Cards & Payments: Time to “evolve or die”

By Paul Sweetingham

The cards and payments (C&P) industry is entering a fundamental shift in the way consumers interact with their financial institutions and retailers.

The move away from cash to electronic transactions continues to gather pace. The UK Cards Association1 has reported a year-over-year growth in card payments of 6 percent, with a 16 percent increase in contactless transactions. This trend is seen in markets globally as well as in the emergence of new payment technology to facilitate transactions across peer-to-peer (P2P), business-to-consumer (B2C) and business-to-business (B2B) channels.

Long gone are the days of “traditional” banks offering standard products to customers, and with those customers entering shops to purchase goods or services. Now customers have a wider choice of whom to bank with, and how, where and when to make payments. This includes retailers converging with financial services, for example becoming issuers of products in their own right — think point-of-sale purchase plans / buy now, pay later products.

Traditional banks are weighed down by legacy technology, inefficient processes and the inability to turn customer data into actionable insight to retain loyalty and trust. This also reduces customer stickiness and cross-sell/upsell opportunities.

New market entrants, on the other hand, are disrupting the C&P market. Traditional banks are under increasing pressure by these innovative nonbank entities, which bring dynamic ways of interacting with customers, from a customized product proposition to an intimate, digitally enabled, omnichannel servicing experience.

While new players bring new propositions to the table, they have their own challenges, such as high entry and buildout costs, which are a burden until scale is achieved.

These market dynamics, coupled with increased regulation (for example the EU’s Payment Services Directive 2 [PSD2] and the General Data Protection Regulation [GDPR]); new payment methods/schemes [mobile, wearables, blockchain]; and technology advancements (robotics, artificial intelligence and machine learning) mean it has never been as important as now to develop products centered on the customer.  As most businesses do not have in-house capabilities, they must enter into strategic partnerships to reduce costs, improve speed to market and leverage the know-how of proven organizations that deliver tangible benefits to their customers.

Three things to consider as you plan for your C&P business over the short term:

  1. Is your product design centered on your customer? A “me too”-type product will not cut it. Your product must be relevant and competitive. This is critical to retain customer loyalty, cross-sell and attract new customers.
  2. Are you able to deliver the necessary mix of technology, people and process? Customers expect a seamless, end-to-end experience, regardless of contact type. Should you not have the capability to deliver all or part of these services, consider outsourcing to an expert. This will also help transform your business to a digitally enabled business and move from high fixed costs to a variable pay-as-you-consume model.
  3. Are you future-proofing your business? With the emergence of instant payments, cryptocurrency, increased regulation and new trends, you must ensure that your operation is agile, flexible and adaptable. Making the right decisions now will help you achieve your strategic objectives.

Although everyone is on a different part of their C&P journey, now is the time to maximize the opportunities that exist and help define the next evolution of payments.

1 UK Cards Association: Card Expenditure Report, April 2017

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Paul Sweetingham is DXC’s Global Cards & Payments Solutioning Leader delivering tailored solutions to meet client needs. He has more than 20 years of experience in this sector across the issuing and acquiring value chain.

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