FX International Payments
By Joe Braue
Retailer thinking on this topic has long held that payment infrastructure was a headache, a necessary cost of doing business, notes Forbes.1 This position, however, is now giving way to a new understanding that payment technology can be strategic in the creation of a better digital experience that spurs customer conversion and retention.2
A key driver for payment-technology investment, experts suggest, is the makeup of the future customer base. Merchants are seeing that more of their customers – especially the younger, more digitally savvy ones – are becoming used to frictionless, person-to-person (P2P) payment solutions, such as Zelle and Venmo. According to 451 Research's Voice of the Connected User Landscape survey, 16 percent of respondents aged 18 to 24 are using P2P apps at least weekly, with 23 percent of respondents aged 25 to 34 doing the same.1
The so-called Generation Z (those born after 1995) are intrigued by digital tools that manage payments, bills, expenses, and personal finance, according to a 2017 survey by Accenture.4 The survey found that 69 percent of GenZers are using mobile banking apps, compared with just 17 percent of baby boomers. Estimates are that 40 percent of all U.S. consumers will belong to Generation Z by 2020.5
Merchants seeking to make inroads with these customers, many believe, realize that digital payment technologies are becoming a key differentiator in getting, and keeping, them. The Accenture survey found that 70 percent of Millennials and GenZers are interested in digital-payments advisory and expense-management services that offer better understanding and control of their personal spending.6 Accenture believes this is a clear indication that payments are not just an isolated transaction around a specific purchase, but a next-level experience, where payment technologies can influence other parts of the customer’s life.7
It’s no surprise, then, that merchants, banks, and billing companies will continue to invest heavily in payments infrastructure to improve customer experience. Researcher Ovum reports that 51 percent of this group will be increasing their budgets for payments-related IT investments in 2018, with a fifth of these companies increasing spending more than 5 percent over 2017 levels.8 Ovum's 2018 Global Payments Insight Survey indicates that IT-driven investment in payments technology will be strongest in the Americas, with 56 percent of enterprises increasing IT investment in the area.9
These investments look to be focused on a variety of customer-related activities. More than 90 percent of merchants and billing companies and 82 percent of banks reported they are making investments in future payments technologies to add greater personalization to customer experience, says the Ovum report. For many institutions, this will require investments to remove friction from the customer experience, particularly the authentication process and integration with third-party payment services.10
Businesses must grapple with the myriad new ways customers can pay, as they continue to invest in payments technology, experts note. Examples are contactless technologies that use RFID (radio frequency identification) and NFC (near-field communication) to read payment information; wearables, such as Fitbits and smart watches; connected homes; and the continued spread of the Internet of Things (connection via the Internet of computing devices embedded in everyday objects). All of these will greatly increase non-cash transaction volumes, according to consultant Cap Gemini.11
What’s more, Cap Gemini notes, in the not-too-distant future, as merchants begin providing augmented reality (AR) shopping experiences, they’ll need to find an AR-integrated payment gateway that syncs with this new customer experience.
Most agree that bankers view data security as among the top challenges today – especially considering that the bad guys are taking identity fraud to new levels, according to Accenture. Not only are criminals using stolen identification to open credit lines, they are now creating new, digital-only identities by knitting together real and fictitious IDs to create “synthetic identities.”12
Ovum’s survey shows that 61 percent of merchants believe they are at greater risk for a data-security breach than they were a year ago, with 22 percent stating they had experienced theft of payment data in the same period.13 As a result, suggests the Ovum survey, 44 percent of retail banks cited the need to fund security projects as one of the leading areas of IT-budget growth in 2018.
Thus, Ovum recommends that, when making investments in future payments infrastructure, enterprises, banks, and billing companies choose more sophisticated authentication and monitoring technology to be best able to both reduce the risk of fraud, and provide “friction-free” customer experience.14
Driven by the competitive need to acquire and keep new customers, a large number of merchants, billing companies, and retail banks are making significant investments in payments infrastructure. New demands from digitally savvy customers, especially the Generation Z cohort, will be even more demanding, as they look for a friction-free, compelling digital payment experience.
For more than 20 years Joe Braue has been a writer, editor, and media executive involved in the creation of award-winning technology content, including articles, research, events, and videos.
1. “A Key Element of Real-Time-Payment Adoption in the U.S.: Education,” Payments Journal; http://paymentsjournal.com/a-key-element-of-real-time-payment-adoption-in-the-u-s-education/
3. ”Real-time Corporate Payments Not Ready for Prime Time,” American Banker; https://www.americanbanker.com/news/real-time-corporate-payments-not-ready-for-prime-time
5. Executive Guide to Immediate/Real-time Payments, Accenture/ACI Worldwide; https://www.aciworldwide.com/-/media/files/collateral/trends/executive-guide-to-immediate-payments-tl.pdf
6. 2018 Global Payments Insight Survey: Merchants. Ovum; https://www.aciworldwide.com/-/media/files/collateral/trends/2018-global-payments-insight-survey-merchants.pdf
9. “Will the Real-Time Payment Use Cases Please Stand Up?” Hyperwallet; https://www.hyperwallet.com/resources/fintech-payout-innovation/will-the-real-time-payment-use-cases-please-stand-up/
10. “Beyond Instant P2P – Real-time Payments for Retailers, SMEs and Businesses” FIS Payments Leader; https://www.paymentsleader.com/real-time-payments-growth-for-retailers-smes-business/