As the payments ecosystem expands into the worlds of crypto and the metaverse, keeping up with customer expectations, regulations and technological shifts is becoming a big challenge for payments providers. The only thing we can be certain of is that things will keep changing! Staying relevant in this environment will require a level of agility that many incumbents have yet to attain. But I believe the answer is to understand that designing payments systems is becoming more and more like building a complex Lego model, and fitting the right blocks together will require partnerships and cooperation. 

At the recent Women in Payments symposium, I had a lively discussion on this topic with Kavita Rao, head of personal, business, and mobile banking at City National Bank; Marla Sofer, industry solutions CTO and financial services lead at Microsoft; Melissa Burns, North America sales director at Volante Technologies; and Geetha Gandhi, global payments and app transformation lead at Avanade. 

I’d like to share some of the takeaways from that discussion. 

Payments innovation requires an adaptable foundation 

The changes in payments are not going to slow down anytime soon. As the industry adjusts to recent innovations like embedded payments and buy now, pay later—and prepares to incorporate new challenges like cryptocurrencies, central bank digital currencies and payments in the metaverse as they become more mainstream—providers that can’t adapt quickly will be late to the party and will struggle to capture market share.  

In order to be agile enough to adapt to all of the new technologies and products that are emerging, payments providers need a stable foundation to build on—one that can incorporate all of these additional pieces and have the capacity to adapt to the ones we don’t even know about yet. If you think about each of these payments products as building blocks, like Lego, you need a foundation that keeps everything in place and provides structure, like the mat you can use to lock in those first blocks. That foundational technology is the system’s cloud-based infrastructure. It has to make payments secure and make them reliable.  

According to Accenture Research, payments leaders are using this building-block approach to unify disjointed systems and channels into an integrated commerce experience—allowing customers to seamlessly pay with and accept any payment instrument in any transaction. 

Adaptability is enhanced by building blocks that fit 

Customers are pushing back against traditional closed, walled-off proprietary applications and systems—this old model is not going to work for them in a world of super-apps and virtual environments. Meeting the growing demands of customers and the diverse ways they want to be able to pay will be easier for providers that are part of a collaborative payments ecosystem.  

Doing everything in-house is going to become increasingly difficult as the definition of “everything” continues to expand. Systems can’t be changed overnight to build or accommodate a shiny new product. Instead, those systems will need to evolve, to be modified so they are ready for the metaverse, for scan and pay, for QR codes and more. Partnerships between banks, fintechs, super-apps, cloud service providers and other players will multiply. To reduce the complexity of this payments ecosystem, interoperability and open APIs will become vital. 

Leaders are preparing for a future where they compete and cooperate with rival banks, fintechs and others in a world of open payments networks.
Accenture, Growing Payments to New Heights

Interoperability means that all the Lego bricks can fit together to deliver seamless services to the end customer. If each system uses a different type of brick, it limits the opportunities to build and expand a provider’s payments structure. It all needs to click into place. If everyone is using a modular system that’s interoperable, there’s no need to take the entire roof off the structure in order to plug and play new services, new rails or any new developments that come along. Nor is there a need to go back to the drawing board to develop a new infrastructure to support them. Instead, the evolutionary foundational architecture I mentioned above provides a stable base for new additions.  

Innovation cannot compromise security 

Being part of a modular ecosystem raises questions of security. If there is any weak point in the system, all the integrated pieces could become vulnerable and the stable Lego structure becomes instead a flimsy house of cards. Customers are eager to use new and convenient payment products, but not at the cost of weaknesses in security and fraud prevention. 

Incumbents that were used to having their own data centers and holding everything safely within their walls now need to adapt to an interconnected environment. Once they have made the move to cloud systems, however, incumbent banks and payments processors have an advantage over the disruptors in the areas of security and identity, thanks to their long experience and built-in processes. They can take the lead on the security front while partnering with fintechs and other digital partners that provide innovative products. 

“Customers want payments to be hidden. They want them to be simple. They want the flexibility of any type of payment: ‘I want to transfer from my bank, I want to use cryptocurrency, I want to use a QR code, I want to use a credit card or I want to split payment with my friend.’ But at the same time, they want it to be secure and reliable, because they always want to be able make a payment.”
Kavita Rao, City National Bank

In addition to traditional security and fraud concerns, customers are worried about their data security. How is their data being captured, where is it being captured, where is it kept, when and how is it destroyed, and who has the keys to it all? Data is a valuable product, and customers will want to know how it is being used in the payments ecosystem and whether it can be accessed or bought from outside that ecosystem.  

Balancing agility and innovation with security and customer protection will be a significant challenge in payments as these partnerships and ecosystems grow and become more complex. Creating that adaptable foundation now can help incumbents prepare for whatever comes next.  

To grow your presence in the payments ecosystem, contact me here. To learn more, read the full report, Growing Payments to New Heights: 

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