Preparing for Payments Perfect Storm – by Ernie Buday

Instant and Secure. Ready for customers to use as they prefer. This is the new payments normal and it won’t wait for financial institutions to catch up. While legacy clients remain important, the next generation of clients – and some who are here already – expect payment experiences on their terms. Market forces are converging into a perfect storm fueled by young digitally-savvy customers, mobile-everything expectations and emerging smart technologies that power them.

Here are three steps to help you accelerate your digital transformation agenda.

Know Your Now and Next Customer

Millennials represent the first, true digital generation, with Generation Z right behind them. According to FIS’ PACE 2018 report, these groups represent soon-to-be beneficiaries of the largest wealth transfer in modern history. In addition, they are expected to hold more than half of US spending power by 2020.

Both groups are predisposed to seek out solutions that are individualized and allow a high degree of self-service convenience. This demand can be expected to grow as other industries and digital services provide such experiences and thus increase the desire for the same in banking and payments. Open banking, which allows third-party developers to create applications that connect to standard banking technology, can pair developers who offer agility and an inherent understanding of consumer behaviors with a banking partner to co-create branded payment solutions that are best in class.

A great example of this is Swish, a Swedish fintech company that was created by a group of six banks from the region. Swish is making tremendous strides in removing cash from the payment ecosystem due to the ease and security of its real-time P2P payment app. Free for consumers to use and requiring only a mobile number to transfer money, it’s become common to hear, “Just Swish it to me” when friends look to split a bill.

Activate Your Data, Deliver Digital First

Now and next customers also are reasons to ramp up investments and focus on digital delivery, advanced analytics, dynamic loyalty programs and more contextual communications. Consider, for example, almost 70 percent of Gen Zers use mobile banking apps daily, with 68 percent wanting instant P2P payments.

Creating great experiences is going to be more important than ever as the business of banking becomes more digital, and interactions with these customers migrate from in-person to digital at an even more accelerated pace. Since digital engagements can be very impersonal, it’s important to harvest the rich data you maintain on customers, powering it with great behavioral and predictive analytics to improve experiences. This will position you to stay top of mind with customers, cultivate great loyalty and remove friction from the payment experience.

To better serve customers, you also can use data to educate them on how they spend, when they should save or how to adjust their financial plan when they experience major life events, such as marriage, birth of a child or retirement. More than 50 percent of consumers recently surveyed by a leading consulting firm said they would share personal information to receive personalized offers.

Embrace AI

Artificial (or Augmented) Intelligence (AI) – this can include robotic and intelligent process automation (RPA and IPA) as well – refers to the capability of a machine to imitate intelligent human behavior. It has transformative potential in financial services as it relates to both better business practices for providers and creating more personalized experiences for consumer and commercial customers.

In fact, almost 80 percent of bank executives recently surveyed think AI has the potential to revolutionize customer engagement, citing better data insight, improved productivity and higher cost savings. According to a Forbes report, more than 40 percent of net new investments by U.S. enterprises in 2020 is projected to be in prescriptive and predictive analytics. And it’s forecasted that $31.3B will be spent globally on cognitive systems by 2019.

Services that are AI-enabled use a combination of customer data and integrated knowledge-based systems. With supervised machine learning, systems can reason based on historical interactions, patterns, and new product/process data to better guide and empower both agents and customers. Bank of America’s new virtual assistant, “Erica,” is a chatbot leveraging predictive analytics and cognitive messaging to provide financial guidance to over 45 million customers. At JPMorgan Chase, through AI technology, chatbots are managing more than 1.7 million employee requests that the company receives each year.

The storm clouds are already visible. Are you ready?