The Key Factors Driving The Payments Industry Transformation

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The payments industry is no stranger to technological advancement, but the last two years have seen a global shift in how we spend and manage money. The COVID-19 pandemic's restrictions and opportunities have resulted in unexpected market changes, which continue to influence how consumers engage. This behavioral shift, combined with the increasing availability of new digital tools, has altered the stakes for online payment gateway companies.

As the convenience and efficiency of digital commerce, new and disruptive payment methods have emerged, ranging from mobile wallets to contactless purchasing. Companies are also embracing payment infrastructure upgrades, which are the foundation of the majority of digital transformation strategies today.

Digital investment is no longer optional, and those who delay will likely fall behind their competitors. But what is causing this widespread transformation?

Changing Consumer Expectations
The shift to digital payments and the new consumer expectations that accompany it is the first key driver of payments transformation. Everything from viewing bank statements to ...
... transferring money and making payments digitally is now easier than ever — especially on mobile devices.

As a result, organizations are under increasing pressure to enable mobile payments and facilitate digital-first services. Customers who do not will likely become dissatisfied and seek alternative providers. Customers have come to expect these online tools, and it is this expectation that is driving widespread digital investment.

The Path to Digital
The payments industry is not the only one undergoing technological change. Because of the broader digital evolution, payment companies now have access to a diverse set of technical partners and infrastructure service providers for digital transformation. Providing innovative payment services no longer necessitates custom technology stacks and large capital investments. Organizations can collaborate with third parties and use APIs to modernize and innovate quickly and affordably.
It is now easier than ever to launch new digital services. As regulations continue to evolve in tandem with emerging technology, payments organizations will need to ensure that their internal systems are compliant. This will be a critical consideration for those using legacy systems, as they may have a more difficult time adapting to changing requirements.

Embedded FinTech
Other markets are using digitization to embed financial tools within their own platforms, increasing competition. Fortunately, payments companies can use embedded FinTech to grow and enhance their offering by leveraging other services. Businesses can better serve their customers within a single ecosystem by integrating the latest technical tools from FinTech partners.

Financial institutions are quickly recognizing this opportunity to increase revenue and customer loyalty. According to Jack Henry & Associates' latest Technology Capabilities Assessment, 75 % of surveyed bank and credit union CEOs intend to increase FinTech investments in the next two years, with 30 % planning to spend $1 billion to $5 billion. This widespread adoption of embedded FinTech represents a significant digital transformation for the industry.

The Convergence of Fraud Prevention, Security and CX
Online shopping environments are just as vulnerable to fraud as physical ones, if not more so. Because there is no physical card or cash payment, merchants must validate other payment information at the best online payment gateway before approving a purchase or risk authorizing a fraudulent charge. However, adding extra security steps can make the checkout process more difficult. Customers may even abandon their purchases entirely as a result.

With such high stakes at stake, payment providers are increasingly realizing the importance of balancing customer experience with fraud prevention and security. To accomplish this, they are turning to digital tools and security vendors that can perform payment validation on the backend without interfering with the customer journey. On a global scale, this is transforming the online checkout experience.

Speed
The need for speed is the ultimate driver of digital transformation. Customers turn to digital tools above all for the ability to get immediate access and service — if a provider cannot serve its customers in a timely manner, it undermines its entire value offering. This necessitates that each company have enough infrastructure and bandwidth to handle its transaction volume at all times, as well as the flexibility to pivot and meet new consumer demands as they arise.

This could entail redesigning the entire system infrastructure to better support integrations and data management. Rather than developing this functionality internally, the quickest way to meet new market demand is to leverage existing products and integrate them into your platform. As a result, smart businesses are embracing payment infrastructures that can support new integrations, which is driving industry-wide transformation.

A Transformed Future
Customers want digital services, but businesses are realizing that the right technology can help them provide better customer experiences. This is driving digital transformation on both the front and back ends. Payments companies are introducing new features and entirely new management systems. Each company may make its own decisions, but everyone is transforming — or falling behind.