Thoughtful innovation: What’s next for the payments industry?

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In a rapidly evolving world, payment systems must meet the challenge of agile development without sacrificing the trust and stability upon which the industry is built, says leading payment systems provider Vocalink, a Mastercard company.

From cash and cheque to chip and PIN and contactless, the payments landscape has changed dramatically over the past 50 years.

Where once consumers had little choice in the options available to them, the near ubiquity of smart devices coupled with a wave of innovation has created growing demand for new ways to pay.

Speed, convenience and ease of use are now considered standard requirements when it comes to making payments, as Gregor Dobbie, UK managing director at leading payments technology provider Vocalink, a Mastercard company, explains.

“In the past, access to payments systems had been fairly limited, but the introduction of a range of new financial institutions and other payments providers into the market in recent years has transformed the status quo,” he says. “We now have far more compelling, competitive solutions, which not only meet, but drive evolving customer needs and expectations.”

One of the biggest payment transformations of the past decade has been the introduction of contactless, with almost two thirds of people in the UK now choosing to “tap and go”. For the first time in history, card payments overtook cash as the payment method of choice in 2017.

The appeal of contactless is easy to understand; in an age of rapid technological change where everything is expected almost immediately, it is a natural progression that money has merged with digital formats to redefine the payments experience.

After all, many of us run almost every aspect of our lives using our phones, including for payments and banking. And as the appetite for faster, more secure and flexible payment opportunities gathers pace, arguably the biggest disruptor will continue to be realtime payments.

According to Mr Dobbie: “The culture of instant fulfilment, which we see across so many other aspects of life, has naturally made its way into the payments industry. This global shift towards real-time payments has been one of the most exciting developments of the past decade.

“Instant payments can offer greater security, more visibility around payments and therefore tighter cash management, and a lower risk of failure.” The potential for real-time payments is vast, including peer-to-peer, business-to-business and e-commerce. Examples where it can have a significant impact include insurance payouts, quicker access to approved loans, and payment of daily and weekly wages. The key to its success, as with any new technology, is ease of use.

Mr Dobbie explains: “Contactless and real-time payments have been groundbreaking in their nature, yet simple in their premise and intuitive in their use. As the industry continues to evolve and innovate, its solutions must remain easy to access. Anything too onerous runs the risk of failure.”

But as with most things, the simplest and most logical innovations are often the most complex to implement. New technology must strike a delicate balance between offering new and exciting opportunities, and seamlessly improving the customer journey with the utmost importance placed on always protecting and continually investing in the critical, national structure upon which so many are reliant every day.

This controlled approach is what Vocalink refers to as “thoughtful innovation”. It begins with a requirement for open communication throughout the financial ecosystem of clearing house, schemes, regulators, technology providers, payment service providers and banks. And it requires a willingness from all parties to work towards one unified vision.

Innovation for social good For Vocalink, developments in payments innovation should also have societal benefits. There remains an estimated two billion people in the world who don’t have access to a bank account and this runs the risk of exclusion from society.

To address the problem within Thailand, Vocalink built and launched PromptPay in early-2017 enabling the country to enter the world of realtime payments for the first time. Its success has been unparalleled, Payment platforms launch innovation empowering Thai citizens to make instant payments and access state benefits in real-time. Mr Dobbie says: “This milestone is significant in the country’s bid to address financial inclusion and support the expansion of Thailand’s burgeoning digital economy.

It’s important that our technology serves economic and social good.” In the UK, Vocalink has facilitated a service with the Post Office to enable people to transact locally as if they were using a bank, in light of the recent trend to review the number of bank branches. Mr Dobbie concludes: “There was still a requirement in some communities without access to a bank branch to be able to transact locally.

For us, it’s about enabling the technology we have to allow people, especially vulnerable people, to bank the way they want to.” While regulation and technology have a powerful role to play in innovation, customer experience and enhancing the customer journey will undoubtedly be the real competitive differentiator as we enter a new era in payments.

As originally seen in Future of Payments published by Raconteur Media on 25th September, 2018 in THE TIMES.

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