Is Value the future (and current) paramount in payments? (own thoughts)

Value as a Vision, preparatory step

I would like to start by highlighting that from my understanding

• Operational resources
• Financial frame
• Value

are table stakes in today´s business landscape and how future is being built. Value is the key driver to close the loop ( + resources & finance), reason why Value is paramount from a broad angle

• sustainable growth
• as a company, Nike is a community of sport not a sport  retailer
• as individuals, in a scenario where automation is replacing some human tasks, bringing back what differentiates us from machines become crucial. We must stand out from what is mainstream / linear in order to not be compare to what a machine does
• as brands in their interactions with customer, deliver of value and experiences
• as governments in terms of transparency, efficiency, tax processes  or monthly rental income
• ......

To sum up Value is the new (current) paramount over which future is being built, for instance blockchain & distributed ledger technologies claim for a new paradigm, the economy of value. 

 

Payments Landscape ( Value as operational competitive advantage not vision)

Payment Industry is being disrupted at a fast pace, not only from the  Value concept previously mentioned, overall highlight that the impact of technologies in this industry and how even the dimension of this fast pace has reached the level of a threat for Europe. “The fragmentation of the payments systems favors solutions from major international players, to detriment of European innovation. PSD2 encourage European cooperation.” Source Finextra.  

Both are reshaping the industry and its dimension. The new dimension of the Payments Industry prompted a disruptive scenario for different reasons

• Digitalization and new customers behaviors are demanding new value propositions and business models where payments play a key role ( digital, wearables, ecommerce..)The time to pay is one of the touchpoints with more perceived impact, a negative payment experience could ruin a positive interaction with a company
• Payments equal to data sources to run business
• PSD2 the newly-established European Payments initiative promises a new vision of payments. For consumers offering new ways to pay will make their daily lives easier & convenient, API  will bring tangible benefits that will harmonize solutions to merchants
• Newly digital currencies and Blockchain are paving a new monetary scheme upgrading money to the digital age
• Giants and disruptors are eroding barriers, e.g Amazon gives a step forward from payment facilitator / enabler to financial institutions
• 5G accelerating the next wave of innovation aiming to help businesses replace credit card machines with smartphones among others.

Scenario that couldn´t be witnessed without the impact of different technologies and the way we relate each other or hor we make business today, some example as follows

-     Mobile

• thanks to NFC (contactless) and boosted by the COVI-19 become mainstream. Other devices such us smart clocks are gaining traction.
• APPs are also spreading digital payments under different models, one-click subscriptions, invisible payments (Uber, Cabify), sharing transport models….
• Apps also aggregates different models and create brand ecosystems like Repsol Waylet , connecting physical points and digital payment.  

Social media

• Social media drives sales via recommendations, promotions and advertising landing on sites to complete the payment step
• For a while now, Social networks are incorporating external payment methods embedded in ads complementing their own payment initiatives (FB Libra, Twitter and Whatsapp P2P….). These new methods are very promising or have a great potential for small companies.
• “Traditional sectors” such us Automotive are embracing digital payments in those social networks where the purchasing flows begin. FB is one of channels with more attribution in terms of sales, so why not testing new concepts like digital car sales reservations

Cloud

• In general terms settlements & transactionality are assumed by local payments processors (MPOs and Virtual Banks solutions), however new ways of settlements & transactionality via APIS, ledger networks and platforms require cloud support  becoming the normal pattern to transact operations
• Expanding business to other markets (global approach).

 Data

• Fraud detection
• New payment experiences like biometry
• price differentiation in real-time
• Customer segmentation and tailored offering.

 New terminals

• Devices with Android capabilities and therefore with new potential models and experiences

Among others the main effects of this new scenarios are  

• on customer expectations (QR, Amazon, omnichannel, cash& go, dni & go….)
• on product enhancement, (invisible payments in line to Cabify)
• on collaborative innovation (API PSD2 and plug and play business models)
• on organizational forms (from local / regional to global)
• on speed, companies need to evolve and become more efficient speed

But the also the increase on competitiveness and technologies optimization will have or is currently having a clear impact on business, revenues and value propositions. Acquiring industry is one of the most disrupted by new technological firms. FinTech firms will be affecting the current business model (business lines) of banks, more sooner than later the knock-one effect of this threat is to decrease revenues     

In all this ongoing process, Covid-19 accelerates the adoption of digital payments boosting e-commerce and payments out of the point of sales. Remote working and lockdowns rocketed the adoption. 

