From Traditional to Digital: Enhancing Payment Systems

Society today demands seamless and safe digital experiences, especially when it comes to their banking needs. What’s more is that with all the options available today, they want incentives for choosing a banking provider. Meeting these demands is becoming increasingly difficult with the friction that comes with traditional payment systems. For banks looking to improve relations with clients, embed rewards programs, and ensure security, redesigning traditional payment systems is a top priority.

Problem with Traditional Payment Systems

For businesses, traditional payment systems can be inefficient and costly. Below are several more problems that traditional payment systems present:

• Check payments- The time it takes for checks to clear is dependent on the draft process, which has multiple steps and can take numerous days
• Tedious reconciliation processes – For businesses with a high level of daily transactions, tracking payments can be cumbersome
• Inconvenient – Many traditional payment systems still require in-person bank visits, which can put undue burdens on employees and customers
• Human interaction – As opposed to the convenience of digital payments, traditional transactions often require humans to set up and complete processes
• Theft risk – Physical disbursements can leave employees vulnerable to physical attacks and put businesses at risk of theft
• Payment options are limited – Digital payment gateways can often support a multitude of payment options, while traditional systems are somewhat limited
• Manual reconciliation – Without access to automated payment reconciliation, businesses needing to exercise manual reconciliation can find it difficult to complete the task efficiently due to the significant documentation involved
• Higher costs – Businesses utilizing traditional payment systems face higher costs as operational costs for traditional systems are normally greater than their digital counterparts
• Diminished transparency – Traditional payments don’t allow for real-time tracking, leaving businesses at a disadvantage when questions about transactions need to be resolved via tedious, manual processes

Redesigning the Payment System to Remove Friction

As a greater number of businesses embrace digital technology, financial institutions need to redesign their payment systems in order to accommodate their customers’ changing demands. Frictionless finance is a way for organizations to ease the payments journey for clients. By removing points in the process that slow things down, they aren’t just making things easier but also building trust.

For any payments strategy today, data has become an essential component. It can help companies to generate revenue and become increasingly efficient. Using accurate data, financial institutions can assist their clients in quickly responding to any potential problems and risks. In relation to payments, financial institutions can use data to gain greater levels of strategic insight that helps to bring value to their clients through products and services. The payment platforms that ultimately find the greatest successes will be those that not only collect data, but also utilize automation, APIs, and different technologies to use it in ways to enhance experiences.

To reduce payment system friction, designing user-friendly interfaces, having minimal steps to complete payments, and guiding with clear instructions will minimize struggles and pave the way for a pleasant payment journey.

Personalizing Payment Systems Through Rewards

Today, consumers have lofty expectations, especially when it comes to rewards and loyalty programs. Customers want incentives like discounts and cashback for using digital payment systems. In a recent study by Deloitte, 80% of respondents were likely to choose a bank that offered rewards for being a good customer. But one large issue financial institutions face is that legacy reward programs lack instantaneous satisfaction and relevancy.

Businesses that are taking rewards programs to the next level use technology to engage consumers in a new way. The use of data enables businesses to elevate the consumer experience, offering personalized and significant offers in real time. In the payments journey, loyalty must be an embedded experience.

Hyper-personalized and micro-experiences drive successful loyalty programs because they allow brands to creatively tailor their marketing to customers through targeted experiences. The customers, in turn, can experience products and services in a unique way. For example, businesses that use micro-experiences and micro-messaging within the payment ecosystem are going to gain not only wallet share, but emotional loyalty to their brand.

Rewards allow businesses to consistently capitalize on customer engagement. They can easily measure success while building strong customer relationships that can last a lifetime.

Securing Your Payment System

Security is an important component to any payment system. To ensure their safety and customer satisfaction, businesses must keep their security and fraud protection up to date, while having secure payment technology policies and procedures in place. The apprehension to utilize digital payments can be successfully mitigated with security measures.

Two examples of enhanced security features include encryption and tokenization. Encryption helps to establish a security protocol whereas data is secured when transferred between customers and businesses. With tokenization, the random generation of numbers replaces sensitive data, so if data was breached, the customer’s information would not be jeopardized. Both these innovations are additional layers of protection to keep customer data secure.

Examples of Innovative Payment Systems

As you can see, creating a seamless user experience, offering rewards, and optimizing security combine to create excellent payment system ecosystems in the BFSI industry. Let’s look at some real-world examples of such digital currency innovations:

1. Enhanced payments experience for person-to-person and small business payments by implementing Zelle as a solution.

To effectively implement the solution in this scenario, it was necessary for the company to key in on areas of engagement including the integration strategy, omnichannel experience, integration and payment processing, digital assurance, and DevOps, support and maintenance, and fraud, risk, and compliance.

Key outcomes:

• Enhanced customer experience
• Faster time to market
• Seamless integration with existing core banking platforms and 3rd party systems

2. Payment and wallet solution

In this payment and wallet solution use case, the company deployed a payment platform that delivered on all the capabilities of a secure mobile wallet while meeting the needs of banks, credit card issuers and retailers, and ensuring end-user acceptance.

Key outcomes:

• Released to market 12 months faster than original projection
• Support for all preferred payment methods; built to accommodate each bank and retailer’s unique needs
• Enabled banks and retailers to incorporate value-added services of their own such as loyalty programs and couponing
• A single, comprehensive, and multi-channel cloud-based payments system integrated easily with existing payment infrastructure

3. Wearables Application

In this wearables use case, the company helped expand a mobile payment platform to support capabilities for new wearable technologies and devices. They also developed a data engineering and analytics platform to help derive new business insights and enhance the customer experience.

Key outcomes:

• Extended mobile payment platform offering to a new segment of wearable device users
• Application of latest technologies enhanced customer image, payment convenience, and payer engagement
• As a result of new data insights, increased merchant transactions

Payment Systems Designed for the Future

Traditional payment systems are becoming less efficient with the continual evolution of the digital payments landscape. As financial institutions embrace their own digital transformations, each will experience rapid changes with payment systems and solutions. Digital payment solutions designed for the future will embed customer engagement tools, loyalty rewards, and security to perform most efficiently and exceed customer expectations.

Digitally native, Apexon helps banks and financial institutions overcome industry disruptions and transform their businesses. Apexon’s technical expertise and software accelerators increase time-to-market and efficiency, enabling clients to launch their digital products and platforms faster, more efficiently. Check out Apexon’s financial services or get in touch with us directly using the form below.

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