Payment solutions: Transaction evolution and the IoT
A visual representation of just how vast today’s online payment network is worldwide would be mind-boggling.
According to data by the Nilson Report, there were 368.92bn digital purchase transactions for goods and services globally in 2019 - translating into 1.01bn credit card transactions alone, daily.
Since the pandemic, consumer behaviour has shifted dramatically, and that figure has risen substantially. Global ecommerce sales rose to $26.7tn in 2020, making up 19% of all retail sales. A report by GlobalPayments Inc estimates that online shopping sales increased by 71% in 2020 and are continuing to rise at the same rate in 2021.
As omnichannel payment options increase, experts also predict that by 2024, 27% of all digital commerce transactions globally will be made via QR codes. And since the pandemic began, 46% of UK consumers purchased a product online that they had previously only ever purchased in-store.
The use of cash is diminishing fast, and in its place, increasingly innovative payment gateways, commerce platforms, and inventive currencies are emerging.
IoT payment solutions
Stan Cole, Head of Financial Institutions at Inpay, believes digital banking has been a driving force behind the virtual payments revolution because it has altered the way people and their money interact.
“People can access their account 24/7 on any internet-connected device they have. So, not offering this functionality to customers automatically means falling behind and losing them in bulk,” he says.
Cole is correct. The universal availability of digital technology and devices has grown the size of the payments space manifold. “The space has become increasingly competitive, with leaders and laggards and the inevitable shakeouts of weak hands. The more choices people have, the less tolerant they are of a subpar digital experience – app, device or provider,” Cole says.
Though technology has played its part in the march towards an increasingly cashless society, the past 12 months have also been massively instrumental, points out Libby James, co-founder of Merchant Advice Service, a UK-based expert advisory service for digital payment merchants.
She explains, “Consumers have become accustomed to using smart technology as a preferred payment method as opposed to cash. For instance, many of our clients within the hospitality sector have noticed a shift towards using order and payment apps in bars, restaurants, and hotels since the pandemic began, which has allowed these businesses to adjust and trade as normal where allowed.”
QR codes are one contactless payment example that has seen a huge uptick in usage since the pandemic. James says that despite having been around since 1994, QR codes have never seen so much activity as they have in the past 12 months.
“Many businesses, including hospitality brands, have been forced to adopt QR codes in order to provide truly contactless experiences, and we will only continue to see their usage rise.”
She adds, “This includes the implementation of QR code payments, where customers can attach a chosen payment method to a QR code, and upon scanning that code, trigger a payment and allow for a real-time reward to be delivered.
But seamless, digital, IoT-driven payments won’t only be those we consciously make, points out David Myers, Financial Services Partner at Deloitte. Instead, payments will evolve to become part of a much wider and more integrated system as technology develops.
He explains, “Machine-to-machine payments have various guises. One example is electricity service providers or utilities that use smart meters to track usage and automatically bill. Fast forward some of the thinking, a more sophisticated machine-to-machine setup will be electric cars.
“If I want to charge my electric car, does that charging station then agree to a contract with the local power station? You can see a chain of events starting to line themselves up.”
Such changes are inevitable - and something to be embraced, says Myers, because they will make life easier and more efficient for people. “These are simple ideas that are beginning to mature and grow as systems become more intertwined and combined. The aim is to simplify people’s lives and make things a lot more straightforward.”
Customer centricity and digital payment solutions
While digital payment methods were fully embedded and increasing in popularity prior to COVID-19, the pandemic has made them a necessity, and often the only way businesses can manage their revenues. Many more companies have switched to online-only services, and person-to-person contact has been minimised.
But what does that mean in terms of customer services, and is there a disconnect between services providers and customers?
He says that recent innovations in digital technologies have “put the power in the hands of the consumer” and that personalisation of services for customers is now the greatest challenge for providers. “The challenge around personalisation is that it’s fast-moving beyond basic product recommendations,” John explains.
“Personalisation is now about creating a tailored experience that is inclusive of consumer likes and dislikes, which can become more difficult if the right technology is not in place. The key to this success is insight.”
But Myers believes companies and organisations are yet to achieve the perfect balance between the technical and the personal, implying that customer service will always require the option of a human being.
