The search for competitive advantage is reaching heights

In the first post in this series, we looked at some of the developments driving change in payments right now: new competition, new customer expectations and new technologies.

Banks, in response, are looking for new ways to increase the value they deliver to customers. For many banks, this has involved moving away from traditional value-added services (VAS) to new forms of VAS, like working capital, alternative payments, cross-industry services and customer relationship management. With such a huge range of VAS options available, banks also need to decide whether to build them on their own or through partnerships.

Whichever route they choose, banks seeking to launch new types of VAS will need to upgrade their core systems and adopt technologies like advanced analytics and artificial intelligence. These can be used to enhance front-office operations with features likes liquidity forecasting, FX management, risk management and operational outsourcing. These are already making a difference at some banks.

For instance, Citi is developing an AI-based risk analytics scoring engine to review trade transactions. Meanwhile, Standard Chartered has announced an augmented intelligence engine for trade document processing which will automate the legacy manual review process currently hindered by the prevalence of unstructured paper documents.


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The industry’s move towards new forms of VAS is being matched by growing consumer interest in alternative finance arrangements. This presents merchants and financial institutions with a need to deliver these services at the point of sale, which some payments players have moved to do.

For example, Mastercard has acquired Vyze, a technology platform that delivers more choice and purchasing power to customers who want their point-of-sale payment options to match the flexibility and convenience of e-commerce. Vyze also enables merchants to connect with multiple lenders, allowing them to offer their customers a wide range of credit options both online and in-store.

But these examples of VAS innovation are just the tip of the iceberg. In the future, we expect to see the emergence of more value-added services which will supplement transactions on payments terminals and offer extras for retailers and consumers, including loyalty and coupon offers seamlessly integrated into transactions.

As new forms of VAS become important sources of revenue and market advantage for payments players, the platform-as-a-service (PaaS) model offers a way to expand into higher-margin value-added services as a platform integrator.

In particular, banks targeting the small-business segment are now collaborating with third-party providers to integrate e-invoicing, accounting and financial management services as well as create loyalty programs.

This is an exciting time of experimentation and innovation for VAS in payments. Not every new initiative will succeed—that’s the nature of trying new things—but there seems to be no shortage of opportunities for new developments in this space.

Our next blog post will wrap up this series with a look at one final trend: card giants entering the interbank payments ecosystem.


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