By Sunil Sachdev, Managing Director, International Payments Group, Fiserv
There are an incredible number of innovations happening today in the payments space. The pace of change in the payments landscape is rapid and not just in emerging economies; it is just as fast in developed markets. It is this tremendous level of innovation and fast-moving change that will see payments hotly discussed at Sibos this year.
In developing economies, the rise of mobile payments is making it practical to serve previously unbanked or underbanked consumers, with the potential to help bring millions of citizens above the poverty line through financial inclusion initiatives. In countries like India and Cambodia, mobile phones are being used to extend e-payments capabilities to those citizens who have never even had bank accounts. It is also helping those with bank accounts perform transactions more easily (24x7x365) in markets where the number of bank branches and ATMs are nowhere near sufficient to meet the population needs. Meanwhile, in developed markets transformational shifts in payments are being brought on by the growing presence of non-bank providers and new governmental regulations. The UK and Australia are examples of this, with both countries working to achieve expansive real-time payments capabilities and where we see a rise in investment from companies like PayPal and Alipay
That said, there is a common trend here that can be clearly observed across both developing and developed markets: the ubiquity of mobile devices. Put simply, the pervasive ownership of mobile devices is changing the way people interact and engage with one another, as well as businesses – for payments, this changes everything.
Companies that provide services on mobile devices have been quick to realize the potential of supporting a variety of payment transaction types for existing customers. These include alternative payments providers like Yellowpepper in Latin America, as well as telecommunication providers like Vodafone, Tigo in Africa and Latin America, and Globe in the Philippines. The list continues to grow, and global brands like Google, Apple and Facebook are also exploring options on how best to participate in the digital payments ecosystem. With companies big and small getting involved, it is clear that there is widespread recognition of the opportunity to attain a piece of the payments value chain at the point of engagement and drive greater monetization of their customer footprints.
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Financial institutions are at considerable risk of disintermediation as more companies enter the payments market. Indeed, as electronic transactions rise and mobile devices become the most popular medium of engagement, financial institutions potentially face the grim prospect of losing their ability to engage directly with these customers in the future.
Fortunately, for financial institutions there is still time to take control of mobile – but, like non-bank providers, they must invest in placing consumers at the heart of the payment experience. That starts with enabling banking services through channels that best meet the needs of the institution’s customer base – such as ATM, online, mobile and tablet. But it doesn’t end there. Financial institutions have to provide access to tools that make it easy for businesses and consumers to pay and get paid.
With the cost of technology decreasing, financial institutions can now provide access to tools such as mobile point of sale solutions for their small business customers, and mobile bill payment and personal payment solutions for their retail customers. They will need to integrate these solutions into the larger payments ecosystem to provide consumers the ability to conduct any transaction, regardless of channel, at the speed to which consumers have grown accustomed when using other digital services. Financial institutions can serve as a hub for customer’s payments needs across multiple channels, allowing them to have a view of all their transactions in one place, a significant differentiator from non-bank competitors.
Each market, each population and each financial institution has its nuances, but the growing ubiquity of mobile devices being used as the medium of choice for accessing services is prevalent across the world. Financial institutions that invest strategically will ensure that they have the right solutions in place to maintain their preferred position in the payments space.