The payment industry is experiencing a massive upheaval, with new technologies such as blockchain, mobile wallets, contactless chip credit cards, and electronic payment platforms promising increased efficiency. However, not all of fintech is paying off, even as they pay out.
In today’s corporate world, the ultimate objective is to operate in real time and boost efficiency to the point where execution costs are nil. Every procedure, from the most fundamental to the most complex, is subjected to this endeavour. Payment processing is a good example, particularly in areas where payment processing fees are high and margins are thin.
“Margins in high-volume retail and groceries are razor-thin. According to John Pistone, senior director of strategy and business development at Toshiba Global Commerce Solutions, “a major retailer may have 1.5 percent margins and pay 1.5 percent interchange fees.” “If they can convert 10% of their credit card users to wallets, they can save millions of dollars every year and treble their client margins.”
But, even when they pay off as predicted, not all contemporary financial technologies, generally known as fintech, are paying off.
“We’ve had great success with services like Stripe, PayPal, and Square. Sean Pour, co-founder of SellMax, a cash for vehicles business, adds, “They’re all simple to connect and utilise to collect payments.”
The disadvantages, however, are similar to those of earlier financial services, beginning with expensive costs. “Transaction fees are charged by [the services], and they may pile up,” Pour says. “The typical transaction fee is 2.9 percent + 30 cents. Another disadvantage is that they usually keep your money for two days, whereas Stripe might take up to a week to get payment. These services, on the other hand, enable you to take payments rapidly and get up and running.”
Transformations in the financial sector
The payment sector is being transformed by a plethora of present and upcoming fintech, which is making place for disruptors.
“Fintech allows smaller businesses to compete with big banks and financial institutions. According to Jared Weitz, CEO of United Capital Source, an internet lender for small and medium enterprises, the goal of financial technology services has switched from being the biggest to being the fastest and most effective.
Even the greatest financial organisations are undergoing adjustments as a result of this transformation.
According to Vikram Gollakota, vice president of strategic alliances at HighRadius, a cloud-based fintech firm, “at a minimum, [fintech] will push financial institutions to re-engineer their systems and value propositions.” Payment transactions can take several days to execute, clear, and settle, he argues, so conventional financial service businesses may benefit from some modernization. Gollakota adds, “New payment systems strive towards real-time transactions.” “Real-time payments are a reality, with 39 nations having already adopted them.”
Companies that provide financial services are also modifying their service offerings and the sorts of clients they serve. “Fintechs like Revolut, Monzo, Monese, Atom bank, and others are boarding literally millions of people without a credit history and with that level of risk for which banks are not prepared,” says Akim Arhipov, CEO of BASIS ID, a provider of end-user authentication and verification services as well as data privacy compliance services.
Because financial services are evolving, it’s a good time to differentiate your brand. Payment services, in particular, are an important aspect of the developing customer experience trend.
Starbucks is a good example of a company that uses payment services as a product feature. Payments are woven into the coffee shop chain’s well-known customer care practises. According to Pistone, “Starbucks has more mobile payment users (23.4 million) than Apple, and the loyalty programme accounts for 39 percent of U.S. sales.”
Users may order ahead of time, collect loyalty points, apply points, and pay for their orders using the Starbucks mobile app. “Starbucks combines the mobile and in-store experience into what it calls the digital flywheel,” which includes using purchase data to create targeted offers and messaging to customers, according to Pistone. “When offers strike a chord, they become sales. Consumers pay with the least amount of friction, sales are funnelled through loyalty reward programmes, which keep them interested and returning, and the cycle continues.”
Payment systems use a variety of technologies. Fintech is utilised for a variety of purposes, and as a result, the best technology for one purpose may score low for another. Nonetheless, and in general, here’s how typical fintech choices stack up.
On the customer side of transactions, mobile wallets are all about convenience. Mobile wallets are simple to use and sometimes include added features like as budgeting tools.
The customer, however, is not the only one who profits. Mobile wallets are proving to be a cost-effective and simple-to-implement solution for businesses.
According to Anastasia Yaskevich, an enterprise mobility researcher at ScienceSoft, a professional software development company, “businesses benefit from mobile payments as well.” “They eliminate waits and create a quicker customer experience from the purchase intent to approving a transaction” since mobile payments are quick and straightforward.
“Bigger businesses build their own applications that include payments and loyalty programmes,” Yaskevich continues, “while other firms encourage the usage of existing mobile wallets, such as Apple Pay or Google Pay.” A point-of-sale terminal with an NFC or QR scanner is all a store requires. Small firms can also use portable NFC scanners that can be readily attached to a smartphone by sales assistants.”
P2P (peer-to-peer) wallets are quickly gaining traction. “Zelle, a peer-to-peer (P2P) wallet that competes with PayPal’s Venmo for mobile payments, is actually a network of 229 banks lead by Wells Fargo and Bank of America. In 2018, they processed 433 million transactions worth $119 billion in payments,” Pistone notes. “What are the benefits of peer-to-peer? It eliminates the need for cash or credit cards, and it is a huge data collecting tool for customer insights from Zelle and Venmo’s perspective.”
