “If I’m a traditional player I will probably be thinking, ‘I might get nibbled around the margin but ultimately my business isn’t going to change much over the next five years so I don’t need to make any knee-jerk reactions to this. I’m still a sustainable business with a sustainable business model and I can defend that.’”


However, Simester adds it would be “foolish” for the large vendors not to be doing their own research and development. “That would hedge some of that strategic risk but I’d be doing it as an established provider because


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