In the rapidly changing world of payments, innovation is the only constant. However, many FinTechs and payments companies are operating on legacy frameworks that could stifle real change.
The digital payments market has witnessed massive growth in recent years — $11.29 trillion is the projected worth of the global digital payments market by 2026.
Consumers expect to be able to pay for products and services at any time and any place. Speed and convenience are the cornerstones of payments in 2022 and beyond, though many payment processing organizations still struggle to keep up.
Yet, increasingly sophisticated consumer demands are relentless. Emerging technologies like voice payments, contactless cards, and wearables present even faster, frictionless options. On one hand, the pace at which these technological advancements are happening is stunning. On the other, FinTechs lack the framework, tools, and processes to maintain pace with this quickfire evolution in payments.
Leaving Legacy Behind
A key problem for payments companies is the reliance on legacy systems that slow things to a crawling pace. These outdated systems contain vulnerabilities, make organizations less reactive, and put them at risk for outages and other processing hiccups. The biggest threat? Challengers on the prowl for their consumers.
Millennials and Gen Z are some of the most vocal generations. Raised with iPads in hand, these segments are not afraid to voice displeasure on social media channels, leaving a trail of damaged brand reputations in their wake.
Legacy systems threaten the digital customer experience, yet many payments companies are hesitant to revamp systems due to the perceived high costs associated with such massive changes. However, these companies should consider the cost they are paying in other ways.
One of the biggest issues (beyond customer experience) with legacy systems is security. Missed updates and other lapses in legacy systems, put sensitive data at risk. One misstep is all it takes for an organization to be breached, and the implications can be catastrophic. What’s more, the consequences of a breach are more concrete than many think:
Brand Reputation – According to a recent consumer survey from PCI Pal, 70% of U.S. consumers would stop shopping (for a few months or an indefinite period) at a retailer that had been breached.
Data Breaches – Moreover, the worldwide average cost of a data breach is $3.86 million.
Declined Transactions – On the other end of the spectrum, those implementing older technologies to guard against fraud — end up facing rising costs from false declines. False declines in E-commerce are expected to reach $443 billion this year.
Embracing Emerging Technology & Alternative Payments
As security and convenience remain paramount, FinTechs, merchants, and payment companies will need to evolve alongside technology, to be able to thrive in a cut-throat environment. While too much innovation may stifle change, not enough can drive away customers.
Blockchain’s distributed ledger technology has sweeping implications on transaction security as well as simplification of many payments processes. Where legacy systems get bogged down by inefficient processes and intermediaries, blockchain promises decentralization and transparency. This transparency facilitates deeper insights, which in turn, streamline payments. The decentralized nature of blockchain can also bolster security. Decentralized, encrypted data becomes almost impossible to hack.
The Internet of Things (IoT) is also emerging as a key consideration for payments. As major card brands like Visa roll out tokenized payments for a variety of things (e.g. wearables and cars) and the IoT continues to expand, the potential of payment channels is on the rise. The convenience and security of these “pay where you are” methods have garnered consumer attention and organizations are wise not to ignore this trend.
The bottom line is that FinTechs, merchants, banks, and anyone building or utilizing payment platforms must take these new trends into consideration. A business case must be made in terms of adopting new technologies or migrating to new platforms, and this will depend on each company’s unique needs. So long as customer experience remains at the forefront of thinking behind each of these decisions, organizations will be on the right track.
Customer Experience Must Remain a Priority
In the coming years, to remain competitive in the payments space — FinTechs and payment companies must prioritize the customer experience. While traditional banks and processors once provided the foundation of the payments ecosystem — retailers, e-tailers, app developers, and payment gateway providers have established a burgeoning presence.
Consumers are aware of this and have greater expectations for how they pay. In short, they expect to be able to turn any channel or thing into a payment method. Commerce experiences now extend beyond brick-and-mortar and desktop to include mobile, mobile apps, social media channels, kiosks, watches, and more. Self-service providers are facing increasing pressure to meet consumer preferences while maintaining security and seamlessness.
Failure to embrace this wave of digital transformation and all of its challenges and opportunities will result in lost consumer trust—and lost business. Staying abreast of new technology and participating in innovation is just the beginning. Payment providers must proactively upgrade their systems and technologies and remain agile as the landscape continues to evolve. It’s the only way to compete in a marketplace of robust offerings and agile service providers.
The digital demands of consumers will only grow more complex. Payment providers with an eye on next-generation technology will be positioned to meet those demands, and contribute significantly to the secure, frictionless payments solutions of tomorrow.