By Mickey Goldwasser
Let’s be honest: for most institutions, bill payment, transfers and other types of money movement are just a checkbox on a list – or even worse, multiple checkboxes on a list. After all, there’s not any strategic value in moving money, is there?
Yes and no.
The way most FIs handle money movement for consumers there really isn’t much strategic value. However, that’s because most FIs are stuck in 1999 when it comes to payments.
At most FIs, moving money takes a lot of work on the part of the consumer. They not only have to know where the money is going, but how the money is supposed to get there. And depending on which options they choose, the user experience can be completely different. It’s a mess.
In a more consumer-centric environment, the consumer would need only be concerned with the “who” and the “how much.” The financial institution would figure out how to get the money where it’s going in the most efficient manner possible, all in the background, separate from the user experience.
But is an upgraded payment experience even worth pursuing, given the number of competitors in this space. Classic PayPal and its Venmo service are just two examples. Why not just surrender payments (and an important part of the consumer relationship) to these contenders?
It’s been proven time and time again that when your institution controls the user experience and owns the consumer data, consumer loyalty rises. And moving money from one place to another is central to any consumer’s use of a financial institution.
What’s called for is a comprehensive, engaging, assistive payment experience that, thanks to your deep, meaningful relationship with the consumer, no other service or fintech startup can offer? This lets you take back control of the consumer payments experience and become a leader in the field rather than a distant follower?
If a financial institution gives up on payments, it’s really giving up on the consumer, and its relevance will continue to erode. In short, if consumers are no longer using your financial institution for payments, they’re no longer your customers/members. The challenge is to create an effective, engaging, assistive, advisory, actionable user experience – in other words, a smart payments experience.
Creating a smart payments experience requires two key components. The first is data. The second is true artificial intelligence (AI) and machine learning technology. AI/machine learning makes sense of all this data and leverages it to provide each member with a more personalized payment experience, one that goes beyond simply executing transactions.
Fortunately, no other organization has more financial data about your consumers than your financial institution does. Data is the fuel that feeds the AI engine and enables it to continue growing stronger and more powerful.
...Four More Components
What does a modern payments platform look like? A truly world-class system consists of the following four components:
* A smart user experience.The system must be assistive and engaging, simplifying the user’s life. It must be able to develop insights to offer suggestions and take action based on the data you’ve accumulated for a particular consumer. For example, if a new bill comes in on Monday, the system can see that there’s not enough money in the account to pay that bill now. However, it also knows that the user’s direct-deposit paycheck goes in on Thursday. The system can then alert the user and can proactively ask the user if it should pay that bill on payday. The user can then schedule that payment by simply answering yes.
* Smart routing.Whether the consumer is paying a credit card bill or sending $20 to little Johnny for his birthday, they don’t care how the money gets there, as long as it does actually get there on time. And quite frankly, even the financial institution shouldn’t have to worry about how the payment is made, i.e., on what payment rail it’s sent. A smart payments platform can choose the best payment rail for that particular payment at that particular moment in time. It can even split the credit and debit portions of a transaction into different rails if appropriate.
* Totally agnostic.A smart payments platform doesn’t favor any one technology or any one payment rail. In order to make the smartest routing decisions, the system must remain neutral.
* API-first architecture.There’s one certainty in technology: It’s going to change. The only way to future-proof your payments platform is to ensure that it’s built on an open, API-centric architecture using modern tools. This ensures that as technology changes and new smart devices — watches, cars, refrigerators or whatever — become available, you can easily connect your payments platform and keep your institution relevant.
‘Do It For Me’ Era
In this “do it for me era,” financial institutions are no longer just competing with other FIs for market share; they’re competing with every other vendor and merchant for mind share. The organization that creates the simplest, most assistive consumer relationship will own that relationship.
It’s simple. Financial institutions that ignore the current payments revolution are in peril. Technology like I’ve described here empowers a financial institution to become each consumer’s “financial Fitbit.” If your institution isn’t willing to take on this role, there are myriad other FIs and non-FIs that would be more than happy to relieve you of this burden – and also relieve you of loyal consumers.
Mickey Goldwasser is VP of marketing at Payrailz.