In recent years, one area of banking that has undergone massive change is payments. Rapid urbanization, technological advancements and the proliferation of smartphones and digital wallets have led to an increase in online and digital transactions, triggering a shift towards a cashless society. Advances in payment technology have helped connect consumers, banks, and payment processors seamlessly.
Millennials expect on-demand banking as well as fast, transparent, contactless and effortless one-click payment options. Regulators and leaders in the payments industry are also driving this shift by putting in place measures to streamline payment standards and mitigate risk.
The Covid-19 pandemic has accelerated these trends, reducing the cycle of change from several years to several months. While these changes were prompted by the unprecedented situation caused by the pandemic, many of these changes are here to stay even after the pandemic. As real-time payment solutions become the norm, we will likely see an increasing demand for retail and peer-to-peer payments, even across borders.
Banks must rise to the challenge
The scale of the change is putting pressure on incumbent banks to evolve their payment technology strategy and be ready for the future. Already, fintech companies, low-cost digital payment platforms, tech giants, as well as future challenger banks are relying on digital prowess and differentiated business models to deliver cheaper payment services and more. best quality.
Already, fintech companies, low-cost digital payment platforms, tech giants, as well as future challenger banks are relying on digital prowess and differentiated business models to deliver cheaper payment services and more. best quality.
– Sriranga N. Sampathkumar, vice president and general manager – MEA, Infosys
Therefore, now is the time for traditional banks to look for new ways to deliver value to their diverse stakeholders. The evolution of the landscape will revolve around:
• Leading strategy by level 1 banks
A good example is the Qatar National Bank (QNB), which operates in more than 31 countries in Africa, Asia and Europe. In 2018, the bank consolidated its multiple payment engines and replaced them with Finacle’s unified, multi-currency, multi-entity enterprise payment hub. This was aimed not only at boosting the efficiency of the business, but also preparing QNB for a truly digital future.
• Innovative bank
Emirates NBD has partnered with ICICI Bank in India to pilot the first blockchain-based network for international remittances and trade finance. By replicating the paper-intensive international trade finance process in the form of a decentralized e-ledger, the new framework allows all parties within the framework to access a single source of real-time information. . This facilitates faster, transparent and secure transactions as well as instant money transfer transactions.
• Digital banks
Liv. Bank, the digital-only lifestyle bank operated and managed by Emirates NBD Group is a prime example of a digital native bank, which caters to millennials. It was built on the principles of simplicity, intuitiveness, intelligent analysis and ecosystems connected to APIs. The bank has attracted more than 370,000 customers at 20% of the cost of acquiring a traditional institution, making it the UAE’s fastest growing bank in terms of customer acquisition. With over 80 percent of new customers coming by referral, Liv. enjoys a high customer satisfaction rate. Plus, Liv. brings a whole new marketplace of various service providers to attract millennials to buy and spend through Liv.
Non-traditional alliances such as the partnership between telecom player Bharti Airtel and Axis Bank to launch Airtel Money are a prime example of disruption in the payments space. This alliance leverages the respective strengths of companies in the telecommunications and banking sectors to deliver banking products and services that can empower financially excluded Indian citizens.
Another prime example is Paytm, which transformed from a simple digital wallet player to launch a mobile-only digital bank in India. Paytm saw the addition of 42 million accounts in 18 months in addition to more than 500 business customers just months after launch. Paytm generates 30% of open bank transactions in India and has seen a 400% increase in average daily transactions, recording five billion transactions per year.
In recent years, there has been immense growth in the use of emerging technologies to support cardless payment transactions. Blockchain as a technology with its inherent capabilities has made it possible to meet source-to-destination funds traceability requirements, providing support for AML / fraud checks while payments are instant.
For example, VISA B2B Connect, a cardless payment rail, helps businesses send money to over 97 countries in real time, with the sender and receiver having the necessary transparency about the payment. Its partnership with technological players such as Infosys has helped bring this capacity to banks around the world.
Additionally, with more and more countries becoming crypto-friendly, we have also seen the rise of the crypto exchange platform. The platforms allow customers to use their cryptos for money transfer where the recipient is paid in fiat / crypto currency. They can use it as an asset pledged for a loan. Crypto-linked payment cards where customers make payments using their crypto wallets are gaining momentum. For example, VISA recently announced that it has facilitated over $ 1 billion in transactions through encrypted VISA cards.
With so many disruptive technologies and innovative banks entering the fray, the writing on the wall is clear. Modernization of infrastructure is becoming paramount and the adoption of seamless digitization, real-time payments and open banking lay the groundwork for adopting any new payment technology in the near future.
The author is vice president and general manager – MEA, Infosys
This content is sourced from Reach by Gulf News, which is GN Media’s branded content team.