“I think there are times when people say ‘I need and want to speak to a human being’ and the handoff isn't always as slick as it could be from one to the other [technology to person].
“There's a moment when we all say ‘I've gone as far as I can, on the automated system or the digital solution, I actually need to speak to somebody,’ because it's more complicated than adding in a few numbers.”
Having the right tools and data analytics capabilities to capture and use these insights, says Johns, is vital to the ongoing success of retailers – especially in a climate where high levels of personalisation are an expectation.
“Many brands are therefore investing heavily in new technologies that help them to create tailored messaging and personalised recommendations that combine the online and offline channels to improve the overall customer experience,” he points out.
Examples of this include the implementation of touchscreen systems in stores that allow for a more engaging checkout experience, with real-time offers and communications delivered to the customer directly at the point of sale. If done correctly, these systems should connect both online and offline channels to ensure that customers receive a completely seamless, omnichannel experience.
Johns also points out that the role of new technologies such as AI has become fundamental to enhancing the customer experience in “collecting and harnessing data and using predictive analytics to understand what customers want, how the market is performing and identifying future trends.”
Although banks have contributed massively to the digital payments culture through taking services online and encouraging customers to manage their money remotely, they are now, ironically, at the mercy of their own genius, says Cole.
“Being able to digest big data in order to understand customer trends and needs is the first step, then finding the right technology provider to support these needs comes second.
“For example, banks are increasingly losing their customers to fintechs for cross-border payments; if banks want to keep up, they need to team up with a low-cost cross-border payment provider to compete.”
Personalised customer experience
But how can companies ensure a personalised customer experience if the only point of contact with the customer is through technology? Some experts believe the answer lies in better technology and the collection of data.
John DesJardins, CTO of Hazelcast, the fast-cloud application platform based in Silicon Valley, explains, “Real-time machine learning (ML) is the key to ensuring personal touch in a digital world. With real-time ML, you can create AI-first autonomous experiences where personalisation is driven by [the] depth of data about the customer and their needs and interests.”
This also opens up new possibilities to dynamically and autonomously present relevant, meaningful, and valuable offers to the right customers at the right moment - the moment of interaction, says DesJardins, referencing the success of BNP Paribas Bank Polska.
Using real-time enabled responsiveness from existing banking infrastructures, BNP Paribas Bank Polska increased personal loan offer conversions four-fold. These include the promotion of loans to customers whose low account balance has stopped them from getting their cash via ATM.
According to DesJardins, the bank’s IT team used Hazelcast’s Jet stream processing engine to act in real-time on 'events' such as an ATM visit and send those customers loan offers by SMS immediately afterwards. This new timeliness contrasted with using the CRM and data warehouse-based infrastructure, which previously could take up to two days to make such an offer.
"The IT team has also estimated that data streaming costs only one-tenth of taking a data warehouse-focused approach,” He says.
The Open Banking revolution
Using technology to make transactions easier for the customer is key in keeping a loyal base of repeat users. Open Banking has been a big contributing factor in streamlining the transactional process for customers seeking finance for products and services.
Myers believes open banking is a natural progression driven by demand for flexibility. He says, “Open Banking allows choice. When consumers have a choice in terms of how and with whom they are banking and paying, it simplifies that world.
“What had in the past potentially been quite an onerous exercise has become straightforward, so people are able to purchase different services and products from a variety of different providers in a matter of clicks.
“Having that flexibility to choose when you do it and how you do it has changed and, for many, accelerated during the pandemic. The transformation and desire for people to have much easier payments has intensified and accelerated to effectively move much more quickly to a digital solution set.”
Jason O'Shaughnessy, Head of International Sales at Envestnet, Yodle agrees. He says, “The introduction of Open Banking has sped up and improved the affordability decision when applying for credit. Previously, this would have been an offline experience, delaying the process for hours or even days.”
However, he says, there should always be a call to action should the customer require a real person to resolve an issue. “Technology should always be used to make interaction easier and more convenient for the customer. Through technology, companies are able to send personalised messages and offers that provide real value to the customer, improving the customer service and experience.”
New payment trends
The digital payments sphere is constantly evolving with dynamic new platforms, and currencies are entering the fray. As cold hard cash transactions diminish, new trends for the coming decade are emerging. These include:
- Blockchain: Currently helping cryptocurrencies enter the mainstream and its use for payments and settlements and fiat currencies.
