Financial services and payment business, as we know, go hand in hand but they have quite an opposite relationship with one another. As the payment business continues to advance, the cliché financial services are suffering great loss and negligence from the very customers which once turned them into gigantic financial figures. Now the question here is, what exactly is casting traditional financial services out from the scenario and why exactly is it happening. To know more, let’s dive right into the heart of the matter:
Evolution of Payments:
Payment business has taken one several new ventures in the past decade, out of which 2 are most prominent:
· Online banking and mobile payments:
Almost half the consumers in the USA are either the consistent users of mobile payments and online banking apps or have used any of these once in their lifetime. Out of the consistent mobile banking users, 68% of consumers have expressed their desire of payment business showing more advancements in technology in the future. This figure alone speaks volumes about mobile payment and internet banking as Apple Pay, Google Pay and Alipay are the future of financial services.
· Blockchain and Cryptocurrency:
Blockchain and cryptocurrency may not be among the payment methods being used on a massive scale but they hold a potential of reforming the financial services as we know. Those who have used blockchain for making transactions claim it to be highly, safe and satisfactory decentralized method of making payments. Blockchain and cryptocurrency have also stripped of corruption and international currency limitations as everything is done in a decentralized manner. You can easily speculate this evolution to stay here for a long time to come.
The launch of online banking, mobile payments, and cryptocurrency has impacted financial services in a number of ways including:
· Bank disintermediation:
Banks and credit card companies are rapidly getting disintermediated from financial services as the payment business continues to shift toward cashless and decentralized methods. The creation of digital payment platforms like Alipay and Apple Pay has straightway thrown banking and credit card companies out of business. Although the role of middlemen still prevails in the form of Facebook and other platforms, banks and credit card companies sure are losing their role as transaction middlemen.
· Payment invisibility:
Another effect which the advancements in payment business are making is on tangible cash. From barter system and cash notes to smartphones and plastic credit cards, businesses have aimed to make financial services free of any kind of friction. Consequently, we are now witnessing a marketplace which does not need to carry any tangible form of cash as digital payment platforms encompass all the perks (and more) which a consumer can ever ask for.
· Loss of customer-dealer rapport:
The disintermediation of banks and payment invisibility have straightaway cast out customer-dealer relationships. Not only the bank customers are unsubscribing from bank’s loyalty programs but also the banks have no real basis to be able to connect with customers on a mutually interesting ground. This is seriously affecting financial services.
How can financial services get back into the game?
The last-minute hope for banking and credit companies to stay in business is to get in touch with digital platform owners who are determined for cashless transactions. These companies can ask for the submersion of specific services such as playing a bank-specific sound at the end of every transaction to reintroduce the banking company. Credit card companies can also offer consumers with the facility of setting up payment schedules in order to avoid approving recurring subscription bills over and over again.
· Use of AI and voice-driven solutions:
Undoubtedly, AI technology and voice-driven solutions have affected customer behaviors. Alexa, Facebook Telephony, Facial recognition features in Smartphones and many other similar innovations are examples of how AI and voice-driven solutions are intervening their roots with our daily loops of routine. Banks and Credit card companies can safely introduce voice recognition and AI solutions which further eliminate friction from making transactions if these companies want to stay in business. Not to mention that customers are also much more likely to rely on bots instead of humans when it comes to making transactions.
· ATM updates:
As the trend of cashless, online banking continues to grow all across America, the ATMs are also demanding to be looked after or dealt with. One way in which ATMs can still sustain their presence is if the banking and credit card companies offer cash withdrawals from payment as well. For instance, Wells Fargo and Bank of America have taken a step forward and introduced the facility of cash withdrawal from Apple Pay and Google Pay. This will strip off the need to have your credit card with you if you want to withdraw cash.
· Integration of banks with payment apps:
Lastly, drowning banks and credit card companies can catch on a straw which is the integration of banking services directly into payment apps. Credit card companies and banks can offer the integration of paying by using the banking service right from a payment app. Recently, the UK bank Monzo has announced its integration it If not This Then That (ITTT) as a result of which customers can connect their bank account to various apps and services for payment services. The launch of new Siri Shortcuts in iOS devices will also make it easier for other banks and credit card companies to offer similar intermediations.
All in all, the payment business plays a key role in increasing conversion rate for businesses. Financial services may need to come up with better strategies to contain in the explosive advancements in payment methods.