Alternative payment methods have become increasingly popular among consumers due to their easy, efficient, and secure way to pay. Mobile payments, P2P payments, and digital wallets are just a few of the many alternative payment methods consumers are choosing aside from credit cards and cash.
In a recent PaymentsJournal podcast, Matt Nilles, Senior Director of Global Products and Solutions at Euronet Worldwide, and Brian Riley, Director of Credit/Co-Head of Payments at Javelin Strategy & Research, explore the groundbreaking shifts occurring within the banking industry, especially regarding alternative payment methods.
Banks, credit unions, and fintechs will greatly benefit from learning about the latest trends, such as the rise of contactless payments, peer-to-peer transfers (P2P), e-commerce transactions, and the importance of adopting these solutions to stay competitive. Finally, listeners will learn about Euronet’s Ren Payments platform, which can enable banks to integrate these alternative payment methods easily and securely.
Why Alternative Payments Are Becoming Popular
Consumers are increasingly looking for ways to streamline their payments and transactions. Amid a more digital age, contactless payments, mobile payments, and digital wallets have certainly delivered on speed and security. These alternative payment methods are not only convenient but also eradicate the need to carry a wallet with credit cards or cash.
“We [consumers] are more concerned about convenience than ever,” Nilles said. “We’re more concerned about security and speed than ever, and that really bolstered the payment methods that have come around in the last couple of years. We’ve seen the rise in real-time payments around the world. It is a trend that is not going away anytime soon.
“We’re all using digital wallets more than ever. And then, certainly, during the pandemic and afterwards, contactless payments have become the norm. And all of this is driving us to that desire of faster to use, more secure payments.”
Clearly, the momentum of the shift to alternative payments comes directly from the customers themselves and not the companies.
“A lot of it has to do with consumer preference,” Riley said. “It’s not just payment card companies pushing, ‘This is what we have available.’ There’s a voice resonating from the consumer side that says we want to do more of these innovative transaction types.”
Challenges Traditional Banks Face and Their Solutions to Remain Competitive
Traditional banks are still lagging when it comes to adopting alternative payment methods. This can be traced to a number of reasons. According to Nilles, the issues confronting banks are three-fold: The first is legacy solutions and the difficulty to introduce new capabilities through them. The second is adhering to compliance and regulatory needs. The third is getting solutions to market without losing control of quality.
“What we like to help banks do is really pull together the right suite of products that they can introduce to their customers to not only create immediate value for their customer, but to also create a great experience for the customer,” Nilles said.
“It’s that balance of being quick and fast to meet the needs of the consumers, but also managing your product offering. And this is what we try to do with our solution called Ren, is to bridge that gap between the legacy solution in the future and current needs of the bank, as well as keeping the solution in regulatory compliance, no matter where it might land in the world.
“And then lastly, managing that offering to make it cohesive and seamless for the customer as they interact with merchants or the bank itself.”
Indeed, compliance is a major issue that has to be carefully navigated amid rapidly evolving regulations, especially in a reactionary manner toward certain events.
“That compliance issue is a really big deal,” Riley said. “Look at some of the things that happened recently in P2P payments where consumers weren’t really understanding that payments are irrevocable once they go through the process and the regulations that protect consumers were not keeping pace with what was going on. It caused many of the financial institutions to come up with their own rules on it.”
How Ren Payments Platform Helps Banks to Integrate Alternative Payment Solutions
The innovation journey can be wrought with challenges for any organization ready to adopt the newest solutions in technology. Moreover, success is not guaranteed. However, the rewards can be immeasurable. The Ren Payments platform endeavors to overcome these hurdles.
“Ren was created not only to address our internal needs but the needs of our clients in the form of a microservices-based architecture,” Nilles said.
“This greatly simplifies the implementation process between us and our clients, but it also allows our clients to move at their own pace on that innovation journey. We’ve coined it the incremental innovation path, the way that our product is built.
“It gives you the control to determine how fast you move on your innovation journey, but also to pick and choose what pieces of the solution that you would like to use.”
An example of how that would work: Say a company wants to adopt FedNow within its organization. The next day, this same organization wants to launch a digital wallet for its current customer base. Ren can help, at the business’ own pace.
You can liken it to putting on the brakes as a new solution is introduced, so it’s not taken over by the rushing waters of the implementation. With the Ren Payments platform, organizations can introduce new solutions without negatively affecting their operations.
Moreover, the goal of the Ren Payments platform is to eliminate disruptions in the product road map and the day-to-day operations. It simplifies the innovation path and grants the organization full control of the pace.
In Closing
Alternative payments are here to stay. These dramatic shifts have been driven primarily by consumer demands for speed, security, and convenience. The pandemic had a hand in bolstering contactless payments such as mobile wallets. With FedNow making its U.S. debut this month, more consumers will be introduced to faster payments.
With all this innovation, banks, fintechs, and credit unions must be ready to do the important work of modernizing their legacy systems, adhering to the constantly changing regulatory landscape, and deploying these solutions without hamstringing their operations. To do that, the right solution that can handle all of these challenges must be implemented, one that can successfully navigate the future payment ecosystem.