For Small and medium companies’ remote payments (via sms or email) meant lower interaction in stores or restaurants at the same time offers new channels to start recovering sales, addressing two of the main goals of this pandemic. In addition large companies prioritized e.commerce being forced to tackle the last mile delivery and take corporate decisions  ( financial positions , labor force, new investments……..).

On the other hand, pandemic accelerates digital economy as well, upgrading digital money to a new economy. Digital Currencies supported by Central became true threating the way current markets operate

Lastly in this ecosystem I would highlight the importance of how merchants - company themselves- are playing a new role in the sector, not only talking about B2C payments but B2B which is gaining traction nowadays. Platform thinking and global scale are dominating the strategies of large companies and according to industry news the next step in the deployment of these strategies is what in known as embedded payment (payment capabilities embedded in Business Systems) 

So to sum up and in terms of technologies, value and new players, there is  a new scenario driven by enhanced experiences, very diversified and innovative, with complete ecosystems both giant players or large companies, aiming to transact in global markets, where platforms enable all type of payments, but facing this way of capturing value to local schemes that monopolizes their local markets, offering cost advantages through  robust systems but with lower levels of enhanced experiences.

Value and the Future of payments ( Value as a vision)

Rather than focusing on technologies which are already mentioned above, and  if  I should outline the golden Keys, (I foresee and recap from different sources for the future),  I would base these keys on the business cases that could bring more value ( as a vision) for users and merchants

Users 

• ID payment solutions
• ID sobering data

Merchants ( all sizes) 

• Omnichanel ( Android POS terminals)
• Fraud mitigation 
• Customer experience and acceptance 

Merchants (medium- large)

• Data for operational performing optimization 
• Data for business
• Enhancing consumer experiences / Co-creation of value
• B2B Payments

Market

• Digital currencies

These keys will enhance the current scenario of business value which is currently more focused on   demanding 

• a global scale but at the same time with the capacity 
• to operate with a local flavour, to limit or even decrease conditions and therefore costs (only feasible on scale grounds) 
• enabling personalization and frictionless/ seamless experience 
• data to run business, improve operational level and value proposition

Authentication (ID identification) is at the bottom line of this upgrade from an operational angle to vision. Static authentication models will be replaced in a world that requires constant analysis due to the different moments and contexts where identification is required nowadays. Complex data sets will generate highly individual relationships groupings with behavioral metada created by the device and sensors. Fraud detection, seamless experiences, payouts and so on will be based on these new capacities to identify individuals

Ledger technologies ( Blockchain) will bring more shortly than later a preliminary scenario driven by public and private collaboration where initiatives from both will converge

• https://www.revistacloudcomputing.com/2020/11/el-proyecto-espanol-dalion-impulsa-la-identidad-digital-con-tecnologia-blockchain/
• https://hipertextual.com/2021/06/la-union-europea-presentara-un-monedero-digital-para-almacenar-documentos-contrasenas-y-realizar-pagos

This Digital identity should boost all the AI business cases we are witnessing deployed nowadays to transform enterprises in pure data-driven companies levering from data to knowledge ( = value)

• Analysis (analytics, operational intelligence, business intelligence)
• Management (data governance, master data management) security, info used when is needed and by the right people among others
• Storage & processing (There are many technologies, and Hadoop and Spark are some of the more important and renowned)
• Customer relationships
• Value proposition to customer according to context and profile (individualized) 

On top of that digital currencies and distributed ledger peer to peer transactions in conjunction with smart contracts will be able to change all the current schemes. 

Lastly all the economical, technical and business infrastructure will be adapted from B2C ( natural market for payments) to B2B ( new opportunity)