Payment platforms and retail banking: who owns the convenience factor now?
As a waypoint in the evolution of digital banking and ecommerce, ‘payment gateway services’ or payment platforms as we more often call them, have become hugely significant for both users and banking brands, especially retail bank brands, in the last few years. Seemingly ubiquitous and integrated into eCommerce propositions galore, their relevance to our everyday lives and by default, our spending habits, are pretty much a done deal.
The convenience they provide by enabling effortless transactions is something we just expect. Using them at the point of checkout or in digital correspondence (SMS / email) is now second nature to most, irrespective of where we are in a transaction. Though some may be excluded due to social and technical pressures, the majority of the population by and large recognise them and yes, certainly trust them.
However, there remains an outstanding question of convenience - the enabling factor that helps us all see retail banking brands in their best light: who is enabling whom to be more convenient? The banks? The payment platforms? Or both?
Who made whom?
If we pause for a moment and think: Apple Pay, Google Pay, Amazon Pay, PayPal, Wise, Stripe, Sum-Up, Worldpay, TruLayer.... and even brands such as Klarna, we automatically register recognition and trust. To those for whom cheque books are something they saw in a museum once (yes, that’s you Gen Z), effective payment gateways and platforms are probably more important than any individual banking brand value. That’s because their loyalty to banks is fractured; consistency or availability to transact with one of several trusted options at the point of sale is what matters most. Considering younger generations seemingly find WiFi more important than toothpaste, it would appear that we are only heading in one direction....
Even though most banking brands link up to some or all of these platforms, the bank itself is in an odd position, in that it isn't the point of absolute convenience anymore; it’s the payment platform / gateway. For other transactions out of the point of sale / ecommerce journey, such as investing, saving, splitting bills, looking at insurance etc., retail banks for one do indeed retain their function – but, as we know, purpose is nothing without brand, right?
The place of a retail bank brand in the financial ecosystem is no less important but as the enabler of easier lives, do they own that position as firmly as they once did? The boundaries are being blurred.
The challenge
So, here’s the rub. As payments become increasingly digital, mobile and integrated with other financial services, the key challenge for retail banking is remaining the key point of convenience (and relevance) in everyday transactions. In doing so, retail banks will generate advocacy which they can capitalise on for other services away from the influence of those dastardly (but ever so fabulously useful) payment platforms. What do they face and how do they design their way to maintain the edge?
Five proposition headwinds
In finding the required convenience:relevance edge, there are perhaps five broad headwinds to navigate for bank brands that want to stay ahead:
1. Increased competition and experiences: Yes, the big one. The one that never goes away – ‘threat of new entrants’, anyone?
Market analysis may suggest layers of saturation within eBanking or Investing platform sectors and so on. Yet, unless a brand is very specialised, niche and a little more protected, most banking brands will still face increased competition from non-bank players such as fintechs and big tech companies for one.
Imagine if Apple suddenly opened up a bank – either licensed directly or via an established ‘high street’ or digi brand... other banking brands would have to up their game overnight. Why? Simply because of the brand challenge. ‘Being more Apple’ could well be some people’s response, but is that really differentiation? Banks will need to develop innovative experiences to stand out. Perhaps ones that even Apple would want...
2. To fee or not to fee, that is the question: Classic fee-based revenue streams from packaged accounts to certain payments will become an even harder sell, so banks will need to explore new revenue models.
We are told that we live in a subscription-based world, so it’s not a great leap to foresee banks charging for great experiences, not just services. And the experiences will have to be great of course, or failure is a real option as the market will also become less tolerant of poor value and experiences.
Loyalty is hard won, easily lost, as is advocacy. By extension, fee-sharing arrangements with third-party providers could well become the norm, transparent to end-users for greater believability in the ‘master’ brand itself. This could have great implications for how banks market and position their brands to consumers.
3. Shifts in user expectations: An old one but a good one. As payments become even more streamlined, more customised perhaps but certainly even more integrated with other financial services, users will expect more from their banking brand(s). Banks will need to focus on delivering seamless and convenient experiences across all touchpoints, even if they’re not payment related.
This is all about turning the mundane into an experience worth marketing... imagine if statements were animated and not static, for example. A programme of ongoing user research is one way for any brand to maintain alignment with the changing needs and ever-increasing expectations of users.
4. Link ups: As the payment landscape becomes more open and interconnected, there will be opportunities for banks to partner with other actors in the ecosystem, such as fintechs and payment platforms.
Banks will need to think strategically about how they can leverage these partnerships to enhance their brands and deliver value to consumers.
5. Insight and data: Banks are already awash with data about consumer behaviour, choices etc. Banks that are able to do something meaningful with this data that connects to ‘1-4’ above will be winners.
Data scientists and analytical skills will be gold-dust in the future but so will the increasing importance of qualitative insight; specifically understanding the context of use of banking services and the relevance / value of experiences banks will seek to invest in to remain relevant.
Finding the edge
To the initial question about who is enabling retail banking to be more convenient, we’d suggest that convenience is now a shared experience from the total capability of the sector, reliant on integration, infrastructure and a broad understanding of good customer experience.
So, adapting business models, features and functions of service are key to owning the factor of – delivering – convenience. Combine this with a branding strategy to remain competitive and relevant to consumers, and a retail bank should be able to hone its competitive advantage.
If supreme convenience is increasingly what we term as ‘a hygiene factor’, then the new challenge for retail banks is going to be staying ahead in becoming the brand that everyone wants to have in their virtual wallet. Because, convenience aside, being the associated brand that people want to talk about or show off will always be the ultimate goal.
Watching the banking landscape shift and change is going to be very interesting... your users will make you do the same, that’s for sure.
Great experiences start off with a conversation.
If this article sparks an idea, let’s chat: get in touch with us today.
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