The Evolution Of The Payments Landscape: How Digital Transformation Is Impacting Financial Services

The Evolution Of The Payments Landscape: How Digital Transformation Is Impacting Financial Services

Having a digital-first focus has become an essential part of modern-day business models, and this includes the integration of technology with a business’s payment system. What was once a paper-based model has now evolved; with the decline of cash payments, many customers are turning toward contactless payment options and streamlined e-commerce transactions. In fact, research shows that nearly half of the world’s population may choose digital wallets by 2024.

To stay competitive, I advise turning an eye to how automation, payment integration and other digital solutions can optimize your business’s processes and answer customer demands. Here are four ways to embrace this new digital landscape.

1. Streamline processes through new approaches.
Switching from paper checks to digital payments has forced financial service providers to look at new approaches for customer needs. Payment processors have turned to new networks, such as unique identifying tokens that use email or phone number in order for clients to share financial details and make electronic deposits while protecting sensitive information. These include the use of mobile remote deposit capture (mRDC), which allows consumers to process transactions in their own time from anywhere.

Digital-first shifts like these will only continue. As industry trends like card-not-present transactions, online shopping and curbside pickup grow, we must adapt. Introduction of mobile payment terminals, touchless payment options and efficient in-store pickup options can help ensure a more satisfied customer and give you a competitive advantage.

2. Prioritize security.
Digital transformation is changing the way we do business—and cybercriminals are rising to the challenge. The U.S. card industry stands to lose over $165 billion to fraud over the next 10 years. For merchants, one of the most common types of fraud is identity theft, at just over 70%. This is especially prevalent in card-not-present transactions.

Now more than ever, our security measures must adapt as quickly as our technology. Taking proactive measures can help prevent fraud from occurring. Here are some steps to consider putting into action:

• Real-time validation of account ownership and payment options.

• Security code requirements.

• An audit of your site’s security.

• Confirmation of transaction legitimacy through the use of address verification or CVV requirements.

• Transaction limits.

• Partnering with a trusted fintech vendor for all digital applications.

• Implementing data and analytic tools to help identify mistakes and process breakdowns in addition to fraud.

• Proper employee training on how to avoid and identify security issues and potential scams.

• Having a trusted advisor, mentor or network with whom you can discuss  discuss strategy and best practices.

As a general rule, if it’s convenient, be suspicious. All information, especially personal client information, has the potential to be stolen. Proactive steps can help mitigate risk.

3. Prioritize digital payments.
According to MasterCard, reducing the use of checks by 10% could save the industry up to $1.2 billion a year (registration required). Whether your business is B2B or B2C, you can increase efficiency and get paid faster by adopting digital payments. To begin, review your payment processes and any areas where work can be streamlined using automation or other digital technologies. The use of a cloud-based accounting system, rather than manual spreadsheet entry, can provide up-to-date data and quicker payment processing.

From there, look for ways to remove manual payment processes like the use of paper checks. Digital invoicing and online payment options can help improve productivity and increase efficiency.

4. Keep track of emerging trends.
Digital transformation has already infiltrated much of the fintech space. But in an age of continual disruption, what will be the next big trend to drive growth? Here are key trends my organization has been keeping a pulse on:

• Embedded Finance: McKinsey estimates that the use of embedded finance, or the placement of financial products into nonfinancial customer journeys, could double in size over the next three to five years. After all, embedded finance is driven by convenience and user experience. Just look at ride-hailing apps like Uber or Lyft, or customer recognition and promotion apps like Starbucks, where you can pay directly from your phone.

• The Humanization Of Banking: Banking is being humanized through AI, machine learning and data collection to create frictionless customer experiences. According to Business Insider, 80% of banks are highly aware of the opportunities presented by AI and machine learning, which include the ability to imitate a live employee through chatbot features, promote ease of customer access and authentication, and more.

• Payment Innovations: These include self-service kiosks, robotic and droid technology, contactless payment options, digital wallets and immersive digital shopping experiences.

• Prioritization Of Privacy And Security: This includes increasingly strict regulations on how to handle customer information. Cyberattacks continue to be considered one of the biggest threats to banks, and financial institutions must have robust cybersecurity programs in place that include firewalls, detection systems and data encryption. In addition, developing fintech must include risk assessments and data breach prevention mechanisms to protect data privacy in the case of a leak.

The Continually Evolving Payment Landscape
Fintech companies have the fiduciary duty to protect consumers in a constantly evolving marketplace. As digital trends impact current business models, I believe companies in the financial services sector will benefit greatly by relying on emerging trends, cybersecurity best practices and streamlined processes to help give their customers the best possible experience.

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