Agility in Payments: Prepare for the Future You Can’t Predict
By Amir Wain
Founder and CEO, i2c Inc.
For financial institutions, payments transformation is as much or more of a business issue than a technology problem. With the market evolving so quickly and consumer expectations driving much shorter product development cycles than most enterprises are equipped to handle, how do you put together a strategy that delivers the right payments solutions at the right time in the future? Predicting the future of payments, no matter how good a crystal ball you think you may have, remains virtually impossible.
When it comes to the under-recognized transformation that’s happening in payments right now and the opportunity it represents, the key question business leaders of financial institutions (FIs) should be asking is whether they have the organizational agility and the supporting toolset to keep their businesses competitive and agile in the long run. Focusing on rolling out static point products they think may work in the future is a losing battle. They are better off focusing on capabilities and functional agility, and on a technology platform that gives them to tools to quickly create solutions and evolve them over time to meet changing market needs.
Payments Transformation: Industry at a Crossroads
Issuers and payment providers know they need to create and deliver new roadmaps with better products and features that appeal to their changing customer base and drive revenue. What’s making this harder is the confluence of market forces and trends that are defining today’s rapidly changing market dynamics: compressed time of innovation and adoption, new business models, and rapidly changing customer needs.
New technology and ideas are spreading faster than ever. Today’s superheated digital environment has compressed timeline between early adopters and laggards. For financial institutions, previously the gap could have been as long as a decade; but now, that timeframe can be as little as 24 to 36 months. Financial institutions that have been working under the assumption that they can wait to adopt new technologies to mitigate risks and costs run the much bigger risk of not having a competitive product or service offering that appeals to new and evolving customer segments.
Consumer expectations are vastly different than what they were just a few years ago. The way we shop and buy has changed, and payments is no exception. Purchases are digital and mobile, and social conversations influence what consumers buy, when, and how. Today’s consumers expect purchasing experiences that are timely and relevant to their unique situations.
At the same time, competition is getting more intense, and not just from other banks. New technologies have given rise to entirely new business models. Recent years have witnessed the proliferation of new products and services like P2P payments and alternative lending offerings from fintech firms remain top of mind for consumers. Tech giants like Apple, Samsung, Facebook, and Uber and other non-traditional payments players are disrupting banking and payments. All this brings added pressure on FIs to differentiate their products and services to stay top of wallet.
This is a daunting environment for card issuers looking to build new revenue streams and take advantage of new market opportunities. Given the velocity of innovation and technology adoption, traditional players have little time to transform themselves into agile innovators, able to quickly and cost-effectively deliver differentiated, personalized payments products that appeal to social and mobile-savvy consumers.
Unfortunately, the legacy processing technology many issuers rely on is completely out of sync with today’s market realities. It wasn’t designed to address problems and take advantage of the new opportunities the digital revolution has presented, and it’s inherently inflexible, complex, and difficult to change. The result is that issuers can’t react quickly to anticipate market needs and are often stuck rolling out undifferentiated “me-too” products.
For financial institutions and issuers, mastering payments transformation means formulating the right product roadmap vision and strategy—and having the right tools to act on it quickly. The pace of change is accelerating, and the future is impossible to predict. Spending precious resources trying to out-innovate the competition on very short time scales with point products that may or may not bear fruit is a losing proposition.
If you don’t know the future, the best strategy is to have a system to help you manage it. With the right set of tools and building blocks, you can build specific solutions that map to market needs in the moment. The key to future-proofing innovation in payments is a processing platform that fuses the agility and flexibility of a modular architecture with the highest levels reliability, security, and scalability. What is needed is a more agile payment processing model.
The New Payments Toolbox – Agile Processing
i2c’s Agile Processing is a unique, highly-configurable and reliable payments processing model that gives issuers the control to quickly and cost effectively build and deploy new, customized solutions that deliver value to customers. With Agile Processing issuers have tools they need to enable a product roadmap vision, test it, modify it, and deploy it using a sandbox to scale model to get to market quickly and drive revenue.
Three key concepts are at the heart of Agile Processing: Composition, context, and control.
- Composition: Composition is the ability to conceive and configure any payment or business process. Just as LEGO bricks can be pieced together to assemble virtually any structure, i2c’s Agile Processing platform is comprised of a vast library of blocks of payments functionality that can be quickly assembled to rapidly bring new solutions to market. Like a structure composed of interlocking LEGO bricks, the different component pieces are engineered to fit and function together, providing inherent stability and extensibility. Issuers can pick and choose elements based on their unique requirements and swiftly and cost-effectively create, test, and introduce differentiated payment products on an inherently secure platform. No coding is required. Hard-coded legacy processing technology is completely out of step with how the marketplace works, making it impossible for issuers to test options and apply what they know about their customers’ experiences.
- Context: In payments, context means understanding and acting on preferences, external events, entitlements, purchase history, and other consumer information that are relevant at that exact moment to create personalized payment experiences. A real-time offer is an example of this as you think about the concept of delivering the right offer to the right person at the right time. Unlike older payment processing technology which is context blind, Agile Processing’s context-sensitive data leverages individual cardholder attributes to create memorable experiences. Context inserts intelligence into the payments stream. It is vital to curating personalized purchasing experiences for consumers, and it can accelerate revenue and enhance loyalty.
- Control: Ultimately, Agile Processing is about giving control back to card issuers so they can execute their unique payments vision and business strategy—on their timeline and on their terms. It gives issuers the tools to respond quickly to changing market requirements and deliver high-value payment solutions.
The pace of advances in technology and the compressed timeline of adoption are putting pressure on FIs to do a better job managing uncertainty. Agility is the secret ingredient for navigating a future that’s increasingly difficult to plan for—and one that certainly doesn’t allow for lengthy product development cycles.
For issuers, agility and control comes from a next-generation processing platform that gives them the tools to respond strategically—and in the moment—to rapidly changing market dynamics without compromising reliability and scalability. The underlying architecture of most payment processing solutions on the market today provide either reliability and scale and in some cases flexibility, but not both.
Those who hesitate to modernize because they are wary of the cost and effort at a distinct disadvantage. Deciding to do nothing is a mistake, but simply deciding to “keep pace” really is no longer an option. Rather than spending resources on point products or innovation labs that may take many months to roll out solutions, any investment today should be in a flexible processing platform to serve as the foundation of their future payments business.