Article written by: JP Fabri; CEO Insignia Cards, co-founding partner Seed.
Payment systems are often taken for granted and underestimated. Current generations have seen the emergence of credit cards, debit cards, online payments, mobile phone payments, contactless payments, and other innovative methods of payments. Payment services underpin main street, the wheels of industry, the operation of markets and the existence of government. No other banking activity is as important to either society or business as payments. Consumers and businesses alike have high expectations for their payments today.
Technology and regulation are driving innovation in payment systems and creating new sources of value. So significant are the changes that the future payments market will have a profound effect on the structure of today’s banking sector and other sectors too.
Regulatory innovation is a key enabler in the creation of new services. However, it is evident that other factors need to come together to ensure a revolution in payment services. These include:
- Simplicity: innovations that allow customers to utilise payment services in a single tap or automatically by leveraging connectivity.
- Interoperability: most innovative payment solutions are not restricted to a single payment method, allowing customers to manage and use a variety of credit cards, debit cards, or bank accounts for payment.
- Value-add services: many innovative solutions offer value-add functionalities in addition to payments, enabling merchants and financial institutions to interact more closely with customers and deliver additional value.
Consumer expectations: payments anywhere and anytime.
Consumers want their payments to be simple and effortless. Modern payment cards let them use, move, and understand money in completely new ways. Payments need to be safe, simple, and intuitive. Consumers also expect to be able to pay whenever and wherever: in shops, on the bus and in online stores.
Business customer expectations: convenience and compliance.
Businesses also demand convenience, safety, and ease of use from their payments. Modern payment cards provide new ways to manage spending and increase employee satisfaction. Integrating payments with accounting software helps save time. Like consumers, businesses expect real-time payments regardless of time and location.
The hybrid customers: run all payments with one card.?
Some banks consider business and consumer customers strictly separate. A single customer may be both a business customer and a consumer customer in the same bank at the same time. This is often the case with freelancers with several sources of income. Problems may arise if this kind of “hybrid customer” is required to have two or more cards in the same bank. Hybrid customers will expect even more frictionless, intuitive, and simple payments. They may wish to be able to run everything with only one service, one card, and a single identification.
The future is now.
Payments keep evolving along with the demanding customer expectations. Additionally, the COVID-19 pandemic has affected customer behaviours and preferences. Here are some new phenomena that are shaping the world of payments.
Super-Apps to meet hybrid customer expectations.
Hybrid customers may wish to combine their needs as business and consumer customers under a single payment card. As a result, “Super-Apps” like WeChat have emerged, with the user at the core of their service. Sign-ins and identifications are streamlined to make transactions and the user experience smoother. Only a few Super-Apps exist now, but more may emerge in the future.
Contactless payment and biometrics.
Contactless payments for small purchases have been mainstream in payments for a while. COVID-19 has increased customers’ interest in them also for high-value purchases. This means that new safety features may be needed. Instead of PIN codes, customers might expect identification alternatives without physical contact. Strong identification through biometrics, such as Face ID or fingerprints, could be a solution.
Tokenised payments expand.
Virtual cards and contactless payments through digital wallets will expand into new domains. Such areas could be home deliveries and mobility services. Issuers should take these developments into account in their service design. This could mean catering for multimodal subscriptions and ‘pay-as-you-go’ services. Tokenisation will help create better customer experiences for hybrid customers in the future.
“Buy now pay later” and point-of-sale lending will disrupt credit cards.
Thanks to emerging fintech players, various credit solutions have become available everywhere. Some of them are built seamlessly into the e-commerce buying journey. Aspiring issuers should assess if such add-on services are in demand among their customers. This helps them ensure that their platform can be configured for them. “Buy now pay later” payments for example may become a normal feature for payment terminals.
Innovation in closed-loop processing.
This phenomenon has made big tech companies like Facebook, Apple and Google expand their payments offering. Besides consumer-facing wallets, like Apple Pay, they now acquire services aimed at merchants. They enable app-based contactless payments that do not require additional payment hardware.
The emergence of Chinese payment ecosystems.
Such payment systems include players like Alipay and WeChat Pay. They are increasingly integrated into global payment schemes and embedded eCommerce application ecosystem. European processors will see them as more salient when it comes to global e-commerce and money transfer capabilities.
Beyond card payments – open banking.
Card transactions have traditionally been the dominant payment method. For a long time, they have been the only option for global, real-time, and cross-border transactions. Recently, open banking has opened new avenues for top-ups and account-to-account payments. Issuers need to be flexible and enable consumers to choose the best payment methods.
Increasing human mobility.
This phenomenon might fundamentally change payments in the future. EU directives are promoting higher mobility between member countries. The demand for foreign workforce is increasing in many countries. Mobility within countries is also changing in unexpected ways due to the pandemic. Many people are moving away from cities and working from summer houses due to the remote work possibilities. As part of the “new normal”, the increased human mobility sets requirements for the mobility of payments as well – money should follow people, not the other way around.
Payment services have been in evolution since the introduction of cards in the 1950s. As technology and regulatory innovations continue to pick up momentum, we are on the brink of a revolution in payment services, disrupting banks and other sectors.
As a card issuing company, we remain focused on delivering modern card-based products to the consumer and corporate client.
