The only thing that’s constant in this world is change. Our world has been moving towards an increasingly digital future but the coronavirus pandemic has proved to be a catalyst when it comes to our behavior surrounding payments. A survey conducted by the Electronic Payments Association and the Strawhecker Group reported that 27% of business owners reported a marked increase in contactless payments in late March1.
This shift to digital payment methods has left a few consumers wary about the dependence on banking institutions. With the rise of contactless payments, merchants have been forced to account for increased costs. With fees as high as three percent, this puts a significant dent in profits.
It isn’t just merchants who are wary. Consumers often complain about the hassle of reversing charges and of the fear of hacks or unauthorized charges depleting their accounts. These fears are very real and in my opinion they present a huge opportunity for digital design teams. I’ve spent 20 years working with financial services firms developing digital products and the advances being made over the previous quarter have outstripped everything over the past decade.
Clearly, design teams have been jumping on this opportunity but there still remains a lot to be done. Consumers these days are increasingly familiar with digital payment options such as PayPal and Venmo but face challenges when paying for services such as hotel bookings, shopping purchases and so on2.
Digital wallets are gaining ground but even their usage is challenged due to the dependence on the physical smartphone. There is a massive opportunity for a design solution that allows customers to seamlessly integrate all of their payments across devices, be it a smartphone, a smartwatch or even a digital banking application.
The underlying technology that makes such integrations possible are Application Programming Interfaces or APIs. These are the digital world’s connective tissue. Older digital solutions used to rely on companies owning the entire value chain associated with payments.
APIs make this a feature of the past. By plugging into a single link in the payments chain and by attaching their own solution to the larger chain using APIs, companies can provide their customers with better and more secure solutions. This ability to plug into an existing system allows companies to develop truly creative solutions since multiple combinations of blocks connected through APIs can deliver different solutions.
A common knock against digital payments is that people in less developed countries are unlikely to use them. Cash is still preferred in many parts of the world. However, the prevalence of digital solutions such as mVisa in Nigeria and PayTm in the Indian subcontinent indicate that digital solutions provide greater financial security and reduce the number of fraudulent transactions in the system.
The secret behind these solutions once again lies in the APIs they use. The cost effectiveness of such digital solutions helps merchants avoid spending large sums of money on Point of Sale systems. Compared to these costs, the fees paid for digital transactions are small.
Close on the heels of the usage of APIs is the move to the cloud in terms of infrastructure. Financial institutions currently rely on expensive I.T setups that draw focus away from service delivery. Leveraging the cloud expertise of SaaS providers is a key step to take in providing a better payment solution and is a huge area of opportunity.
Increasing the seamlessness in payments is where huge opportunities lie. Investing in great UX design will bring the largest returns on investment. While cash might not be entirely eliminated, this doesn’t mean it will occupy the lion’s share of payments. Companies that push digital transformation now stand to gain significantly. It’s time to adapt and grow stronger.
1: Coronavirus surge cashless mobile payments, The Inquirer
2: Consumer Desire and the future of Payments, Visa Blog