Financial services

The Vital Role of Customer Payment Choice in the Financial Services Industry

It’s no secret that the fintech industry is one of the most active and rapidly changing spaces in the tech world. The payments sector is a particularly successful player in this already highly lucrative industry, with Deloitte finding that it occupies the largest sector of the European fintech market.

Customers are being offered more payment methods than ever before, and this wealth of options will only increase as the payments market continues to grow steadily. In light of this, how can businesses and consumers make the most of these innovations to benefit from improved payment experiences within the financial services industry?

Improve payment security

Fundamentally, the proliferation of new payment methods we’re seeing is driven by customer demand and expectations. These are underpinned by a variety of broader social, economic and even political factors. Among these, payment innovation responds to a consumer need for increased security. This has become a priority following the prevalence of online fraud, as criminals have taken advantage of increased online shopping during the pandemic. In 2020, more than £69million was stolen from consumers via online shopping scams in which customers entered their card details on fake websites without knowing it. Understandably, as the magnitude of this problem has become widely known, customers and businesses want to seek and provide security assurance, respectively. One of the main ways to do this is to ensure customers have access to familiar and trusted payment methods.

By offering digital wallet payments, businesses can not only ensure that customers feel safe knowing that their payment will be processed securely through Apple Pay or Google Pay (among others), but can also use the features advanced security features of this method.

With 39% of UK businesses identifying cyberattacks in 2022 so far, information security is a priority for businesses and customers. Unlike a traditional card payment that requires customers to enter their card details, digital wallet payments allow customers to pay simply by confirming their identity using the fingerprint or face scanner built into their smartphones. This sends the payment to the merchant without sharing any sensitive information, as the card details are encrypted, which not only makes it a more secure option, but also a more convenient one.

Convenience Driven Innovation

All of the new payment methods and paytech innovations we see emerging have one fundamental common goal: to provide greater convenience to customers. Online shopping has become increasingly popular thanks to the convenience, speed and flexibility it offers in both the retail experience and the payment options available. Consumers have become accustomed to it and it has shaped expectations for all customer experiences. Therefore, it has become more important for financial service providers to think about how they increase the ease and accessibility they provide to their customers.

Financial service providers must ensure that they meet the payment preferences exemplified by consumer spending habits. With 10 million mobile contactless payments being made in the UK in 2022, it’s clear that financial service providers need to focus their attention on delivering the digital solutions that customers prefer. This means not leaving alternative payment methods to the retail industry. The financial services industry can unlock significant benefits by using non-traditional payment options, from digital wallet payments to digital payment links sent via SMS or social media.

Although many customers, especially Gen Z and Millennials, tend to opt for digital options, for some users and situations, meeting in person is the first choice. Fortunately, one doesn’t have to come at the expense of the other – financial service providers can use a digital ecosystem that brings all of these options together. This allows financial industry organizations to ensure that across all of their channels, whether in person or at one of their APMs, their service is always convenient, accessible and flexible. By doing so, these organizations can reap a host of benefits, such as customer retention and increased service usage.

Business Benefits

Innovation in paid technology is driven by the value it can bring to customers, but this is inseparable from the value it brings to the companies themselves. Frustrating checkout processes lead customers to abandon their online shopping cart or drop out of a financial services onboarding process. With this in mind, it is crucial that financial services organizations see payment innovation not only as a “benefit” for their customers, but also as one of the most important tools at their disposal to ensure the success of their company. By offering a multitude of payment options, organizations gain a significant competitive advantage over organizations that don’t make the effort to tap into the vast group of digital users while delivering the highest quality in-person services to those who prefer them.

Stephen Ferry, Managing Director, Pay360