What is the real currency of a payment?

In the big scheme of a customer ecosystem, payments always tended to take a back seat. A 'back end' business process, little more. The inconvenient truth at the end of a buying decision.

But in the digital economy, a payments experience is one of the most critical touch points between a business and their customers. So it's really interesting to see technology providers start to build a value proposition around this core function of payments processing.

Pure play payments FInTechs (let’s call them PayTechs) are searching for a point of difference.

At the same time, payments are also becoming increasingly ubiquitous, so PayTechs are looking to move beyond payments to add inherent value to a transaction. Some are obvious product add-ons - such as data enriched payment instructions - others are more subtle, such as embedding the payments experience deeply in to a platform or user experience.?

A ‘point of difference’ is becoming increasingly important to enable PayTechs to increase market share. If it is not a ‘point of difference’, potential customers are searching for a product roadmap that looks to the future of payments, which is undergoing a generational change.?

Initiatives like #OpenBanking and #NPP are also starting to modernise the payments ecosystem so we find ourselves in an incredibly interesting time. How do you make your payments solution shine?

Cheat Sheet - follow your D.R.E.A.M.S

I often dream about payments, but I do accept that it’s?probably not normal… DREAMS, however, is a handy acronym about discovering the true value of a transaction:?

• D - Data Insights
• R - Rewards
• E - Embedded Finance
• A - Accrual?
• M - Management?
• S - Security (Simplicity & Speed)

Here’s a handy breakdown of the thinking behind each value proposition:

D - Data Insights

In Australia, data insights via Open Banking - part of the Consumer Data Right - is the latest case study being showcased by new payments providers. Beyond this, a global standardisation of messaging (ISO 20022) has enabled businesses to include more data in a payments package - allowing for all manner of insights to a business and to consumers, of course.

There were early trailblazers like smart receipts Fintech Slyp who showed that a simple application of data enrichment provides a great customer experience. As real-time payments infrastructures across the world begin to move businesses away from batch file uploads to line-by-line processing, we will see data play an increasing part in the payments value proposition.

R - Rewards

From loyalty to affiliate and referral programs, rewards are an increasingly popular service that businesses are looking to incorporate in to their user experience to retain and reward their customers.

Leading payments services providers like Stripe are rolling out their own embedded loyalty programs to win market share and target small to medium businesses -a highly coveted target market

Typically, loyalty platforms reside alongside a payment within a digital wallet (technically, a stored-value facility) in the digital economy, which is one of the fastest growth areas in the payments ecosystem.

E - Embedded Finance?

Embedded Finance has become something of a buzz word(s) last year but it continues to show huge potential for large enterprises to become a financial service provider by offering embedded payments within their existing (and often significant) ecosystem. The customer value proposition here is that it reduces the need for anyone to leave their platform of choice simply to transact - the ultimate 'sticky' customer.

The obvious use case for embedded finance would be a metaverse like Fortnite, where there is an entire economy of fiat on/off ramping in exchange for v bucks. But there are more ominous examples such as Australian telecoms giant Optus releasing a subscription management platform (subhub.com.au) where customers can bundle and manage multiple subscription payments from within the Optus platform (including Netflix, Microsoft, Binge, etc). Oh, did I mention that they also have a loyalty platform...

A - Accrual ?

Whether you are rounding up your daily transactions to a savings account, or donating to a preferred charity, the idea of 'acorn savings' and accrued roundups is now prevalent across the Australian payments ecosystem amongst major banks and retail giants including Woolworths Supermarkets .

Whilst this may appear to be a basic customer experience, the idea of routing parts of a transaction value to different merchants and settlement flows required a modern payments capability. We can expect to see these dynamic settlement tools open up even more use cases in the short term.

M - Management

Essentially the first use case of Open Banking from FinTechs such as Frollo , the Personal Financial Management (PFM) app remains the key example of how modern technology is helping people with financial literacy - a truly positive social impact of technology.

Although Personal Financial Management is not a new concept, the digitisation and automation of this process is making a big difference and is now embedded into Internet Banking of several major banks and financial institutions.

S - Security (and Simplicity... and Speed...)

Finally - and perhaps most obviously - the ultimate payments experience is one that is simple, secure and fast. Not just for a consumer (seamless one-click checkout) but also for a business (fast settlement with real-time updates on a payment status).

With speed comes convenience, but it is not without its challenges. In the UK, for example, when Faster Payments was launched in 2008, it simply sped up fraud before a consent framework was retrofitted to fix the problem.

Similar infrastructure such as the New Payments Platform (Australia) is experiencing high (unexpected?) levels of merchant fraud. As such, we should expect some great innovation in the fraud, risk and consumer protection area's of the payments ecosystem in the short term.