Fluctuating economic conditions affect consumers’ spending capacity, while corporations and SMBs grapple with working capital and collections-related issues. As digital adoption revs up, increased volumes and instant processing requirements are stretching the legacy payments infrastructure. In addition, post-pandemic concerns about “risk on all fronts” – liquidity, credit, non-compliance, and cybersecurity – aggravate the situation.

Mix of external, operational, and technological factors concern payments executives

Pandemic after-effects fueled industry transformation to a new era as payments become embedded, immersive, and invisible. Embedded Pay includes payments within products/offerings to enable a convenient, personalized customer experience. We call this CX-centric approach the Payments 4.X era.

Payments 4.X – customer eXperience defines the post-pandemic era

Banks are taking steps to ensure Payments 4.X era profitability. Investing in third parties to develop innovative propositions (52%), orchestrating an API-based ecosystem, and moving into a platform-based business model (45%) are the key priorities of executives to boost profitability.

How banks plan to boost payments profitability

Creating value from data is essential for survival. But, only 18% of firms say they consider data an asset to be shared with third parties for value exchange. Data monetization is hampered by perceptions that compliance may hinder talent/resources to harness data are scarce, and subject-matter expertise is not readily available. It is essential to leverage data and consider it as an asset class.

Firms maturity in using data as an asset

Banking infrastructure generally falls short of capabilities necessary to handle rising digital payment volumes performed on various instruments/methods. Given the different capability levels of firms, there is no “silver bullet” solution. There is a growing appetite to implement payment hubs because they facilitate payment instrument convergence, network connectivity, personalization options, and greater customization and control.

How capable are firms around core payments processing platforms?

Payments data can be transformed into a profitable portfolio of value-added commercial services/features to increase data monetization avenues. In the short term, banks can monetize their current offerings by overhauling technology and specializing services. In the medium term, banks can augment technology capabilities to enhance and commoditize offerings. In the long term, investments in innovation and technology for value-added services will offer competitive advantages.

Where is the money?

High-performing Payments 4.X early adopters will become tomorrow’s embedded finance leaders. While there is no standard playbook, a customized game plan is essential. Most importantly, calibrate scope (customer segments, types of offerings) and collaborate to scale (geographical expansion, product innovation, capability augmentation) for profitability.

Transform Payments to Possibilities