There is clearly no dearth of gloom and doom scenarios and analyses around us. So let’s spend a few minutes to reflect on some concrete opportunities for key stakeholders in the payments and financial services ecosystem. This includes, for example, banks, service processors and new generation fintechs born out of the PSD-II revolution. Below I discuss eight potential opportunities and approaches in the COVID-19 times.
It is worth recalling that the global payments business bounced back to normal within 18 months after the 2008 financial crisis.
Managing loyalty and churn in these times
As more people spend time at home and out of their usual “auto-pilot” busy business lives, we can expect more consumers to deeply reflect on their spending and focus on expenses that should be cut or reduced. This, along with a weaker pipeline, will also push businesses to make more competitive offers, at least in the short term. As a result, businesses will also need to move beyond price cuts/delayed payment terms and propose solutions to drive loyalty and conversion. Deeper insights into their customers’ spending behaviours and priorities, qualified understanding of different types of packaging to identify the “best match” and remote solution testing to uplift user experiences would be key.
Troubled verticals = Target verticals
The merchant segments mostly hit by COVID-19 (e.g., hotel, travel, hospitality, luxury retail) are going to do anything and everything to cut down their expenses. Fintechs, neo-banks and new generation processors born out of the PSD-II storm should target the adversely affected merchant segments and deliver value propositions targeted to drive retention and conversion through deeper insights in spending, end-users’ priorities, targeted marketing, campaign management and more seamless e-commerce.
In these uncertain times, saving a penny is worth more than a pound
Building a global outlook is key
The COVID-19 crisis has shown the value of a wider market spread. We know that the recovery pace across the world will be different across regions and countries. While some countries will limp back to normal faster, others will take a longer time. Strategically mapping the “first wave of normalising markets” and proactively targeting them with the right messages (without of course sounding mean) and smart offerings could be one approach. Another idea would be to “hard challenge” all services with two questions:
(i) What would it take (partners, technology, capabilities etc.) to make services ready beyond local markets?
(ii) What would it take to make it “crisis (situation) ready”?
AI-driven intelligent payments?
We can expect a rise in demand for “AI-driven, intelligent payment advice solutions” which will not just help to move the money but also offer their users real-time caution on liquidity and “on the fly” advice on better deals (through price comparisons) and drive precious savings. In the B2B and SME segments, AI-driven solutions could also propose best available lending rates/ bank loans etc. Old school payments logic of simply moving money from “A” to “B” will be not enough. Collecting deep systematic insights on which types of post-payment / settlement services do consumers and businesses value most and why, which services will bring the most value for businesses and how will be key.
Rise of “micro-commerce”?
As more people take greater control of their financials and outgoing payments, could we expect a stronger market reception for micro-payment solutions where we only pay for the value consumed for example; pay per view, pay per article, pay per stream? Payment prices as electricity prices which you switch “on and off” instead of paying flat for maintaining a buffer capacity that you never utilize. Will the news-media and publishing houses see this as a smart way to attract readers who want to discontinue their “flat subscriptions” and take more control? For payment providers, getting a deeper understanding of media houses’ priorities will be very important.
The cloud option – If not now, then when?
This is certainly a time to take a hard look at the cloud platform and migration options, especially the “non-core” processing services (e.g., fraud, data insights, spend-trend reports, tokenization, e-commerce and front-end services). As the payment volumes continue to fall and mass-scale cure for COVID-19 remains distant, a pragmatic assessment of the cloud option would be wise to save operational costs. As most IT vendors are also pressed on revenues, issuers and processors could even get a “better deal than in normal times” (however crude this may read). For payment and IT service providers, getting a granular understanding and patterns on bankers’ and payment professionals’ views, priorities, concerns etc. on cloud platforms would very useful.
We can expect a more open mindset from financial institutions and retailers to diversify and shift from costly card payments to Account-to-Account (A2A) platforms, which are also fast transforming into real-time payments. This would be especially relevant for the verticals most hit by COVID-19 (for example; hotel, travel, hospitality, luxury retail) where saving every penny will count and collecting their payments in real-time will be crucial. How are these verticals preparing to reduce the costs of payment handling? How do they assess a potential shift from card to A2A platforms and what are their biggest concerns? Understanding these insights ahead of proposing solutions for these verticals would greatly help payment processors and banks to act as helpful partners.
Will the newfound solidarity in the global community also drive various national payment ecosystems (for example; new P2P schemes) to establish cross-border interoperability to help consumers seamlessly do e-commerce from a wider range of choices? How do merchants, acquirers and consumers see the idea to bridge various P2P payment schemes? What are their key concerns and preferences? Such insights would be very helpful in European initiatives as EMPSA.