Payments have fundamentally changed. Only a few years ago, sending and receiving money required a great deal of effort, coupled with lengthy processing and clearing times. People expected delays, and wait times were the norm. Today, consumer expectations are quite the opposite, and incumbents are having to heavily adapt.

With the first article in this series focussing on the changing payments landscape, we now turn our focus to the future, examining what banks are doing to adapt to changing consumer demands.  

User experience at the forefront

With banks looking to close an increasing number of branches to make room for more digital offerings, bankers are now looking to place heavy focus on user experience and convenience. This doesn’t only apply to easy onboarding (a sign up from your sofa) or 24/7 customer service, but also the ease of making and receiving payments. Challenger banks have paved the way to provide innovative payment solutions, making it possible to pay friends by Bluetooth or send money to your phone contacts in a less than 5 taps. Legacy banks have followed Barclays’ lead in providing mobile cheque-imaging, recognising the (perhaps surprisingly) long tail of cheque processing. Meanwhile, the PayTech pioneers continue to innovate the ways we make in-store payments and payments online. In 2020 it’s the norm to pay for your shopping with your smart watch or phone in less than a second.

What these solutions have in common is clear – the demonstrated desire to meet the 21st century consumer’s need for ease and speed when making simple payments to friends and family. Ground-breaking digital payment methods are rarely considered a ‘gimmick’ for long, quickly becoming the expectation of retail banking consumers. Incumbent banks therefore need to take note of rising payment trends and act quickly to ensure not only that their banking back-end is slick and agile, but also that the front-end user experience is intuitive, hassle-free and fast.

Ground-breaking digital payment methods are rarely considered a ‘gimmick’ for long, quickly becoming the expectation of retail banking consumers.

Eliminating 21st Century fraudsters

According to a report by UK Finance, the value of remote banking fraud (internet, mobile and telephone) grew by 53% between 2013 and 2018. This implies that although the improving convenience of increasingly digital payments is great for the consumer and the provider, the 21st century fraudster is also capitalising on digital transformation in banking. As an increasing number of payments take place in real time, banks must become smarter and more technically sophisticated in their methodology of identifying and preventing fraudulent payments.

Some banks have already taken clear measures to provide advanced transaction scanning and monitoring technology, such as HSBC and ClearBank leveraging the adaptive behavioural analytics and machine learning capabilities provided by Featurespace. The banking industry is making strides in collectively preventing payment fraud, reportedly preventing £4.5m of fraud per day in the first half of 2019. The banks themselves need to look at crime-combatting capabilities, or build similar in-house technology to maintain customer trust in a rapidly evolving landscape.

Alongside self-imposed additional fraud measures, banks also face a number of new regulatory requirements when it comes to payments, for example Confirmation of Payee and Strong Customer Authentication, is expected to be fully enforced by the end of 2020. These measures are clearly a reaction to the rising risk and amount of fraud taking place as digital and real-time payments continue to dominate the payments landscape. However, the execution of these measures will inevitably slow the user experience down. Banks should proactively work to innovate, eliminating potential added friction so that consumers can continue to make and receive payments in the seamless manner that’s become the norm.

Keeping competitive

Understanding and shaping payment service offerings to meet and keep up with 21st century PayTech trends is not only a key to success for both incumbent and challenger financial service providers, but also an increasingly critical factor as we look to the future of digital payments. Providing excellent customer experience, investing in sustainable technology and proactively ensuring the security of customer banking are considerations that legacy banks and PSPs can no longer avoid.

 To meet these challenges and remain competitive in an increasingly demanding landscape, banks and PSPs must actively invest in revolutionising their technology and general offering. In doing so, they’ll not only provide themselves with improved technical and financial crime capabilities, but they’ll also have the opportunity to vastly improve their operational efficiency and truly ‘wow’ customers with a simple and seamless banking experience.