The COVID-19 outbreak has delivered many valuable lessons to the banking industry. The most critical was that current digital platforms must be carefully scrutinized against consumer demand. Specifically, if a customer needs to perform a certain function and they are unable to because the platform is unable to fulfill that request, there is a problem. 

“Functionality gaps” were never more clearly seen than during the pandemic as consumers were unable to satisfactorily use the online and mobile banking services. 

Meanwhile, more fintech companies are picking up the slack by offering services with “frictionless payments”. 

What’s Happening In The Payments And Banking Industry

As seen over the past year, the relevant trends that can be observed are the number of digital payment vehicles rising to meet the sudden surge of transaction volumes.

Contactless payments have also reached meteoric heights. More customers are less willing to fumble with the traditional way of dealing with transactions. This is clearly seen in the way they can get car services, order food, or get coffee, all via an app. Most importantly, these payment experiences must be seamless and integrated. 

All of these trends are critical feedback loops that banks must pay very close attention to. When consumers no longer connect the retail bank with the payment transaction, it’s time to take notice. Herein lies the monumental task of working towards staying top of mind for their customers. They can do so by moving in the direction of offering additional services to their customers. 

Luckily, banks are moving in that direction. 

Tim Sloan, VP of Payments Innovation at Mercator Advisory Group said:

“How a financial institution can drive itself to be top of wallet in those environments is critical, and that’s what’s happening now.”

Banks Must Remain Relevant

Like any industry, the banking industry must work tirelessly to stay current with their innovation in order to meet ever-evolving customer expectations. However, knowing just how quickly the payment space seems to change, the banking industry is waking up to the fact that their infrastructure is due for a massive overhaul with their decades-old, clunky processes. 

Part of the overhaul is determining early on what type of infrastructure they will need in order to adapt to these rapid changes, while still meeting their customers’ needs. 

The type of technology they should be exploring are those that can be released into the cloud. It must be “microservice-based, architecture-enabled, and API-first.” This will facilitate adaptation. Additionally, banks must have the capability to first design, then test, and finally deploy their new services for their customers in just a few weeks or months to stay competitive. 

Sloane added:

“If (banks are) not providing services that better guide the consumer as to what cards are on file and how much they’re spending, then (they’re) going to be usurped by a financial institution that has the capability.”

Furthermore, as banks explore their technology options, they must be prepared to choose a payment solution that will be unhampered by the future. Whatever payment platform or solution that a bank adopts today, there is no guarantee that it will remain useful in the near future. The payment landscape is changing at warp-speed.

Banks need to adopt a solution that is able to authenticate the customer, route the transaction, and authorize the payment. All of these steps need to be performed to accommodate the customer’s expectations. The traditional way of authentication using a PIN number is being phased out. The new way of authentication is employing the use of tokenization and biometrics. 

Looking Ahead

Although many businesses, including banks, pivoted their business model to resume operations entirely online, having a digital platform didn’t automatically translate into profitability. 

It is critical that banks stay closely in-tune with the rapidly changing innovations of the payment space and act accordingly.