Digital transformation” is a popular buzzword, but what does digital transformation for payments really mean? We explore all the implications and potential impacts.
There is wide agreement that instant digital payments pose a powerful alternative to payment cards in the next several years. Developing systems and infrastructure that can accommodate evolving and sophisticated consumer preferences and industry standards have become front and center for payments organizations. In fact, 70% of companies report they have a digital transformation strategy in place or are working on one, and businesses spent roughly $1.2 trillion on digital transformation in 2019. Upgrading existing payments systems and creating internal efficiencies is a means rather than an end. Retooling and revamping internal operations is a necessary step in upgrading payments offerings that facilitate frictionless, secure, fast payments.
Payments organizations engaging in digital transformation (DX) face many obstacles. Creating and executing DX strategies requires a transformation of perspective within an organization. This type of change management requires buy-in and proactive endorsement from the top down within an organization.
Another challenge is time. Payments organizations are beginning to feel a sense of urgency around DX as the payments space is one of the most disrupted spaces under the fintech umbrella. Industry changes are occurring rapidly, requiring organizations to react quickly and nimbly to not only weather current challenges but future-proof payments systems beyond today.
While the technological, strategic, resource, timing, and budget considerations are important, they are secondary to the need for payments organizations to create value-added services for customers. In truth, payments organizations likely face a number of competing priorities that are each tugging at resources. This is further complicated by an intense regulatory atmosphere and monolithic architecture and infrastructure that makes pivoting incredibly difficult if not impossible.
Payments organizations must embrace disruptive change and make the difficult trade-offs necessary to create products and services that add value and will endure and lead the market of tomorrow. DX will require significant investments, changes to internal operations, retraining of teams, and new strategies for overcoming obstacles. The end result will be omnichannel, real-time, secure, customer-centric value-added payments services that meet and exceed customer expectations.
Customer experience is driving the payments transformation by aiming to make transactions more seamless. Real-time payments and security features like biometrics are being driven by sophisticated consumers looking for technologically sleek payments applications. This underlying push towards DX is significantly tied to customer experience:
DX enables payments organizations to both adapt to and drive disruptive change within the industry. This requires a level of digital competency that can fuel new business models along with value-added products and services. Customer-centric DX also has the pleasant byproducts of improving operational efficiency and performance.
An eye toward innovation will be key when strategizing DX initiatives geared towards providing the best customer experience. Customer-centricity goes far beyond simply offering better online or mobile experiences and focuses on enhancements to the overall infrastructure that not only enable better products and services, but also improve the overall business model and workforce mobilization.
The cloud has been center-stage for many business’s DX initiatives — and with good reason. The global public cloud computing market is projected to exceed $330 billion in 2020. Cloud infrastructure has been embraced by both the payments and the larger fintech space. The cloud offers on-demand, pay-as-you-go computing resources that can increase operational efficiencies organization-wide. Not only does this allow payments companies to streamline their offerings, but it facilitates faster innovations within payments.
Security, privacy, regulatory climates, fraud, and risk mitigation are all tied up on DX initiatives. Legacy systems are poorly equipped to deal with the rapidly evolving payments landscape where security, privacy, and fraud protections must evolve in real-time. Fast-changing regulations make it increasingly difficult to adapt quickly, but cloud offers promising opportunities. Not only does it reduce the need to overspend on infrastructure that may be unnecessary, it significantly reduces maintenance costs associated with on-premise infrastructures. Upgrades become seamless and on-boarding evolves into a fast, elegant experience.
Payments modernization through DX is an opportunity for payments companies to simplify processes, enhance offerings, and better connect with customers. Employing new data elements and governance will also ensure that the customer experiences remain unencumbered by fraud, privacy, and security concerns.