The future of payments: putting customers first
The payments landscape is undergoing enormous change with new entrants, changing regulations and incredible innovation, writes Evelien Witlox, global head of Product Management, Payments & Cards at ING Wholesale Banking.
Consumers and businesses’ expectations of the payment industry are growing steadily. Our daily interactions with smartphones and tablets have encouraged us to expect technology that is seamless, always available, instantaneous and intuitive: nowadays most people presume they will be able to use a new app or device without ever looking at a user manual.
To a large extent, the payments industry is keeping pace with these sky-high expectations: the pace of innovation has dramatically accelerated. New technology is transforming how we make payments, improving convenience, visibility and security. It is not only payments tools and processes that are evolving, but the nature of the payments industry itself.
New fintech entrants are bringing fresh dynamism to payments, both with their own offerings and by collaborating with existing players. At the same time, established tech giants are increasingly entering the payments market, having recognised the attractions of integrating payment capabilities into their ecosystems. For consumers and businesses, this disruption means there has never been more choice on offer.
Despite this, there remains a central role for banks – provided they are willing to commit to this new payments world. To remain relevant to customers, banks must put customers’ needs at the centre of their business – as ING does. ING’s mission is to enable customers to stay a step ahead in life and in business. Making payments faster, safer and more straightforward is a key concern for customers. Consequently, driving change in the payments industry is a priority for the bank.
ING is investing €800 million in digital transformation across the bank as part of its Think Forward strategy: payments transformation is an important element of this drive to improve the customer experience. ING’s guiding philosophy in these efforts to transform payments is that payments should reflect how clients do business: people expect to be able to make payments easily and in multiple ways. To this end, ING is also thinking beyond banking – envisaging how payments can be fully integrated into the buying experience rather than being a separate stage on the journey.
The role of regulatory change
Regulators around the world are eager to stimulate innovation in the payments market. In Europe, the Payment Services Directive 2 (PSD2), due to be introduced in late 2018, is specifically designed to open up the payments infrastructure, encourage innovation and add value for customers. It will enable customers to give third parties access to payment details from their bank and to carry out transactions with the customer’s payment account. For banks, PSD2 represents both a challenge and a motivator: it is encouraging them to work with fintechs and connect to each other.
One of the defining elements of PSD2 is the introduction of mandatory APIs, which will facilitate more streamlined payments within business e-commerce sites and between banks. ING is currently implementing an API-based architecture in order to learn how to deliver better, faster services internally before offering to clients. However, the bank has already embraced the opportunities PSD2 offers with a series of innovations, developed both internally and with industry partners.
For example, in 2014 ING created Payconiq, an all-in-one app enabling users to make direct payments online, in-store and peer-to-peer. Payconiq launched in Belgium in 2015 and expanded to the Netherlands and Luxembourg this year. In order to achieve critical mass and increase the value of Payconiq for users, ING has opened it up to other banks in the countries where it operates.
In the UK, ING re-entered the retail banking market earlier this year with a free mobile app to help people keep track of their finances. The app, called Yolt, enables users to manage their money matters with different banks for different financial services in one place. As importantly, by understanding more about customers’ behaviour, ING is able to add value for them and create opportunities for partners. For example, Yolt gives its users the ability to monitor spending on utility bills and connects them with cheaper suppliers in order to save money on energy.
Making payments invisible
When consumers or companies make a purchase online, payments currently take place at the end of the shopping experience. On many sites, the payments process feels tagged on, with a different look and feel. In some instances, when companies want to make payments associated with a purchase, they must login to their bank portal and input payment details. This process is clearly inefficient; it reflects a model of banking that will come to an end in the foreseeable future.
As more B2B spending moves online, the payment process must become integrated into the customer’s purchasing activity to improve speed and convenience. Instead of customers coming to banks, banks must come to customers: their payment capabilities must become part of online marketplaces. Indeed, the impending widespread adoption of the internet of things will require machines to be able to make purchases themselves, making such integration essential. Ultimately, the goal should be to make payments invisible: users will select their payment method once, and just buy and go.
Artificial intelligence (AI) and data analytics will be critical to facilitate the seamless flow of information that will underpin the integration of purchasing and payments. They also have an important role to play in other elements of the payment process. For example, mandatory know-your-customer checks prior to onboarding a customer currently take a couple of days. AI and data analytics can use multiple data sources to determine eligibility and decrease significantly the time and effort necessary to onboard customers.
Even though payments might become invisible, reliability and trustworthiness will remain key strengths of bank-customer relationships. Banks’ solutions must reflect these characteristics and ING therefore continues to invest in cyber security.
Innovation is key
While technology is critical to the future of payments, this does not mean that customers expect banks to develop technology themselves – in the era of the app, there is widespread acceptance that different providers play different roles. Banks must also recognise that the pace of innovation means they cannot develop everything themselves.
ING understands this new landscape and has shaped its strategy accordingly. The bank has partnerships with almost 100 fintechs. For example, it uses Kabbage’s technology and data platform to power automated lending to small and medium enterprises. ING is able to easily assess creditworthiness based on payment flows, accelerating the lending process, while customers have the peace of mind that comes with working with a major bank.
The payments landscape seems certain to undergo further dramatic change in the coming years; possibly in ways that no-one can yet comprehend. As the market continues to evolve, ING’s commitment to innovation, cooperation and its open-minded approach will ensure it continues to lead. By working with fintechs, banks and others such as Visa and MasterCard, ING will ensure that customers have access to the digital, integrated payment offerings they need to do achieve their strategic business objectives.