Three Principles Guiding the Future of Payments

Feb  10 
Rossana Thomas  Product Management, Enterprise Payments Platform, Fiserv  

Study reveals financial institutions' strategies, opportunities and challenges

The payments landscape continues to change, spurred by increased customer demand for new ways to pay and the technological advances that make those methods possible.

By viewing payments transformation as a continuous improvement rather than an infrastructure or regulatory to-do list, financial institutions can remain flexible to new ideas. Still, the transformation requires guardrails and a plan to best identify changes that will push organizations forward.

In 2019, Fiserv and Finextra surveyed senior executives at global financial institutions on the topic of payments. Based on our experience and their responses, here are three guiding principles for the future of payments.

1. Real Time Is Now

People and businesses want to move money faster, globally and with more information. In our survey, 94 percent of respondents said their customers expect real-time payments as a basic feature when they open an account.

Yet only 54 percent of those financial institutions had successfully launched real-time services. About a third (33 percent) expect to be live with real time within four years. In comparison, 96 percent of respondents to the 2015 survey by Fiserv and Finextra anticipated launching the capability within four years, which clearly didn't happen. Without a clear pathway to real time, new entrants – and new alliances – are forming to respond.

Most executives responded that alternative real-time offerings will directly threaten their payments business. Solutions created by Fintechs and major players, including Visa and MasterCard, are already disrupting the market.

To stay relevant and competitive, many financial institutions are incorporating real-time services into their payments strategies with a strong focus on real-time fraud prevention. 

To stay relevant and competitive, many financial institutions are incorporating real-time services into their payments strategies with a strong focus on real-time fraud prevention. 

2. Information and Money Move Together

Moving money efficiently is important, but it's not enough. Information about transactions must travel just as quickly. That means data from multiple rails must merge, which benefits retail and corporate customers as well as financial institutions.

Customers expect their account information and transactions to be easy to access and seamless to execute, regardless of what goes on behind the scenes or an in-depth understanding of back-end processes.

Financial institutions benefit from having an enterprise-wide single view of revenue sources. Yet less than half of the executives we surveyed have a consolidated view of their revenue streams. As a result, they have limited reporting and decision-making capabilities, and their operations often lack transparency.

Using that consolidated view, financial institutions can leverage advanced technologies to achieve numerous, quantifiable benefits. Automation can improve efficiency and cash flow, and auditing tools help ensure compliance and reduce risk. Better reporting can lead to better revenue management overall as problems such as over- and under-billing come into focus.

The technology to integrate legacy payments systems exceeds many organizations' in-house capabilities. In our survey, 68 percent of executives said they anticipate using third-party vendors to operate a significant share of their payments systems over the next three years. Partnerships will be necessary for most financial institutions to develop, execute and manage payments products that are integrated and information-rich.

3. Experience Matters

As payments technologies have evolved, retail and commercial customer needs have not wavered. Customers need speed, security and value from their transactions. But with the rise of ubiquitous digital capabilities, customer expectations have changed dramatically. Other industries, especially those in e-commerce, have set a high bar, which may cause some dissatisfaction with available payment options.  

The gap between customer expectations and financial institutions' capabilities should continually shrink. In this area, Fintechs wield an advantage. Unburdened by legacy systems or sizable overhead, they can more nimbly build solutions around the customer journey.

To compete, financial institutions are using collaboration and self-service to improve the customer experience.

Collaboration is the new norm for financial institutions – if not by choice, then by necessity. Most financial institutions need external support to develop and manage technology, and some organizations are opening their doors even further. For example, customers are being invited into design discussions, along with developers and technologists. That team approach to product design has the potential to produce industry-changing results.

Financial institutions can also improve the customer experience by putting more power into the hands of consumers and businesses. Through self-service, financial institutions are empowering customers to independently access and complete transactions. Self-service tools boost satisfaction while saving financial institutions time and money.

More than 90 percent of the executives surveyed acknowledged they could improve how they present and share transaction information with customers, and about 87 percent said they plan to improve self-service capabilities over the next three years. Payment initiation, status inquiries and transaction reporting are top targets for self-service.

Forward-Thinking

The payments transformation target will always be moving. The key is to remain flexible and open to new opportunities, yet steadfastly focused on the customer experience. The future of payments isn't limited by today's technology, infrastructure or silos. Only legacy thinking will hold the industry back.