Digital transformation is moving us, at quite a dramatic pace, into an ever more connected world. It has created a generation of consumers who expect ‘always on’ service in all aspects of their lives. Traditional payments systems, developed during the physical rather than our current technological era, are no longer meeting the needs of consumers who expect swift, simple, and seamless payment options.
This shift to digital is about more than just convenience, though. It is creating opportunities to develop an open, more inclusive payment ecosystem, with modern payment methods giving consumers access to financial services that they may never have had in the past, and the ability to pay in real-time. In addition, it is giving businesses the opportunity to reach more customers, sell more products or services, ensure greater customer satisfaction, and get paid more quickly and securely. And, while this dynamic payments environment is disruptive and challenging for financial institutions, these traditional organisations are coming around to the fact it is providing them with improved ways to serve their customers while increasing revenue and efficiency.
Over the past decade, there has been a significant rise in the number of countries taking advantage of these new payment opportunities to boost their economies, increase financial inclusion and create more secure and accessible payment systems. A Mastercard report on Payment Modernisation showed that by the end of 2021, there were 66 markets globally with live access to real-time payments, the equivalent of more than 90 percent of global GDP.
What is driving this rapid modernisation?
After living through decades of complicated banking regulations and antiquated legacy systems that required us to visit physical branches to perform simple tasks, or wait days to receive a payment, financial institutions are under pressure to re-evaluate their current payments systems in order to remain competitive and meet customers’ demands.
There are three standout factors driving the payments revolution:
The concept of customer-first. Customer experience is at the heart of the payments transformation. Value-added services to supplement transactions are becoming crucial for new business models to become a reality.
Technology disruption. The transformation is a response to technological advancements, digitisation of financial services, and increasing smartphone penetration and connectivity, all of which means more people are connecting to the internet and transacting through smartphones. In addition, companies are increasingly using APIs to create new business opportunities and improve services and product offerings.
Regulations. There is a trend towards open architecture in banking, which is built on the premise that customers own the data they generate and have the right to direct banks to share their data with others they trust. Regulators around the world are working to accelerate this transformation to provide modernised, secure payment methods that are customisable to the consumer.
How are modern payment methods benefiting us?
New payment methods are growing the total volume of payments worldwide, targeting new use cases and supporting new digital experiences that offer more accessible and convenient ways to pay.
Being affordable and done in real-time, payment modernisation improves efficiency and increases access to payments, which boosts financial inclusivity and helps to grow the economy, which, in turn, supports payments - it’s a virtuous cycle.
The shift from cash to real-time payments directly benefits consumers, merchants, corporates, and governments by offering enhanced visibility into payments, enabling better cash management, and by helping businesses better manage day-to-day operations.
The modernisation of payments is likely to completely change the way we transact and do business. On a grander scale, it is poised to boost economies, create secure financial systems, formalise cash economies and bring the unbanked into the financial system.