As we ring in the new year, we can’t help but look forward to what lies ahead. New Year’s resolutions keep us focused on our goals and help us plan for success. With such historic advances such as real-time payments, artificial intelligence, mobile wallets, and open banking, 2017 has seen unprecedented advancements in the way we pay.
Having a defined payments strategy is more important now than ever before. However, a surprising finding came from the American Bankers Association. In 2017, they conducted a survey of 219 U.S. banks and found that 87% do not have a formal payments strategy. Meanwhile, 71% said that they do not analyze payments data to gain insights into customer behavior. It suggests that financial institutions (FIs) make payments a priority by thinking about payments holistically and integrating payments into their overall business strategy. These five tactics can take your payment strategy to the next level.
- Make a Play for Real-Time Payments and P2P
- Reconsider Omni-Channel
- Give Bots a Chance
- Be Open to Open Banking
- Reinvent Cards for the Digital World
Make a Play for Real-Time Payments and P2P
Real-time payments is anticipated to be one of the biggest advances changing the financial services industry in the next several years. Not only will it affect the payments arena, but it will infiltrate the entire banking organization. From new account opening, to loans, to security, and customer service, we are likely to see the after effects of real-time payments continue long after the initial launch.
Recommendations for FIs include having a clear strategy for real-time payments and identify which use cases fit the overall strategy, culture, and client base of your FI. Additional recommendations include approaching P2P payments as part of the mobile product strategy and prioritizing driving traffic to mobile banking applications. Making sure consumers know that real-time payments and P2P services exist, and educating consumers on the value proposition of real-time and digital P2P payments is also critical. Consider real-time and P2P payments as an important launch pad for driving overall digital consumer engagement.
Omni-channel emerged as a buzzword in 2010 then gradually fell out of favor as many conflicting definitions surfaced, preventing the concept from taking hold. Since then, new channels emerged and have become popular both in the general population and financial services. Consumers and businesses not only communicate with their banks and credit unions in the branch, call center, online, and mobile; communication has now expanded to SMS, messaging apps, social media, and other stand-alone apps.
Messaging apps have now surpassed social networks in monthly active users. Messaging apps are making their way into consumer payments. Apple offers an iMessage app that allow users to send money to friends and family as well as make purchases with popular merchants. PayPal expanded its partnership with Facebook, enabling PayPal sellers to send invoices through Messenger. These examples show commerce is expanding into new channels and new contexts.
It is important not to lose sight of the omni-channel purpose – to offer a seamless consumer experience and data transfer along with that experience. Developing banking channels in isolation from one another is risky. Consumers want seamless experiences that blend physical and digital. Minimizing channel conflict and re-evaluating where your FI stands in your omni-channel strategy will help banks and credit unions stand out in 2018.
Give Bots a Chance
IoT (Internet of Things) devices, AI (artificial intelligence), and NLP (natural language processing) are joining together as the silver bullet solution to address user experience and customer service. 2017 seemed to be the emerging year for chatbot technology. Large FIs such as Bank of America, Citi-Bank, and USAA integrated chatbots into their customer service, online, and mobile channels. Much of the ease of chatbot acceptance is because chatbots communicate with us via channels in which we are already interacting and comfortable with – voice, text, or messaging.
A main benefit that chatbots bring is increased consumer engagement. Because chatbots offer personalized communication, they are often used for customer satisfaction and problem solving. They can provide real-time interactions and are easily integrated into other channels for an omni-channel experience. Chatbots are also active data collectors on key customer behavior and offer enriched experiences with the FI and its brand. Chatbots bring a tremendous opportunity for mobile banking and payments, as well as general customer service of the FI as a whole.
Be Open to Open Banking
One of the key trends that emerged through 2017 was the increase in competitive partnerships between FinTech firms and more conventional payments players. According to an Aite Group report, banks used APIs (application program interfaces) as competitive tools to open their systems and remain relevant in an environment of increased competition. It found that for a majority (67%) of respondents, API development for real-time payments was and will continue to be, a major priority. This way of thinking has become increasingly popular as Open Banking, which allows FIs to quickly enhance their digital offerings using third-party developers, became common in 2017, in anticipation of the PSD2 European law scheduled for January 2018. In the U.S, open banking mainly has been in the form of FinTech partnerships such as Chase’s deals with OnDeck Capital and Digital Asset Holdings, Bank of America’s partnerships with Cardlytics, and others. Yet with the PSD2 push, the demand for faster, smarter, and safer transactions has reached fever pitch, setting the stage for the game-changing payments progress anticipated to come in 2018.
Reinvent Cards for the Digital World
Credit and debit card usage exceeded cash usage worldwide for the first-time in 2016. The cashless trend is expected to intensify. As overall card usage increases, and large FIs and FinTech firms invest more into their card strategy, we will see significant interest in credit cards in the community financial services space. Major providers in the space are reinventing their cards for the digital world while working to capitalize on the current card usage momentum.
Examples of how to give consumers reasons to spend on credit and keep their cards, rather than their competitors' cards, top-of-wallet include:
- Ensuring card rewards programs are evolving and becoming more robust.
- Meeting consumers' desire for online shopping by strengthening card usage online.
- Developing creative ways to use cards, such as through instant application.
- Incorporating data analytics into card strategy.
Accessing, analyzing, and applying data will be critical in the success of any card program. Now is the time for FIs to evaluate their current card program and revisit how it stacks up to today’s digital consumer user experiences.
In 2018, FIs should begin looking at payments holistically; looking at the way they service payment clients, evaluating the interfaces in which payment clients interact with them, and identifying, and interpreting the data behind the payment solutions they offer. This is just the beginning of focusing efforts on developing a formal enterprise payments strategy to keep up with technological advancements, the competition, and ever-changing consumer expectations.