- QR codes: The past 12 months have seen considerable adoption of QR code usage as contactless payment methods have become necessary for millions of businesses. Experts believe QR code usage will continue to rise because they’re cheap to implement, can contain large amounts of data, and are fast becoming a very comfortable channel of engagement.
- CBDC: Central Bank Digital Currencies. Experts believe these can and will disintermediate banks at a massive scale with a likely hit to their balance sheets.
- Digital remittances: This market is growing, despite dire predictions the market would drop due to COVID-19. Senders are demanding more from their payment providers.
- Big Tech: Google Pay has partnered with Western Union and Wise, while Opera has launched its own fintech. These new market entrants will most likely hit the banks hard as they offer transparent, low-cost remittances from the US. It’s worth remembering that any of the big platforms that control vast networks can stake a claim in the payments space. And this is even before Big Tech goes into obtaining banking licenses.
- More partnerships: Greater numbers of banks will partner with niche payments fintech players who offer turnkey remittance solutions on a white-label basis, thus enabling banks to compete directly with brand name fintech’s that are currently taking their business.
One of the biggest disruptors of the digital payments revolution has been the emergence of Open Banking, a financial services term that refers to the use of open APIs that enable third-party developers to build applications and services around the financial institution. Open Banking results in greater financial transparency options for account holders ranging from open data to private data. Service providers can use Open Banking to arrange faster finance for their customers.
Top 10 digital transaction platforms
The best online payment methods for SMEs in 2021 according to Expert Market
- 1) Stripe: best for flexibility
- 2) PayPal: best for worldwide reach
- 3) Worldpay: best all-rounder
- 4) Sage Pay: best for quick payouts
- 5) Square: best for simplicity
- 6) Braintree: best method for ecommerce entrepreneurs
- 7) takepayments: best for short-term contracts
- 8) Handepay: best for cost-effectiveness
- 9) Shopify: best for creative newcomers
- 10) GoCardless: Best for recurring payments
Nymbus enters strategic partnership with Plaid
Nymbus, a leading provider of banking technology solutions, has partnered with Plaid, a data network powering the digital financial ecosystem, to more instantly authenticate and fund customer bank accounts for financial institutions.
This new integration will allow Nymbus bank and credit union clients to securely onboard new users in a matter of seconds, which in turn translates to more active and engaged banking experiences. Plaid’s data network enables consumers to connect their financial accounts at over 11,000 institutions globally to more than 5,000 digital finance apps, including leading payments, investing, and budgeting tools.
What are the benefits of the integration?
Benefits of the Nymbus and Plaid integration for financial institution customers include:
- Improve user identity verification and reduce fraud.
- Instantly authenticate and link members’ bank accounts.
- Streamline ACH transfers between any bank or credit union in the US.
- Access and analyse comprehensive transaction data.
- Validate real-time account balances to protect against overdraft and enable account pre-funding.
“As more consumers than ever before rely on digital finances for their everyday lives, financial institutions need to meet their customers where they are while supporting safe and reliable money management experiences,” said Sarah Howell, Chief Alliance Officer at Nymbus. “Our expanding network of partners are important contributors to Nymbus’ combined portfolio of the technology, people and process available to quickly innovate with new routes to market and revenue streams.”
Continuous growth and expanding partnerships
Founded in 2015, Nymbus has continued to grow. Most recently the company has closed a new round of financing led by the Curql Fund. The US$5 million investment will be used towards Nymbus CUSO and accelerate a shared commitment to breakthrough technology for ensuring continued growth and stability for the credit union community.
Nymbus CUSO was founded in March 2021 to help break through barriers to growth, and its mission is to connect credit unions with trusted fintech offerings that both simplify technology delivery and enable new digital revenue opportunities.
Last year Plaid set a goal to move 75% of its traffic to APIs by the close of 2021, calling it “one of our top priorities as the industry moves full-steam ahead toward a fully digital financial system.”
Recently it has announced an open finance partnership with Capital One, a digital finance innovator, and the successful completion of its migration to the Capital One API. They have also completed or have in-motion data access agreements with major US financial institutions, including U.S. Bank, JPMorgan Chase, Wells Fargo, and others.