Focus on invisible payments, customer journey

Expect real-time payments to pick up steam, writes FISPAN CEO and co-founder Clayton Weir in the PYMNTS eBook, Baseline 2022: What the Next Six Months Holds – benefiting retailers, banks and, perhaps most importantly, their customers.

What we have seen, what has always been true and what we have understood is that all our efforts must be customer focused. Our decisions must be based on improving the customer journey, and our products and solutions must remove any friction that exists in that journey.

So the baseline for the rest of 2022 and into the future really should be “how does this support the customer?” with a focus on payments that puts the customer experience first. At its core are payment methods that are fast, easy to use, seamless, and ultimately invisible.

This includes payment types such as real-time payments (RTP) and bank-selected payments. Real-time payments aren’t new, but they’ve certainly gained traction as customers demand faster payment processing. Bank-selected payments, where the customer sends the payment and the bank determines the best, cheapest, yet timely payment method for forwarding, are also seeing increasing demand.

These invisible systems work behind the scenes to the great benefit of the customer, either by enabling improved cash flow management or by optimizing payment costs and types. Different payment methods, but both benefit the customer while providing them with a smooth, seamless customer experience.

Financial institutions are still missing out on the SMB market

Banks have long focused on their large and mid-market customers as these have traditionally been a smaller group and the largest contributors to revenue. However, small and medium-sized enterprises (SMEs) are a critical engine of the US economy, and SME customers make up a significant portion of many banks’ customer bases. There must be a major shift to serve this group.

Neo-banks are an example of non-banks focused on serving this market and are gaining traction with their low barriers and highly targeted approach. SMBs are demanding faster, more transparent B2B experiences because cash management is critical to their survival. Traditional banks have the means to compete and should use their digital initial offerings to retain existing customers and attract new SME customers.

Banks that pay attention to and serve this market will become the preferred banks for the large and growing SME base and will win in the long run.

Bank-FinTech partnerships will be key to the success of banks

We have seen a shift in the partnership landscape as new bank-FinTech partnerships are rapidly emerging as banks realize the many benefits that can come from this.

APIs have had the biggest impact on innovation lately, and financial technology can develop the technology needed to support new API-driven capabilities like embedded banking.

Banks can certainly build API solutions in-house, but often struggle with development schedules, time-to-market, and the general maintenance required. However, FinTechs have proven time and time again that they can securely design, deliver and effectively support these digital solutions with a much faster time to market.

The digitization gap in the financial industry will continue to grow and become even more pronounced between the early digital adopters and those who wait. The time to act really was yesterday.

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Around: More than half of utility and consumer finance companies are able to process all monthly bill payments digitally. The kicker? Only 12% of them do this. The Digital Payments Edge, a collaboration between PYMNTS and ACI Worldwide, surveyed 207 billing and collections professionals at these companies to learn why full digitalization remains elusive.

Virginia C. Taylor