Specifically, Tony suggests, it will be digital transformation that will differentiate the leaders in payments from the also-rans. That applies across the payments sector: in the peer-to-peer, bank-to-bank and consumer-to-merchant arenas.
The relationship between PayPal and Venmo illustrates how digital has revamped the payments world, Tony writes. By acquiring Venmo in 2013, PayPal demonstrated how payments players are taking cues from the tech industry – e.g., applying design thinking principles and purchasing competitors’ IP – to build a moat around their brand.
In addition to advanced digital expertise – table stakes in today’s payments sector – what other factors will separate the payments winners from the losers?
Tony points to three:
Payments Success Factor 1: A focus on the end-user
Nowhere is the presence of digital more evident in payments than the user experience. Just two decades ago, for example, it was all but impossible for small businesses to accept credit card payments online. Today, a host of payments vendors offer this service for a nominal fee.
One of those firms, Square, even used the form factor of its first product (a square-shaped smartphone dongle) as its brand name. For present-day payments players, what the user sees and touches is paramount.
That’s especially true on mobile: A growing number of banks are not just mobile-friendly but mobile-first.
Payments Success Factor 2: A willingness to invest in partnerships and tech
PayPal and Venmo offer just one example of the kinds of partnerships or integrations that successful payments providers pursue.
Another is Zelle, the bank-to-bank payments platform that several major U.S. banks partnered to create. And some of the world’s largest tech companies offer their own payments tools, such as Alibaba’s Alipay or Apple’s Apple Pay: both of which are designed to integrate into third-party apps for seamless purchases or transfers.
It’s because the user experience is so important that Big Tech is making these kinds of investments in seamlessness. Getting the back-end technology right, and acquiring or partnering with other firms as needed, is proving essential for payments leadership.
Payments Success Factor 3: A niche focus
PayPal’s strategy shows how specialization is becoming the norm in the payments sector. Venmo serves as PayPal’s peer-to-peer payments tool. But PayPal also owns Braintree, whose focus is on facilitating consumer-to-merchant payments in ecommerce.
Square has taken a similar approach, with its namesake brand oriented towards SMBs and Cash App allowing peer-to-peer transfers.
By establishing themselves in a specialized niche, payments providers can corner their market, so to speak, and enhance acquisition and retention. Expect this trend to continue as retailers and electronics companies explore new payments opportunities.
The Final Word
Payments is a broad sector, with a host of providers vying for consumers’ and brands’ business. Yet despite their diversity, payments providers share certain success factors: a focus on UX, significant investments in partnerships and technology and offerings for specialized market segments.
Read the complete article, as featured on Admap here:
The Future of Payments: Mobile UX and P2P payments drive evolution in financial services.