Emerging Fintechs and agility offered by new technologies have been the key drivers for innovation in the financial services industry, particularly cards and payments. Innovation is leading to ground-breaking changes in the way customers make payments in a seamless, convenient, and secure way. As the industry continues to evolve and mature, let us analyze the new ecosystem that has paved the way for world-class experiences in these new modes of commerce.
Until recently, cash ruled, but the growing popularity of digital payment methods have led to a drastic shift in consumers’ outlook towards convenience. Moreover, the recent unprecedented pandemic of Covid-19 has pushed consumers to avoid handing out cash and choose digital means for making payments – for big and small purchases. With people not going out as often as they would pre-Covid, the demand for e-Commerce is surging, which has boosted the adoption of digital payments.
In 2020, we see a new set of alternative cashless payment methods growing globally and capitalizing on the huge market opportunity. Mobile and QR payments, contactless cards, and digital wallets are going to become more significant than ever. Real-Time Payments is also becoming increasingly popular and has grown to become a critical feature for customer experience offered by most banks and FIs.
A large share of non-cash transactions still belongs to credit and debit cards. Cards make shopping fast and easy, and consumers are normally offered a host of complimentary perks such as cash back, loyalty points, and merchant rewards. Mobile applications also allow consumers to save their card details so they can shop without having to worry about carrying physical cards. It is not uncommon to see cardholders use their smartphones’ built-in location services to restrict use to a specific geographic area or even help them receive and redeem merchant rewards in real time. Consumers have grown accustomed to managing their finances online, and digitization of cards will have the potential to bring new levels of control, functionality and security to these essential financial tools.
Issuers that provide standard card management features in today’s evolving times need to step up. The coming months and years will see issuers explore innovative ways of integrating card spend data and processes into existing accounts receivable, accounts payable, and accounting platforms and workflows. Commercial cards can prove to be valuable tools for end-user organizations and current market trends suggest that their use will continue to grow.
Substituting the very familiar plastic card with an e-card that can simplify online payments. The use of Virtual Cards for online payments protects the details of your primary card and can provide replacement for single and recurring use. Virtual cards grant consumers added control, such as spend limits, forced end dates, and merchant locking. It is not uncommon for consumers to own multiple virtual cards with flexibility to set spend limits on each of them, without having to worry about a merchant overcharging them. Freezing or deleting a virtual card is at the consumer’s convenience and if something goes wrong, it is taken care of right away.
There are significant efforts being made to streamline the overall value virtual cards can offer. North America holds a dominant share of the global virtual cards market because of the significant growth of market leaders and early adoption of the technology. 1 The industry is expected to grow to $2T by 2022 and we are excited to witness the rapid adoption of B2B Virtual Cards, B2C Remote Payment Virtual Cards, and B2C POS Virtual Cards.
Shoppers in some countries notice a new way of paying which is neither a bank card nor store credit. Quick, convenient - Buy Now Pay Later. This is the newest entrant that could prove to a suitable alternative to the traditional credit card. The BNPL option, as it is popularly called, allows customers to either delay the payment for the entire bill amount, or split the cost into equal instalments. Millennials prefer this option compared to using cards and, to engage with their customers better, banks are now offering cardholders a separate Pay Later option that lets them access 45 days digital credit with just a click. Customers can pay their bills, shop online and make payments to any merchant easily and instantly. Pay Later is being made available as an option in internet banking and mobile banking.
The BNPL service is growing globally and that could easily translate into increased usage, if more consumers are exposed. Visa announced the launch of Visa Installment Solutions, which enables active issuers and merchants to give Visa cardholders more authority over how goods are paid. 2 In 2020, Visa will pilot the solution in the U.S., India, Romania, Russia, and the UAE, and eventually expand to the rest of the world.
Just 45 percent of debit card holders have been offered installment payment plans online and 28 percent while at retail stores, according to recent research. Credit card holders are even less familiar with BNPL services, with only 17 percent being offered such options. This represents a massive user base that could be convinced to adopt BNPL payment plans, with 51 percent of credit card holders accepting installment plans when offered them.
Issuers will win in a big way as they roll out the BNPL options to consumers as they already trust them with their products and the ongoing relationship between them brings a sense of comfort and familiarity. Consumers interact with their issuers often – for account balance enquiries, statements, and bill payments. This gives the issuers ample opportunity to present and educate consumers about their installment offerings, before they complete a transaction at the POS, or later when consumers are managing their cards on a preferred digital channel. It also implies that the issuer has better insights into the customer’s complete financial behavior, compared to a never-to-be-repeated installment lender relying on limited data.