Although cryptocurrency has a lot of promise, few consumers and companies are willing to pay with bitcoin or other cryptocurrencies. The fact that there is no one blockchain flavour further complicates the situation. Some options are more beneficial than others.
There will be a blockchain shakeout at some time, with the best standing remaining. Even so, there are a few more things to think about.
“The biggest advantage we see with blockchain is that it allows individuals to make immediate payments. Most payment processors may hold your funds for a few days, but if you use bitcoin, you will receive your funds immediately, which can help with cash flow. Furthermore, while bitcoin eliminates many needless bank costs, it does not provide the protection of a federally supported currency,” argues Pour.
Financial institutions, on the other hand, recognise the potential rewards. “Blockchain is being used by JPMorgan Chase to improve payment at the time of settlement. “They built the Interbank Information Network, which is a network of 75 banks,” Pistone explains. According to him, the goal is to establish an environment that would allow fintech start-ups to build products for their environment, allowing JPMorgan Chase to collaborate with them rather than fight with them as disruptors.
Combinations of mobile and blockchain are popping up all over the place, most notably on social media networks and messaging applications. Alipay and WeChat Pay, for example, use messaging applications to send money.
Using the WhatsApp messaging software, Pistone argues, “Facebook is now seeking to penetrate this market.” In India, where WhatsApp has 300 million users, Facebook sees an edge.
“Facebook is integrating its messaging capabilities with a ‘stable coin,’ which is a cryptocurrency tied to a fiat currency such as the US dollar. This is viewed as a method of making retail payments, but it may also be used for remittance. “Combining this payment mechanism with the new Instagram ‘shoppable tags,’ according to a Barclays analyst, means Facebook has an extra $19 billion income stream,” Pistone continues.
Pay-at-the-table (pay-at-the-table) Restaurants are already embracing fintech. Customers may pay for their orders using tabletop tablets rather than having their credit cards taken away by a waiter. Consider it as a form of self-service payment.
According to Erik Ploof, vice president of business development for TableSafe, a pay-at-the-table solutions provider for the hospitality industry, “many restaurants around the United States have recently adopted pay-at-the-table technology in an attempt to bring greater operational efficiency, enhanced security, and faster table turns.” “Some restaurant owners have combined the concepts of table-side ordering and payments into a single system that remains at the table or is controlled by the server.”
Ploof adds that many other operators, particularly full-service operators focusing on exceptional service, see value in separating the payment and ordering processes.
Other companies, such as bowling alleys, fitness gyms, and hair salons, are considering using fintech. It advantages sectors that want to eliminate centralised payment queues and provider station delays, such as hairdressers who use Square on mobile phones to process payments.
Accounts payable automation includes everything from paying freelancers to paying supply chain vendors. According to Tom Kieley, CEO of SourceDay, a procure-to-pay and supply chain collaboration software-as-a-service provider, “the added efficiencies that come with enterprise payment tools like accounts payable automation are required to meet today’s growing ‘instant gratification’ demand, especially for manufacturers and distributors.”
“Amazon, Walmart, and now Target are all promoting one-day and same-day shipping, almost guaranteeing that this will become the new standard. Merchants will only be able to stay up and compete if they can discover methods to make every link in their supply chain faster—and automating and digitising payment is a key part of that,” Kieley says.
Personalized fintech aims to handle unique payment concerns and satisfy individual requirements. “What motivates a person to take a metal prepaid card and deposit money on it? Fintechs provide their consumers a sense of significance, success, and revolutionism by providing these cards, adds Arhipov. “Or choose Zestful, which is a debit card for your staff. They are given a budget for an employee benefit programme, which they may use for training or fitness. Accountants will no longer be reimbursed. Isn’t it good for the soul?”
The new layaway programmes are point-of-sale (POS) loans. They’re especially popular among millennials, who despise debt and shun using credit cards.
The benefits of POS loans to consumers begin with the fact that they are interest-free. “Lending businesses, like credit card companies, impose a fee to the store on the transaction,” Pistone continues. “Usually, POS loans are paid in instalments, such as four monthly payments of X dollars. However, you can take the purchased item home today. In the past, you would purchase a refrigerator [on layaway] and only take it home after completing the final payment. Approvals are given right away.”
The bottom line in effective fintech is total value. “It’s not really about technology; it’s about personalising the experience, people’s behaviour, and brand,” Arhipov adds. “Whether personal or corporate, fintechs must develop a strong brand, and it is all about value rather than volume.”
Leaders may learn a lot from payment systems.
- Provide clients with a variety of payment alternatives. Making it simple for clients to pay improves their experience and motivates them to buy again.
- To reduce financial service prices, consider giving extra perks and discounts. Provide clients with a discount or other benefits if they use certain payment methods.
- Negotiate better terms with conventional banks using modern technology. To save money and enhance cash flow, consider renegotiating bank fees, conditions, and services with your traditional banks, such as real-time deposit and payment crediting.
- Customize payment alternatives for your brand and link them to loyalty programmes. Consider creating your own applications that incorporate payment methods and loyalty programmes, similar to what Starbucks has done.
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