The payments landscape is ever-evolving, driven by emerging technologies and changing regulations. But customer experience should not be overlooked as a catalyst behind changing payments.
Customer experience is the nucleus of payments in 2020. Customers are increasingly seeking out payment options that are sleek, seamless, frictionless, and secure. As one-click payments and real-time payments continue to morph the landscape, it has become apparent that customers are driving the payments ecosystem forward. Specifically, tech-savvy and sophisticated consumers have high standards that only organizations equipped to provide a total digital payment experience will be able to meet.
As the industry floods with new entrants — especially ones built on emerging technologies — established payments organizations must adapt to provide multiple, streamline payment methods that optimize the customer experience. The pandemic has also accelerated the need for digital and remote payment options across the board. Additionally, as regulators work to accelerate and standardize real-time payments and increase adoption of ISO20022, faster payments are becoming table stakes.
These initiatives, which also center around data, are enhancing customers’ transaction experience. Open banking is also moving payments organizations in that direction, as many adopt an API approach to unlock business value from data collected during payments transactions. It is a catalyst for improved customer experience as consumers gain the ability to manage their finances and data with total transparency. Overlaying services that leverage open APIs facilitate peer-to-peer payments and other functions that make it easy for various players in the ecosystem to enhance the payments experience.
New technologies and standards are certainly driving change within the payments space, but security has not taken a backseat. In fact, when it comes to payments, security is a critical part of the customer experience. With enhanced technology and new payments opportunities come new opportunities for fraud, cyberattacks, data breaches, and other threatening activity.
Payments companies are painfully aware of the gravity of these threats. Many organizations large and small have suffered data breaches and put sensitive customer data at risk. Not only is this costly in terms of fees and fines for compliance violations, but it costs an organization the trust of its customers. This reputational damage can perhaps be the most expensive loss of all. As a result, customers have raised expectations surrounding security measures and how organizations enact them.
The good news is that large volumes of transaction data can help stymie fraud with the help of Artificial Intelligence (AI). AI can identify anomalies in purchase behavior patterns and other nuances in transaction data to more quickly identify and flag fraud. Data security will continue to be a key priority and area for investment in the near and long term. In addition to aiding in regulatory compliance and protecting sensitive data from cybercriminals, data security provides peace of mind to a customer base that is careful in whom it places its trust.
It would be naive to have a conversation around customer experience in payments while ignoring generational preference. Generation Z and millennials have been raised as digital natives and hold a substantial command over technology and data. These generations are the ones that are hyperfocused on emerging payments technologies and the latest and greatest ways to pay.
Peer-to-peer (P2P) payments are increasingly popular with these generations. About 79% of Gen Z and 75% of older millennials use P2P payment platforms at least once a month. counterparts are using P2P payment platforms once a month. Just 65% of their Gen X counterparts, on the other hand, report using P2P payments at the same frequency. Younger generations are hardwired for fast and easy payment experiences.
Digital transformation and the increased push toward payments modernization are beginning to address many customer experience issues. Initiatives like real-time payments and open banking are gaining global and additional opportunities to improve the customer experience continue to present themselves. Increased fraudulent activity will go hand-in-hand with this trend as bad actors take note of these new opportunities and aim to exploit any vulnerabilities.
It will be imperative for payments companies to tap into enhanced data capabilities, including AI, in order to enhance security alongside the customer experience. As APIs and other data elements and platforms continue to evolve, the payments systems of today will transform into the customer experience systems of tomorrow.