Banks are reconsidering investing in new card platforms, because of the rise of buy-now-pay-later, driven by a huge economic and consumer behavioral shift.
Global travel was at his highest until Covid-19 hit the world. Though the future of travel appears to be bleak now, industry experts believe the situation will normalize. Growing travel needs have given rise to the need for travelers to make safe and seamless payments without having to worry about changing foreign exchange rates and high fees. Issuers must consider issuing cards that can be configured for multiple currencies. Physical and virtual multi-currency cards could be great differentiators.
Another trend that is rapidly being adopted is that modern tokenization as a more cost-effective (and secure) way to protect and safeguard sensitive information. Tokenization allows users to store credit card information in mobile wallets, ecommerce solutions and POS software, to allow the card to be recharged without exposing the original card information. Some examples of tokenization are when businesses keep their “cards on file” for subscription billing and recurring payments, quick checkouts on e-Commerce websites and for NFC wallets such as Apple Pay and Android Pay.
Once the user takes a picture of the card and saves it on their phone, Apple/Android send those details to the issuing bank or network, which encrypts it into randomly generated numbers. This protects the card details stored on the phone from being misused. Modern tokenization solutions are known to ease PCI Compliance by reducing the number of systems that have access to customers’ card information.
Secure Remote Commerce is another catalyst for enabling one-click checkout when you are making a purchase on a website, mobile app, or any other digital channel with a card of your choice.
The modern payment landscape has paved the way for instant gratification led experiences and it is not extraordinary for consumers to expect banks to instantly issue a new card. The migration to EMV card technology and the expectation of being able to use the card almost immediately are the key drivers for this. Instant issuance empowers customers with the flexibility to replace their cards on-demand.
Instant card issuance can help issuers increase revenue opportunities, attract and retain customers, improve customer satisfaction, and cross-sell products and services.
EMV-enabled NFC cards are way safer today and it is becoming increasingly common for contactless cards to be used for seamless travel experiences. They can be used at tap-and-go payment terminals as faster travel. Contactless cards improve your customer experience, as travelers appreciate being able to pay quickly and efficiently.
Given that debit cards access a cardholder’s bank account information, it is imperative to maintain control. Though EMV has limited in-store fraud, card-not-present transactions are not completely
fraud-proof. Cards are a popular preference to make payments in most geographies and banks that offer card controls to track card use and monitor spending certainly have an edge for better fraud management.
A great trend is allowing cardholders to manage their cards directly from their mobile device. Cardholders can choose to receive real-time transaction updates to alerts about every purchase made on their card. This will allow cardholders to set spending limits, designate locations for card usage and geographical parameters, and even mobile device proximity can have a significant impact on their exposure and vulnerability to both card-present and card-not-present fraud.
If a cardholder’s card is compromised, they have the benefit of instant, uninterrupted access to “turn off” their card, both limiting further damage to their account balance and the impact on their financial institution.
The rapid adoption of modern technology and infrastructure tools has enabled issuers to build highly configurable solutions, capable of handling a huge volume of transactions while lowering costs, maintaining high availability, and complying with changing regulations.
Cloud based card solutions coupled with a modular architecture are the answer to scalability, availability, and performance needed for mission-critical solutions. It helps you rapidly develop and launch new products to gain an edge over your competition.
APIs are fueling rapid innovation with simplified integrations to deliver exemplary experiences and powering modernization of the Cards & Payments industry. Issuers can monetize their platform for several out-of-the-box value added offerings for faster processing, reduced fees, personalized offers for consumers, easy card application and issuance, flexibility of payments. Organizations leveraging APIs the right way can build a robust ecosystem to increase their revenue. Workflows can be simplified using APIs, leading to a great amount of flexibility.1 Source: https://www.pymnts.com/news/b2b-payments/2018/accenture-virtual-card/
Card solutions with innovative features and flexibilities, coupled with coming-of-age digital capabilities, are imperative to stay relevant and competitive in an evolving marketplace. Issuers need to embrace open APIs and third-party integration capabilities to tap into great insights about consumer behavior, with an opportunity to offer better products and services. Consumers today are anxious and accustomed to immediate gratification. The only way you will keep them engaged is with solutions that are convenient, available on-demand, secure and almost instant.