Tony Virdi, head of UK banking and financial services at Cognizant, outlines the changing landscape of payments. He argues that all payments providers must ensure that the customer experience is enhanced without compromising on security considerations
While the way money exchange is handled around the world varies dramatically from region to region, one thing cannot be denied: payments systems, infrastructures and options are evolving.
Over the years, we have transitioned from bartering to tender and cash, moving into cheque and card payments, with many countries now also embracing online and mobile payments. In fact, the value of goods and services purchased with a mobile device is expected to almost triple from £4.8bn in 2013 to £14.2bn in 2018, according Centre for Economic and Business Research.
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Indeed, this fast-paced evolution has even extended into social network payments with the recent announcement that Facebook is seeking regulatory approval in the UK to offer mobile payments through its platform. And just this month, Denmark announced two cashless initiatives: the ability to pay with mobile phones in shops nationwide and the agreement to run a pilot in which only mobile payments are allowed and shops could refuse to accept cash payments.
In order to keep up with alternative payment providers, those players in the payments ecosystem who do not look to the future, risk stagnating as consumers increasingly seek alternative, more convenient and immediate ways of making payments. But what are the market conditions changing the payments landscape and which are the current priorities of payment providers and processors?
In a report published by Cognizant in conjunction with the Financial Services Club and VocaLink, we explore the state of the world’s largest payment infrastructures and how market conditions are changing the game.
Overwhelmingly, the evolution of technology and in particular, the rise of online and digital channels is having significant impact. As cheque payments are moving towards possible extinction, organisations now notice the importance of mobile and smartphone usage, social networking and collaboration.
In addition, security concerns around cloud computing seem to be lessening – according to our research, security has been replaced as the top priority by mobile, with 79% of respondents. As a result, the cloud is used by many of the most forward-thinking organisations who are already putting these observations into practice.
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By GlobalDataWhile these mobile, digital and social changes are mostly impacting the front end of retail payments, there is also an important role to be played in the back-end integration of new payment channels. Co-operation is now key and this involves all parties from banks, merchants and card issuers to payment processors, mobile operators and handset manufacturers working together to develop a multi-channel payments process that is user-friendly.
In addition, the report highlights that regulatory change remains at top on the agenda and is currently the biggest focus for the world’s largest payment processing infrastructures.
Over 50% of banks consider this a priority as Basel III, the Banking Union, the Bank Reform Bill, Dodd-Frank and more are all hitting the banks hard this year. This is also true for the wider industry. The spotlight on payments resilience, the implications of ring-fencing on bank payment systems and the potential for account number portability are all pertinent issues in this market. But, in a global and digital world, the future lies in innovation. Those organisations that use analytics and customer insight will be the winners.
Analytics technology allows organisations including merchants, card issuers, banks and technology and service providers to understand the spending and payments habits of consumers.
Such valuable insight ensures that any new channels rolled out match customers’ habits accordingly. Following such a process will enable organisations to innovate and become more competitive, which is critical given the rise in alternative players entering the market. Most recently, Holvi, PayPal, Amazon Payments, e-Wallet/smartphone services and Square have emerged, along with the arrival of Facebook and Apple into the e-money business.
Customer insights can be gleaned by gathering data from various different sources to create a 360 degree view of the customer. Real-time insights about each customer are based on advanced statistical analysis and machine learning techniques on very large datasets of granular payment data.
It is this granular data that enables organisations to better understand their customers and tailor their communications and processes in a more personalised way, rather than relying on old segmentation methods. As each customer’s response, feedback or behaviour is processed, it is analysed to provide inputs about campaign effectiveness, brand loyalty, changing spending habits and profit/loss.
There is a huge opportunity for the payments ecosystem to adapt and evolve in line with the digital transformation that is changing the rest of the world. Such change helps organisations to run differently and be able to compete with new players. But for this to work, those involved in the industry must build strong partnerships, based on analytics and evidence that a payments channel is of interest to the consumers.
At the same time, all payments providers must ensure that the customer experience is enhanced without compromising on security requirements and regulations that protect our money in the first place.
