Consumer payments are becoming more and more invisible. People can now do things like order food and have it delivered without ever pulling out cash or a credit or debit card. As more fintechs popup with services that offer frictionless payments for customers, banks and issuers struggle to remain in the game.
To further discuss the current trends in the banking industry and how traditional banks can use these trends to remain relevant in an industry full of new technology, PaymentsJournal sat down with Jens Audenaert, SVP/GM of Payments at Diebold Nixdorf, and Tim Sloane, VP of Payments Innovation at Mercator Advisory Group.
Key trends in the banking and payments industry
There are many current trends in the payments space. One of the key trends over the past several years being the remarkable rise of digital payment vehicles and the associated transaction volumes. Like many other digital accelerations that have occurred over the span of COVID-19, contactless transaction volumes have hit astronomical highs.
Much of this digital push has to do with consumer expectations. “If you think about how people buy goods and services these days, in many instances, you don’t even think about the payment anymore; you can buy a coffee through an app, you can get a car service through an app,” explained Audenaert. “Consumers have really started to expect these very seamless, integrated payment experiences.”
This is pertinent information for retail banks, as a lot of those payment experiences are delivered by fintechs and neobanks. Retail banks must consider how they will remain relevant when a consumer does not associate their primary bank or card with a particular payment transaction. While this is a clear threat to retail banks, it can also be a great opportunity for them to adapt and begin offering these additional services to customers.
“How a financial institution can drive itself to be top of wallet in those environments is critical, and that’s what’s happening now,” concluded Sloane.
Banks maintain their ‘stickiness’ with consumers
For banks to remain relevant, they must be sure that they are funding and processing transactions for their consumers. To do so in a way that meets those consumers’ expectations, banks must keep up with continuous innovation. Yet, when contemplating the ever-rising rate of change in the payments space, banks are realizing that their infrastructure is decades old, making it especially difficult to adapt to market trends.
“This is where banks really have to think [about] what’s the infrastructure that [they] need so that [they] can very easily adapt to the changes that [are] seen in the market and can actually meet consumer expectations,” said Audenaert. “And that’s really hard with the old technology.”
It is important for banks to have technology that can be deployed in the cloud that is microservice-based, architecture-enabled, and API-first because they are all easy to adapt. Being able to design, test, and deploy new services for consumers in a matter of weeks or months will keep traditional banks in the game.
“If [banks are] not providing services that better guide the consumer as to what cards are on file and how much they’re spending, then [they’re] going to be usurped by a financial institution that has that capability,” warned Sloane.
What makes a payments solution innovative?
For Audenaert, what makes a payment solution innovative is that it is future proof. The world of payments is constantly changing, and while banks can embed a solution or payments platform today, that solution or platform may not remain relevant in the future.
Processing a payment requires authenticating the consumer, routing a transaction, and authorizing the payment. Banks must be able to do all of these things in a number of ways and adapt to new expectations. For example, authentication used to be PIN-based, but now biometrics and tokenization are quickly becoming the norm.
“[Banks] really have to be able to allow any kind of authentication and to route any different way,” explained Audenaert. “If you think about open banking, and the opportunities that [it] creates for banks to route outside of the traditional international schemes, accepting new modalities and new ways of payments… that’s what an innovative payment solution is about.”
Open banking allows banks to adapt quickly to both the modern market and what is yet to come. API-first architecture or microservices architecture will help to enable banks to do exactly that.
Diebold Nixdorf ventures into the payments space
While it is new to the payments space specifically, Diebold Nixdorf is no stranger to processing transactions. The technology company has a deep understanding of the retail and banking world through both its software and hardware businesses.
“Based on our relationship with banks [and] existing businesses, we really understood the pain point that banks are facing,” said Audenaert.
Diebold Nixdorf is working to address this issue by helping banks replace some of their old infrastructure with highly modernized technology solutions. It is an exciting new opportunity, and a number of banks are already live and seeing great results.
“It’s great to have such a trusted name helping to move payments along at this very exciting time,” concluded Sloane.
