How Innovation in Payments Creates Unique Disruptions – Deltec Bank

October 14 19:20 2019
How Innovation in Payments Creates Unique Disruptions - Deltec Bank

Deltec Bank
New technologies in the payment sector will enable agencies to bypass the traditional value chains that exist. That means the profit pools will see a natural redistribution effect that shifts the emphasis from single-channel providers – Deltec Bank

Companies can go through hundreds of transactions every day as consumers purchase goods and services. The payments that occur are migrating away from cash because customer preferences are shifting to mobile and online channels.

Even in-store purchases are trending toward debit and credit card transactions instead of cash.

Higher levels of competition, combined with a changing regulatory structure, are leading the payments industry toward declining profits. Customers are also reluctant to switch to something new unless there are significant benefits headed their way.

That means new technologies often see limited adoption. How can innovation happen in such an environment?

Fundamental Forces that Impact Payments in Financial Services

The disruptive potential of payments in the financial service sector can create unique situations that offer specific outcomes to consider.

1. Cost Commoditization

Early adopters of innovative products will accelerate the commoditization of their cost base. This action will remove them as a point of competition. Machines will continue to replicate human behaviors to help institutions manage capital and labor using a single set of capabilities for the industry.

2. Interface Ownership

The power in the payment industry transfers to the owner of each customer interface as innovation occurs. That means manufacturers must become focused on their scalability if they want to stay competitive. The market will see several different ideas that individuals and companies may use before consolidating to a handful of popular options.

3. Monetization of Data

Data is what will set providers apart in the future world of the payments industry. Multiple sources will combine with static information sets to become useful in real-time situations to improve customer experiences. Businesses could even use this advantage to re-target customers in real-life with a method similar to what online advertising currently uses.

4. Profit Redistribution

New technologies in the payment sector will enable agencies to bypass the traditional value chains that exist. That means the profit pools will see a natural redistribution effect that shifts the emphasis from single-channel providers.

5. Enhanced Regionalization

Each region will have different regulatory priorities to meet because of the unique challenges that communities face today. Innovation in the payments sector will help multinational companies function like a local business because it will have enough information to act on specific customer needs. That means distinct paths are possible in different areas of the world while still using a preferred provider.

Will Payments Fragment in the Future?

Payments may fragment with a push toward innovation as different merchants and intermediaries try various schemes to corner a market segment. Customers would receive customized experiences with this approach, but banks would gain access to the entire payment profile of a consumer.

If payments move toward becoming a loss leader, then the industry will look for new strategies to implement. Smaller providers will try to find partnerships to ensure their survival. Merchants and customers could benefit from such a scenario.

Local payment solutions will dictate the future market. That will help to create an outcome that fits the lives of tomorrow’s customers. Today’s providers must look for ways to take a leadership role in this sector in these critical areas to continue receiving consumer interest.

Disclaimer:  The author of this text, Robin Trehan, has an Undergraduate degree in economics, Masters in international business and finance and MBA in electronic business. Trehan is Senior VP at Deltec International www.deltecbank.com. The views, thoughts, and opinions expressed in this text are solely the views of the author, and not necessarily reflecting the views of Deltec International Group, its subsidiaries and/or employees.

About Deltec Bank

Headquartered in The Bahamas, Deltec is an independent financial services group that delivers bespoke solutions to meet clients’ unique needs. The Deltec group of companies includes Deltec Bank & Trust Limited, Deltec Fund Services Limited, and Deltec Investment Advisers Limited, Deltec Securities Ltd. and Long Cay Captive Management.

Media Contact
Company Name: Deltec International Group
Contact Person: Media Manager
Email: Send Email
Phone: 242 302 4100
Country: Bahamas
Website: https://www.deltecbank.com/

  Categories: