The Cloud-Customer Connection in Payments

Digital transaction value is projected to reach $4,406,431 million this year, a 14.2% increase year-over-year from 2019. The global pandemic promises to accelerate the growth of digital payments even more as retailers offer contactless shopping options and homebound consumers purchase everyday items online. Peer-to-peer (P2P) payments have also increased as more money changes digital hands between family and friends.

Digital payments were increasing prior to the coronavirus pandemic; however, payments companies are now experiencing a dramatic increase that is leading many to question their operations and the ability to scale, adequately fight rising fraud, and adapt in an increasingly volatile market. On top of that, another looming question remains: how do we continue to engage customers on sometimes shaky footing?

Scaling for Surges

With the ability to quickly and effectively scale at the forefront of many company’s minds, the cloud has proved to be an appealing option. As digital payments continue to increase globally, the cloud enables payments companies to seamlessly handle spikes in payment processing without system failures. Given that several major financial institutions have experienced such unwelcome failures, it’s a necessity for many payments companies who are finding themselves currently strapped in their ability to allocate resources when heavy upticks in transactions occur.

Many organizations that moved to the cloud prior to the pandemic find themselves in an advantageous position. These organizations were forward-thinking in terms of flexibility and capacity, and leveraged cloud providers like Amazon Web Services (AWS) to plan for unexpected spikes in transactions. AWS enables payments companies to scale-up while simultaneously guarding against fraud. In some cases, these organizations are able to handle up to five times their usual volume.

Aligning Agility With Consumer Behavior

The pandemic has driven many to pivot their business models in unexpected ways. As customer spending patterns change and evolve around the pandemic, many payments companies are finding unique ways to align with these patterns through the use of loyalty and rewards programs, new business models, and technology.

In the U.S., card issuers raised the threshold for contactless payments to accommodate increased demand. Fintechs like Kabbage, Inc. are flexing their ability to operate nimbly. Kabbage enabled tens of thousands of small businesses to submit Paycheck Protection Program (PPP) loan applications in minutes using automation tools like Amazon Textract. In other words, the company was able to restructure technology in a very short period of time to help small businesses obtain financial relief.

The pandemic has put a strain on the entire payments value chain for many payments players, spurring those organizations to take another look at their ability to shift gears on a dime and provide essential services when the situation calls for it. Payments organizations must evaluate payments flows from start to end and ensure that their internal infrastructure is built in a way that can evolve alongside consumer spending patterns.

Balancing Fraud Prevention and Friction

A critical part of the customer experience is ensuring customers that their payments are safe from fraud. This must be achieved without introducing unnecessary friction into the payments process. Many payments organizations are discovering the challenge of achieving this balance, especially as fraudsters take advantage of the uncertainty around the pandemic. More remote transactions mean more bad actors are looking for vulnerabilities to exploit, with even the FBI issuing a warning about the rise of pandemic-related fraud schemes.

Organizations that utilize a cloud infrastructure like AWS have access to better authentication mechanisms that can be seamlessly integrated into the payments experience. Multi-Factor Authentication (MFA) enables more secure authentication as well as real-time alerts on suspicious activity to nip fraud in the bud. These tools do not complicate the payments process as they tap into seamless techniques like passive biometric authentication that can confirm a person’s identity via their unique digital profile analysis. This technique is instant and frictionless, enabling organizations to guard against fraud without inhibiting the user experience.

Payments organizations that leverage AWS machine learning and analytics services can more easily balance fraud prevention and frictionless customer experiences via an API gateway that can run server-less functions like applying machine learning to detect and flag possible fraudulent activity for review. Those machine learning decisions can be stored for future reference.

Modernizing payments will be about much more than offering digital payment options. The cloud allows payments companies to morph disparate legacy systems into an agile, scalable core that is PCI DSS compliant, resilient, and able to meet the rapidly changing needs and expectations of customers. As digital payments continue to rise, payments companies should take a serious look at how leveraging the cloud can improve scalability, resilience, and customer experience.