It’s so much more than taking the payment.

Way back in the deep, dark history of financial payments (say 7 years ago) it was a straightforward world where financial institutions enabled payments for merchants and customers. Business was simple, effective and profitable.

As a financial institution (FI) you established an account with a customer, merchant or individual, checked their credit worthiness, and then enabled them to take and make payments of a debit or credit variety. Aside from offering some basic reporting you didn’t really have to worry about how the merchant ran their business, what technology the customer wanted to use, what story the transactional data told, or whether the data formats were compatible with third party API’s. You just told them what you had available and they took it. Good times.

That’s no longer the case for a modern payments business, be you large institutional bank or small third party processor. These days the core is still about taking a payment but the offer should be about a lot more. These days you need to be innovative in the way you mine and deliver transaction data. You need to allow that data to deliver customer loyalty, coupons and promotions. You need to interact with social networks. You need to ensure the way your payments business works actually makes the customers life easier. You need to offer great technology and the ability to interface to other great technologies.

The world of payments is no longer about the FI as the only piece of the payments world. Great technology has enabled the focus to shift to the customer as the central component, where the FI now has to ask questions like, “How would you like to access your payments? What technology works for you and your customer experience? What story can I tell you from your transaction data? What will make it easier for you to do payments with me, rather than my competitors? How can I help you drive customer loyalty? How can I make your life easier?

Both upstream and downstream of the actual process of taking a payment there are emerging innovative technology companies like Square, Simple, Dwolla and Mint. These new style payment companies are concentrating on creating unique value for customers around the payments process, and thereby putting themselves in the driving seat of the customer relationship. In these businesses FI’s still underpin the payments process but all of a sudden they no longer control the all important customer relationship.

The danger for any FI in losing the customer relationship is that the customer becomes “sticky” to the technology, rather than the payment piece. This gives potential control of who processes the payment to the technology company, and takes it away from the FI. If the technology company decides to change its payment processor it has enough customer attachment to take the customers with it.

If you’re in a payments business today you should be spending time looking at how the technology that surrounds your core payments platform adds value to your customer. If “peripheral” technologies like your user interface, CRM, web and mobile tools, social network connectivity, and API’s aren’t offering great value for your customer then you need to be looking over your shoulder. Someone else could be offering your customers great technology right now to make taking and managing payments easier, and that could shift the control of your customer to them.

© 2012 521 Group. All Rights Reserved.

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