Businesses, consumers, and even governments are focused on faster payments; yet, many payments organizations are hamstrung by legacy software and systems. Here’s a look at why faster payments make the case for modernization.
Smartphones have been transforming the way consumers engage with businesses and this shift has had huge ramifications for payments companies. Every purchase made through mobile must be facilitated with digital payments technology — which every merchant must provide. The payments companies that can offer these services to their customers are likely to reap big rewards. On the downside, if they fail to provide payment innovations, they’ll be left for a more digital-savvy competitor.
This is specifically true for younger consumers, who will eventually offer companies the greatest lifetime value. According to AdWeek’s recent study, roughly half of millennials would prefer to pay for small items with their mobile than with cash, while a similar number used mobile to track spending and split payments with friends. More broadly, Statista reports that over 40% of U.S. smartphones had made a contactless payment at least once — comparable to tech-forward South Korea.
The appeal of mobile payments is clear: they enable immediate or near-instantaneous transactions on the go, within the convenience of a tech product that most people already own. For a payments company, this is a substantial opportunity to position itself as the right business partner for B2B digital growth. Ensuring that its payments product can support fast mobile payments, as well as other new digital tools, will be critical for success.
It’s not just everyday consumers who are moving towards the digital market when it comes to their transactions. Global governments are increasingly opting to invest in faster payments for their constituents, due to the universal benefits for both companies and customers. Establishing this at the federal level is a much more complex process than for an individual company, but successful schemes are trying to create a valuable ecosystem that everyone can tap into.
Specifically, the U.S. Federal Reserve established the Faster Payments Task Force in 2015, which culminated in the formation of the Faster Payments Council, which today works to enable every individual and organization to “safely and securely pay anyone, anywhere, at any time and with near-immediate funds availability.”
This is also taking place elsewhere around the world. China’s central bank is orchestrating a nationwide clearinghouse for online payment services like AliPay, while the European Union has partnered with the European Payments Council to work towards accelerated payments for all. Similar collaborations are taking place in both the U.K. and Singapore, with Faster Payments and non-profit Fast And Secure Transfers (FAST) respectively. Ultimately, it is universally recognized that there is great value in providing fast, secure digital payments.
The companies leading the charge in fast payments are unsurprisingly tech-focused, most commonly falling under the FinTech category. The platforms that have helped to pioneer digital wallets and contactless payments have found themselves in an enviable position, with consumers quickly shifting their preferences. These digitally-minded businesses have an agile approach to software development and an infrastructure that can easily support new tools.
This is where banking and payments institutions may find themselves falling behind. Any payments company with a legacy system will struggle to compete, due to the heavier technology demands of the modern market. Others in the market are already prioritizing digital growth and opting for partners that are equally future-minded. Even long-term B2B relationships may be vulnerable in this market, so payments companies must act fast.
An investment in digital transformation now will reap dividends for years to come, as all evidence suggests that consumers will continue to move towards digital options. By prioritizing faster payments and consumer satisfaction now, companies can build on their existing B2B partnerships by offering market-leading services and attract new customers in the process.
Consumers want them, governments are willing to invest in them — faster payments are desirable across the board. What’s more, there is still a window of time in which payments companies can get ahead of their competition and lead the way in speedy spending.
To do so, payment companies require a technical infrastructure that supports not just mobile payments, but broader digital solutions. A cloud infrastructure paired with API-led connectivity can free data from silos, democratize access to data, and enable IT to build reusable assets.
Another priority should be to work with developers on microservice packages and containerization, to maximize the speed and flexibility of software integration. Microservices consist of only the necessary software tools for implementation and are packaged in easily integrated containers. This minimizes the drain on a B2B customer’s system without compromising on quality. By committing to an approach that is agile and provider-agnostic, payments companies can ensure their products will grow alongside their business.
Ultimately, payments companies cannot afford to fall too far behind the disruptors in their industry — instead, they should aim to be disruptors. Consumers, businesses, and governments alike have demonstrated their growing preference for mobile banking and faster payment tools. Payments companies must heed the call by ensuring their infrastructure and strategy are built to deliver. Those that can innovate in the market will build long-term loyalty and grow revenue. With the right technology, this is certainly within reach — but a significant commitment to modernization is required.
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