Five Untapped Opportunities for Payments Change

Chris Beard, Solution Sales Director – Europe, Diebold Nixdorf

In recent years, we have seen how digital and cloud-based solutions have significantly impacted the financial services sector. In particular, payments have taken huge innovation leaps as new platforms and architectures continue to shift how we pay - for both business customers and consumers. With the ever-evolving payments ecosystem, deciding where to invest for the future can be complex. Let’s explore five key areas that can drive opportunity and create value right now.

Creating choice

The expansion of payments-based technology has certainly introduced significantly more choices for organisations and their ability to enhance customer journeys, alongside introducing new ones. The counterbalance to this is driving change which will make a material difference to the end-user experience. Creating meaningful choice is often the missing puzzle piece, and as with most strategies for financial institutions, any payments evolution must keep the customer at the forefront of decision making.

How to successfully broaden choices for consumers will vary from one organisation to another. Decisions should be based on data and driven by innovation, catering to different needs and preferences across the customer base. It is also important to recognise consumers may want the flexibility to pay in different ways at different times. For example, despite the rise in digital payments, a fifth of purchases in UK shops are still made in cash, marking a rise for the second consecutive year, highlighting the need for a spectrum of choice.

Empowerment and education

We all know the benefits of financial education and giving people the tools to manage their own finances, but true commitment to this varies significantly by organisation. Research shows that 72% of individuals aged 16 to 24 regularly use mobile payment services, versus only 16% of those aged 55 to 64 and just 8% of those aged 65 and older utilise these services. This emphasises the crucial need for diverse payment options in order to be financially inclusive.

Agile fintechs are certainly helping to plug the financial inclusion gap, and we are seeing the industry embrace other options, such as instant payment systems for those who do not have access to credit or more traditional payment methods.

Across the payments landscape, financial empowerment is also being achieved by delivering dedicated tools and services. For example, Mastercard’s Touch Card helps visually impaired users identify different cards as the traditional embossing of cards is phased out.

Considering collaboration

The days of taking a back seat on payment innovation are gone, as competition strengthens, and payments offerings expand on an extremely active basis. This equally applies outside of the financial services industry as we see the retail and hospitality industries creating capabilities with a faster, more digital and more flexible approach. Financial institutions looking to tread the same path face two choices: build or collaborate.

With time to market a critical consideration as the progress wheel speeds up, many financial institutions are choosing to partner with either other similar organisations, merchants or technology providers to leapfrog the innovation gap.

To be truly successful, collaboration decisions need to be considered alongside longer-term objectives to ensure brand identity is not sacrificed. A payment offering which means the financial institution’s visual presence gets lost in another brand’s process or platform, can not only be confusing for the customer but can also erode brand loyalty. Collaboration which boosts engagement and fortifies the brand connection with the end-consumer, will reap the most value.

A system-wide approach

Questioning traditional best practices can often feel uncomfortable, but rapid innovation across the payments landscape also calls for new methodologies and a fresh outlook to managing processes.

As part of this evolution, we are seeing a shift towards cloud-based, micro-services architectures within financial institutions, enabling a system-wide approach and enhancing co-ordination between different parts of the ecosystem. This not only aids a more seamless end-user experience but also establishes a more integrated platform for future development.

Indeed, innovation itself will inherently be inhibited by a fragmented payments system. This extends further when the payments objectives are not aligned with the organisation’s digital strategy or overall business strategy. We are all familiar with the legacy systems, which often hold progress back for financial institutions, but this also applies at the tip of innovation. Payment innovation silos which are not fully integrated into the overall service offering and customer experience are equally as likely to fall short of delivering maximum value.

With payments representing a significant payment source for most financial institutions, getting the integration correct can prove to be of critical value.

An adaptive regulatory framework

Regulation and compliance have become significant strategic considerations for the entire financial services industry. Keeping processes and service offerings secure and in line with industry standards can be a costly and time-consuming process.

As innovation in the payments space continues to accelerate, an adaptive regulatory framework could add significant value and a competitive edge for organisations. As digital payment offerings expand, we are seeing a reassessment of existing regulatory frameworks in many countries to ensure they remain relevant and fit for purpose.

An updated regulatory environment could not only build versatility into payment infrastructures but also add flexibility into payment execution requirements. With industry resilience a key objective, creating a secure yet adaptable framework for the future could be a game changer.

In summary, the world of payments is a rapidly changing one. There is no doubt that the time for change is now, but any changes must be relevant, meaningful and focused on enhancing customer engagement. The industry must continue building payments resilience and operational stability to create opportunities for untapped value, ultimately maintaining customer trust and loyalty.

Chris Beard, Solution Sales Director – Europe, Diebold Nixdorf

1 British Retail Consortium, 2024

2 UK Finance, 2023