Payments - an accelerator for digital transformation

Payments organizations — whether as part of a larger financial institution or via payments companies within the financial services ecosystem — can be the heroes needed to spur digital transformation.

We live in a digital era where tech rules and customers have grown to expect best-in-breed, tech-driven solutions to all their everyday problems. Taking it further, customers also have a much lower tolerance for mistakes, delays, and any impediment to the perfect experience. This is especially true for payments, where customers have grown increasingly acclimated to one-click payments on mobile devices.

Payments companies are well-suited for this age of digital disruption and transformation. Adding to that, owing to the pandemic — the digitization of the payments industry has been accelerated by two to three years. Customers are touching physical cards less and less and relying increasingly on services like digital wallets and peer-to-peer (P2P) payments to transact. Payments companies that are able to deliver on these more sophisticated preferences are well-positioned to build long-term brand loyalty with customers. Better yet, the delivery of these personalized services also enables the collection of rich customer data that can be used to further personalize experiences and optimize various touchpoints.

Payments Can Pack a Punch

While payments within financial institutions (FIs) are on the front lines of financial services, payments companies are also in the trenches as PayTechs flood the market with digital solutions geared towards wooing existing customers away. This reality makes a strong case for digital transformation. It’s not the only thing driving change.

The payments space is chock-full of data. Payments organizations possess large volumes of historical transaction data along with all the data that is being collected in real-time with every new transaction. This data is robust enough to build out comprehensive customer profiles and the frequency with which new data is collected makes it easy to validate (or invalidate) recent campaigns.

Digital transformation in payments also triggers a trickle-down effect. Whether it’s other lines of business within a financial institution or other offers, products, or services within a payments company, digital transformation or payments will improve the customer experience through and through.

Focusing on Digital Transformation Efforts

Digital transformation is always perceived as an extensive undertaking that will involve a wholesale overhaul of all systems that may take years to complete. While this is largely true, emerging technologies make it much easier to embark on the digital transformation journey in ways that can be hugely impactful and less intimidating. Tapping AI and machine learning tools can streamline the path forward for the digital transformation of payments systems.

Payments organizations can start by organizing data and breaking down silos to better assemble customer data. This bypasses pricey upgrades to legacy systems in favor of more flexible data assembly solutions that can begin collecting and integrating contextual data from customers’ mobile devices to build out customer profiles.

As this data is collected and customers become better-defined, hyper-personalized trigger campaigns can be launched based on transaction and contextual data. Data-defined trigger campaigns ensure that the message, intended target, and timing are aligned for each campaign. These types of campaigns can be repeated over and over, with data-driven tweaks and optimizations occurring after each iteration. Context-based marketing can also spur data sharing between payments companies and their partners, both of which can leverage each others’ data to fill gaps and personalize offerings.

Digital Transformation Wildfire

For FIs in particular, a successful digital transformation initiative in payments — no matter how small — spells good news for the rest of the organization. Measuring the impact and showcasing it, is often enough to be used as a catalyst for promoting digital transformation across an organization. The payments industry is not the only group under attack from Big Tech. Between alternative lenders, neobanks, and other FinTechs, FIs face pressure from all sides to compete with digital giants. Using payments digital transformation as a case study can spark change across an entire institution.

The trickle-down effect can spread to other lines of business within an FI and the impacts of digital transformation are not negated to the groups from which they originate. In other words, a digitally transformed payments group can be leveraged by other lines of business to upsell and cross-sell products and services. Customer data can be aggregated, shared, and mapped across different groups, products, and services. The ultimate payoff is an overall better understanding of customers — and an improved ability to serve them.

Conclusion

Digital transformation is critical, but that doesn’t mean payments organizations can’t take smaller steps towards impactful initiatives. Contextually-based campaigns — and the positive results they tend to have — can be used as a foundation for promoting bigger digital transformation initiatives. Focusing on customer-facing communications that occur via payments can yield positive results within months, rather than years. Working with the right partner and leveraging AI and machine learning solutions means payments organizations can begin to build modernized, personalized payments experiences that compete with FinTechs, Big Techs, and other competitors.

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