Frictionless payments are changing the way we interact with retailers. IoT payments, using devices such as smartphones, only require a swipe or tap for transactions to complete. This makes the payment process blissfully seamless and significantly quicker than other traditional forms of payment such as cash or cheque. As technology continues to evolve, so too do these upcoming forms of payment that make their mark on just about every financial market. People are already adopting these types of transactions into their daily lives, which promises even better solutions in the near future.
We are approaching the time when financial institutions will need to consider technological innovation in two distinct time frames. First, there is the need to develop more engaging and actionable frictionless payments that help customers, as described in this article in Finextra:
“It’s not a big leap to suggest that soon, consumers will be able to ask Alexa or Google something like ‘I want to switch my broadband. Check with my bank what I spend and what the best deal available is right now’, and their assistant will tell them, and then ask if they want to switch. Yet I wonder how many banks are already working to make this a reality? If they don’t someone else will. Banks already in their physical branch format are already less relevant except for the most complex, high value, advisory or emergency situations, so how to stay relevant in this world is critical. Banks need to be thinking broadly in terms of what they are offering and providing the convenience consumers desire. This will encourage customers to stick with their bank and entice non-customers to switch and enjoy greater benefits.
To maintain customer loyalty and grow sales they need to make sure they are offering the best offer or the most comprehensive deal, both for their own products and those for other services in the marketplace. They also need to capture the attention of consumers shopping around with something enticing enough and as simple as possible to switch to, whether it’s good service, good product, good range, good price or something else.
The banks that do best will be the ones that can truly personalise service and build trust to secure more business. For example, they could advise a customer asking to take out a personal loan that it would be better for their financial situation to take some extra equity out of their mortgage instead, so it will save them money. As it happens, 86 400, a new challenger bank in Australia, is doing something similar, texting customers messages like ‘if you deposit an extra 167 dollars you’ll get your bonus interest rate this month.’ That such banks are willing to take a hit on profit margins in the short term to improve their customer experience will reap the long-term benefits – customer loyalty and retention based on trust – the essential building block of any bank. Most banks wouldn’t bother telling them, and focus their strategy on offering teaser rates and not reminding customers the rate will change, causing customers to lose out, but by being transparent, proactive and upfront they can develop relationships that last.”
The second wave of technology, which is fast-approaching, will further change the role of financial institutions as Internet of Things (IoT) technology delivers service providers much greater access to customer data. This will enable not just a more prescriptive set of recommendations, but even automate purchases based on far more data than humans can possibly interpret (as described here).
Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group
