The early months of a new year is always a good time to reflect on the previous year. From the perspective of the payments industry, 2016 was a year that laid the groundwork for stunning innovations and continued expansion into new financial technology (fintech) and financial services (finserv) territories.
What 2016 really did was set up fintech and finserv for an exciting 2017. Below is a list I compiled with colleagues of the top trends we expect will take center stage in the months ahead.
While blockchain has been around for a few years now, it’s finally emerging from the shadows and hitting the spotlight with larger financial firms. As the underlying technology to the cryptocurrency bitcoin, blockchain made larger institutions question its place in the financial landscape, and how it might affect their place as well.
But blockchain has moved from wait-and-see technology to the realm of product possibility. A joint proof of concept project, between the Bank of Ireland and Deloitte, was introduced in early 2016. This project focused on the data associated with trading stocks and shares, attaching a full, trackable ledger to the transactions across the entire trade lifecycle. And Bank of Ireland is just one of the first institutions to investigate the value of blockchain. In a survey of over 200 global banks, 15 percent stated they expected to be using blockchain technology by the end of 2017.
Using data for an improved, personalized customer experience
Financial institutions have accumulated mountains of customer data over the years. While this data has traditionally been used to identify risks and potential fraud, in 2017 there will be a shift to using that data to improve the customer experience and provide personalized services.
With larger financial organizations working hard to differentiate themselves from fintech startups, leveraging the massive amount of data at their fingertips is a good place to start. This information can help build out products that fit the exact needs of customers, when they need them. And by offering the right services at the right time, banks and other financial organizations can build loyalty and trust with their customer base.
For instance, if a customer always uses a specific payment card when in San Francisco, because he or she goes there regularly on business, that individual’s digital wallet could display that card as the preferred payment method when the GPS shows the customer is in the San Francisco area.
Another example could be making customers aware of specific financial services during different phases of life. If a bank’s data shows that there is a correlation between customers downloading a certain application and his or her proximity to retirement age, the bank could provide information about retirement strategies and products while also looking at the information to help formulate new products and services appropriate to the customer’s needs.
Changes to legacy infrastructure due to real-time payments
Real-time payments have reached a level of maturity that requires financial institutions to make changes to accommodate. Projects in the United States, Europe and Australia are expected to be ready with real-time payments in 2017. However, many banks operate on legacy systems that are incompatible with the speed and processing needed to handle real-time transactions.
To stay on pace with the move to real-time processing, banks will need to invest heavily in updated infrastructure to handle the demands, or risk falling behind. Beyond infrastructure changes, financial institutions will need to make updates in staff knowledge and skills to handle the new technologies.
The growth of contextual commerce
Consumers spend a lot of time on their devices. But only around 2 percent of that time is spent actively shopping. Consumers want to make purchases in the moment, when the need – or desire – arises. Take, for instance, the Amazon Dash buttons. These little devices can be placed in your home, where you need them, making re-ordering of frequently purchased items as easy as touching a button.
Amazon’s Echo provides a similar experience, allowing you to order what you need with a simple voice command. By making it easy to purchase items while you’re thinking about them, Amazon fosters loyalty in its customer base. In 2017, more ecommerce merchants will look to add the benefits of contextual commerce to their buyer journey.
According to recent research, 56 percent of consumers who follow brands on social media do so specifically to view products. So it’s no wonder that Instagram, Pinterest, Facebook and even SnapChat already have, or are introducing, functionality that allows platform users to make purchases directly from their social media feeds.
Further advancements in digital wallets
With predictions of contactless payment users reaching over 69 million by 2019, it’s no surprise that digital wallets will be a huge focus for the payments industry in 2017. But because mobile, and even wearable payments already exist, the focus will be on improving the experience and making them more accessible.
Improving the mobile payment user experience
While some mobile payment applications – like the Starbucks app – have created a pleasing, seamless user experience for customers, many other payment applications are far from frictionless. With the Starbucks app, you can do almost everything you would at the counter, with your phone – you can order your drink, pay for it and even apply your Starbucks Rewards account to the transaction.
For some, using mobile payments isn’t more convenient than using an actual card. Unlocking a phone, choosing a card, scanning it and still having to enter a PIN, all while having to add a loyalty card separately, removes the seamless experience that would make users leave their wallets at home. To see the expected growth in mobile, the customer experience must improve, making it possible for consumers to shop where they want, without carrying their wallets.
A move toward ‘true’ digital wallets
Current incarnations of digital wallets lack some expected features. For instance, carrying around loyalty cards in your actual wallet may be cumbersome, but at least you can use them when you’re paying for your purchases. Mobile payment options need to account for all the different cards you carry, and apply things like loyalty memberships and rewards points to purchases in a single user action.
Increased availability of NFC POS terminals
The last piece in the contactless payments puzzle is the ability to use your digital wallet wherever you go. Some merchants may be hesitant to change to new POS terminals after the recently mandated switch to chip-enabled terminals didn’t go so well. But as the number of customers demanding to use mobile or wearable payments increases, they will be more inclined to make the switch. And with 85 percent of the POS terminals shipping in 2016 being near field communication (NFC)-enabled, many merchants will already have the capacity to accept mobile payments without changing a thing.