The vital role of customer payment choice in the financial services industry
It’s no secret that the fintech industry is one of the most active and rapidly evolving spaces in the tech world. The payments sector is a uniquely strong performer in this already highly lucrative industry, with Deloitte finding that it occupies the largest sector of the European fintech market.
Customers are being offered more payment methods than ever before, with this wealth of options set only to increase as the payments market continues on a track of steady growth. In light of this, how can businesses and consumers make the most of these innovations to benefit from improved payment experiences within the financial services industry?
Enhancing payment security
Fundamentally, the proliferation of new payment methods that we’re seeing is driven by customer demand and expectations. These are underpinned by a variety of broader social, economic, and even political, factors. Among these, payment innovation responds to a consumer need for enhanced security. This has emerged as a priority following the prevalence of online fraud as criminals took advantage of the increase in online shopping during the pandemic. In 2020 over £69 million was stolen from consumers via online shopping scams in which customers entered their card details into fake websites unknowingly. Naturally, as the extent of this problem has become widely known, customers and businesses are keen to seek and provide assurance of security respectively. A key way to do this is to ensure that customers have access to payment methods which are familiar and trusted.
By offering digital wallet payments, businesses can not only ensure that customers feel safe in the knowledge that their payment will be securely processed via Apple Pay or Google Pay (among others) but can also make use of the advanced security features of this method.
With 39% of UK businesses identifying cyber attacks in 2022 so far, information security is front-of-mind for businesses and customers alike. Unlike a traditional card payment which requires customers to enter their card details, digital wallet payments allow customers to check out simply by confirming their identity using the fingerprint or facial scanner integrated with their smartphone. This sends the payment to the merchant without sharing sensitive information, as card details are encrypted – making it not only a more secure option, but also a more convenient one.
Convenience-driven innovation
All of the new payment methods and paytech innovations we’re seeing emerge have a shared fundamental goal: to offer greater convenience to customers. Online shopping has become more and more popular thanks to the convenience, speed, and flexibility it offers both in the retail experience and the payment options available. Consumers have become accustomed to this, and it has shaped expectations for all customer experiences. Consequently, it has become more important for financial services providers to consider how they increase the ease and accessibility that they offer their customers.
Financial services providers need to ensure that they respond to the payment preferences exemplified by consumers’ retail spending habits. With 10 million contactless mobile payments made in the UK in 2022, it’s clear that financial services providers need to focus their attention on providing the digital solutions that customers prefer. This means not leaving the Alternative Payment Methods to the retail sector. The financial services sector can unlock significant benefits by making use of non-traditional payment options, from digital wallet payments to digital payment links sent via text or social media.
Though many customers, especially Generation Z and Millennials, tend to opt for digital options, for some users and some situations in-person is the top choice. Luckily, it doesn’t have to be one at the expense of the other – financial services providers can make use of a digital ecosystem which pulls all of these options together. This allows organisations in the financial industry to ensure that across all of their channels, whether in-person or one of their range of APMs, their service is consistently convenient, accessible, and flexible. In doing so, these organisations can reap a host of benefits, such as customer retention and increased service usage.
Business benefits
Innovation in the paytech space is driven by the value it can provide to customers, but this is inextricable from the value it provides to businesses themselves. Frustrating payment processes lead to customers abandoning their online cart, or dropping out of a financial services onboarding process. With this in mind, it is crucial that financial services organisations see payment innovation not only as a ‘nice-to-have’ for their customers, but one of the most important tools available to them to ensure business success. By providing a wealth of payment options, organisations gain a significant competitive advantage over organisations that don’t make the effort to tap into the huge group of digital users while also offering highest quality in-person services to those who prefer them.
