Bringing down walls, letting innovation in (Part 2)
The move to a cashless society is visible everywhere you look.
So does this mean a smaller slice of the pie for incumbents? Not at all. There are still plenty of areas of payments which are currently underserved, and not just in the consumer space. The SME market holds revenue opportunities for those who develop a business model for tailored services; micro payments, bespoke instant payments, B2B discounts, and more. These services can be delivered by new kinds of PSPs, or in collaboration with traditional players. In the cards space, MasterCard and Visa are investing in strategic acquisitions and developing new technologies in order to develop their P2P and instant offerings. The ‘one-trick payments pony’ may disappear in this new payments ecosystem,’ as acquirers, processors, fintechs, and banks expand their payments offerings to meet customer demand for greater choice.
The key is to truly put the customer (merchant/corporate as well as consumer) at the centre of the payments equation, and then build a model that serves their needs.
It’s especially important to keep the customer in mind when it comes to the innovation part of the equation. Frictionless is the current buzzword, and it’s true that customers do want frictionless payments; look at the uptake of contactless card payments. But customers also want a sense of control, which is where regulation around secure ID and authentication comes into play. It’s about providing frictionless payments, without it feeling like pick-pocketing. This can be accommodated by the payments industry by building in authorisation preference management. Happy transactions are fast, open, and secure.
PSD2 will drive an open marketplace, where digital payments abound. And digital payments require a fast ecosystem. Beyond the fast instant transfer of money (in real-time), the entire customer experience needs to be fast. From customer onboarding, through payment initiation and authorisation, right up to the immediate transfer of funds – all the stages of a fast digital payment offer opportunities to bring new services to market, which meet the demand for real-time customer experiences. Payment initiation in particular will be a hotbed of innovation as Payment Initiation Service Providers (PISPs), and Account Information Service Providers (AISPs) spring up to take advantage of the new opportunities.
These fast services will require open partnerships in order to succeed. Whether that means partnering with other financial institutions and intermediaries for access to new customer groups, markets and capabilities, or being an attractive partner through both attitude and ease of technical integration. In an open payments environment we have to think of the regulator as a partner, helping us to develop new revenue streams. We all want to be successful in this New Payments Ecosystem. As Charles Darwin said, “It is not the strongest of the species that survives, nor the most intelligent, but the one most responsive to change.”