By: Eddie Gonzalez, Guest Contributor
Digital banking is not a new concept, nor is it unusual for consumers to conduct their banking digitally, but what is true about digital banking, especially for businesses, is that the industry has not accelerated at the same pace as demand. Trends in the payments industry tend to follow innovation that is happening in the consumer market, but if consumers can make safe and low-cost instant payments, why has it not been available sooner for businesses to do the same?
When the pandemic made its way around the world, digital banking was introduced to millions of new users. Just in the first half of 2020, the volume of digital payments increased by 21% among American consumers, according to Statista. Today, only 1 in 5 Americans prefer going inside a physical bank. For businesses, the pandemic also led to an influx of supply chain shortages, and having the ability to move money quickly was an important value-add to mitigate any further disruptions.
Businesses want, and need, the same banking conveniences they have access to as consumers. This is crucial to stay afloat amid the threat of an unstable global economy and to meet the evolving needs of their customers. Businesses that can’t compete with efficient payment solutions will fall behind, and it is up to payment providers to ensure they have the solutions businesses require to meet their customer demands.
Real-time payments are one necessity for businesses, and gone are the days where it was acceptable to wait days, even weeks, for a payment to reach an account. There is more to digital payments than just that. Low-cost options and highly secure solutions should also be a top priority, in addition to being able to choose a payment provider that can deliver around-the-clock care. These features are pivotal for companies to not fall behind their competition and seamlessly make and receive payments in the digital age.
Understanding customers’ expectations can be one of the greatest challenges for businesses. The customer journey needs to be seamless for the payer and the payee to ensure their needs are met and the process is a positive experience. Customer satisfaction is a high priority, but certain processes can’t be overlooked. This includes the safety, security and credibility of the payment transfer.
Payment providers must do what they can to mitigate risk, and with the global payments security market expected to reach $54.1 billion by 2028, growing at a compound annual growth rate (CAGR) of 16.5% between 2021 and 2028, digital payments open the door to security breaches and fraud. With the payments industry set to invest more time and money ensuring top-of-the-line security solutions are in place, financial criminals match that workload with new malware.
It should come as no surprise that distrust in the payments industry is a factor standing in the way of its exponential growth. Identifying vulnerabilities in payment software is incredibly important to keep up with the latest payment solutions and its risks to instill trust among customers. Cutting corners in the security of digital payments can only cause more harm, especially if real-time, low-cost payments are already almost too good to be true.
The global real-time payments market was valued at USD $13.55 billion in 2021 and is expected to grow at a CAGR growth rate of 34.9% from 2022 to 2030. The adoption of real-time payments by businesses surged following pandemic lockdowns in 2020 as they filled in the gap of the payment ecosystem with contactless and timely payment solutions. Prior to real-time payment solutions, businesses—and specifically finance teams—struggled with wasted time due to operational problems, including slow payments and failed expectations between what was promised and what was ultimately delivered.
One-third of business payments are still made manually, but making the shift to more efficient digital payment solutions can reduce risks and preserve revenue that might otherwise have been lost. Mitigating the risk of payment failures is one benefit that can come from using a reliable payment infrastructure. Not to mention, businesses would have more control over the payment process. Being able to move money quickly and knowing the status of individual transactions is an important feature when payments need to be made in a short amount of time. It also removes any risk associated with credit payments as transactions are cleared and settled in real time.
International payments are cause for a new challenge altogether. Businesses and individuals making international payments in a multitude of currencies often experience high transaction and regulatory fees. The additional cost of doing international business can certainly add up, and often these charges are passed on to the payee. The combination of high transaction fees, slow speeds and poor transparency have dominated international payments, making them highly inefficient.
National bank transfer solutions, similar to ACH (automated clearing house) transfers, can allow costly transfers to be transacted across lower-value rails using the latest digital technology, ensuring customer convenience, reliability and fast payments. These payment solutions provide a better result for both the payer and the payee as they provide lower transaction fees, and the transfer can be made within a couple of days—as opposed to wire transfers, which are costly and take longer to process.
The global payments industry still has a long way to go to achieve efficiency demanded by consumers, but the pandemic exponentially accelerated its ease of use and accessibility. The digital transformation led to more efficient digital payment solutions and changed how businesses operate, and this became a foundational pillar to securing a positive customer journey. Customers and business partners in the payments industry value trust above all else, and payment providers are increasingly offering high-security solutions and data that tracks the payments journey, creating reliable end-to-end communication.
Next Steps in the Customer Journey
Every touchpoint of the customer journey has been made more convenient to the consumer by going digital, and no facet of any stage should be overlooked, right down to making the transaction as seamless as possible. The reality is, if consumers have the option to advance at their own pace and can resolve problems on their own, they are more likely to proceed to the next stage.
Enhanced innovations in technology can ensure customers are given the information they need to keep them progressing forward, but privacy is also a highly important element to factor in. Demand for a fully digital, custom-tailored payment experience will surely be high in the coming years as the payments industry meets ever-evolving consumer demands and payment providers expand capabilities to increase efficiency, optimize security, deliver transparency, and make digital payments even more accessible around the globe.
Eddie Gonzalez is founder and CEO of i-payout.