Planning for Suc­cess in New Era of Pay­ments – The Need for a 3600 Vi­sion

Banking Frontiers - - New Models - Bruce Jen­nings Head of Strate­gic De­vel­op­ment, FIS

The global pay­ments land­scape is ex­pe­ri­enc­ing its great­est transformation since the dawn of elec­tronic pay­ments. Ob­vi­ous trends are the de­cline of cash and cheques, the con­tin­u­ing growth of cards (global fore­cast to reach 500 bil­lion in vol­ume by 2022) and the rise of in­stant pay­ments.

And with a global CAGR of 10.9%, the in­dus­try is an at­trac­tive one, but with many chal­lenges. Reg­u­la­tion, tech­nol­ogy and ris­ing cus­tomer ex­pec­ta­tions are re­shap­ing the mar­ket, and suc­cess re­quires an in­te­grated view across all pay­ment types and chan­nels. While this is sim­ple in the­ory, there are many prac­ti­cal con­sid­er­a­tions. Why?

The pay­ments land­scape has evolved along prod­uct lines. In the be­gin­ning, there was just cash, then cheques ar­rived, fol­lowed by elec­tronic pay­ments, cards and so on. Each has unique sup­port needs, pro­duc­ing a siloed in­fra­struc­ture with a stag­ger­ing TCO. More­over, in­stant pay­ments and open bank­ing will have a per­ma­nent im­pact on pay­ment busi­ness mod­els. While some pay­ment providers may ini­tially per­ceive this as a threat, it is also an op­por­tu­nity to do things dif­fer­ently.


Banks can build on cus­tomer loy­alty. In this era of open and in­stant, they can of­fer ser­vices that deepen cus­tomer re­la­tion­ships. Re­search shows that 52% of peo­ple trust banks over tech­nol­ogy providers (<5%) for apps that man­age their fi­nances.

Many cus­tomers feel more con­fi­dent about choos­ing third-party apps pro­moted by their bank of­fer­ing ‘mar­ket­place’ op­por­tu­ni­ties to ex­ist­ing in­sti­tu­tions. New apps help build cus­tomer loy­alty and gen­er­ate new rev­enues for both banks and their fin­tech part­ners.


On the face of it, the in­fi­nite use cases of­fered by ac­count-to-ac­count pay­ments will eas­ily out­shine their older, less flex­i­ble card net­work cousins. How­ever, the cards world is also evolv­ing to a more real-time open ex­pe­ri­ence. Card ac­count open­ing, fraud man­age­ment and authorizations are all of­fered 24/7. To­k­eniza­tion is lib­er­at­ing the card pay­ment from the con­straints of the phys­i­cal world.

The key strength of card pay­ments lies in the ex­ist­ing cus­tomer base, where cards have truly reached ubiq­uity in many mar­kets through sig­nif­i­cant in­vest­ments by banks and mer­chants in de­vel­op­ing POS net­works. Cards are known and un­der­stood, which is a key strength in an in­creas­ingly com­plex world. Card pay­ments also of­fer sig­nif­i­cant con­sumer pro­tec­tion through the charge­back and dis­putes rules of the schemes and reg­u­la­tion. These have been built up over many years. The level of trust em­bod­ied in the Visa and MasterCard brands will be dif­fi­cult to repli­cate.


So, for the fore­see­able fu­ture, we be­lieve there will be two core plat­forms that par­tic­i­pants in the pay­ments in­dus­try must sup­port - ac­count to ac­count and cards or en­ter­prise and re­tail pay­ments, as you pre­fer. The bal­ance be­tween the two could change dra­mat­i­cally de­pend­ing on the moves of the larger par­tic­i­pants, reg­u­la­tory pres­sure, stan­dard­iza­tion ef­forts, how ma­chine-to-ma­chine pay­ments de­velop.

Ul­ti­mately, all pay­ment providers will need greater agility to adapt to un­pre­dictable mar­ket and cus­tomer de­mands. Suc­cess will come with build­ing plat­forms that have ca­pa­bil­i­ties that can be turned on and off, tuned up and down.


Most pay­ment providers need help to boost their busi­ness agility. The move to open and in­stant pay­ment rails is a unique op­por­tu­nity to review the pay­ments blue­print. Tech­ni­cal part­ners can help, but they must of­fer in­sight and a prac­ti­cal un­der­stand­ing of the pay­ments busi­ness.

A tech­nol­ogy part­ner must of­fer an in­te­grated blue print for pay­ments, such as F IS™ Pay­mentsOne, which of­fers a com­pre­hen­sive suite of pay­ment so­lu­tions. Once the over­all pay­ments blue­print is un­der­stood, the tran­si­tion to greater in­te­gra­tion can be mod­u­lar.


Un­der­stand­ably, there is in­creas­ing ap­petite for hosted pay­ments ser­vices, whether for real-time pay­ments or card man­age­ment. These ser­vices en­able a more con­sis­tent cus­tomer ex­pe­ri­ence across mul­ti­ple chan­nels, in­su­late pay­ment providers from change and re­move many in­te­gra­tion bar­ri­ers, mak­ing it eas­ier to add in new fea­tures.

Pay­ment providers start from dif­fer­ent points and should be free to choose pay­ments components as ei­ther licensed soft­ware, a man­aged ser­vice, fully out­sourced, or as a hy­brid so­lu­tion. The key is to en­sure smooth in­te­gra­tion and world-class ser­vice. Fur­ther­more, what’s right for to­day, may need to adapt tomorrow.


Some banks have a bold vi­sion of their fu­ture po­si­tion; oth­ers are adopt­ing a cau­tious ap­proach. While a ‘wait and see’ at­ti­tude is un­der­stand­able, do­ing noth­ing is not a vi­able op­tion. In the­ory, a pay­ment is a pay­ment is a pay­ment, but pay­ment providers that can ac­cel­er­ate the move to a holis­tic blue­print will be able to stream­line their op­er­a­tions sooner and re­lease in­vest­ment for where they can re­ally add value and win cus­tomer loy­alty.

Bruce Jen­nings

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