Digital innovation to create new services
It’s no secret that the coronavirus pandemic has helped accelerate the shift to digital payments – but surprisingly, the need to transact remotely is not driving these trends. On the contrary, there is plenty of data to suggest that digital transactions were already on a digital switch-over path before the pandemic – COVID-19 was just an acceleration of what was already a transition underway.
Luke Gebb, senior vice president of Amex Digital Labs, told PYMNTS in an interview that there are two reasons behind the current transformation. The first, and most obvious, is that the technology needed to support digital payment transformation has only recently matured to a point where it can be used to conveniently and securely conduct transactions. Second, with the transition of payments from analog to digital comes an explosion of new features and financial capabilities that were not available to consumers before.
For example, Gebb said that digital payments come in more form factors today and offer a lot more functionality than ever before. There are buy now, pay later (BNPL) services that weren’t available a few years ago, account-to-account (A2A) services like Venmo and Zelle, and even crypto, which offers cross-border transactions, high yield and loans. options, he explained.
“You just have this blast [of tech] and the ability to deliver all of these features, and consumers want those features, ”Gebb said. “The pandemic, when it arrived, added security concerns around contact with money and proximity to other people, and so it only accelerated this trend. “
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Seismic change in payments
The digital payment transition is happening everywhere, with people exchanging money for credit cards, debit cards, and peer-to-peer (P2P) payments, Gebb explained.
He pointed to Amex’s own data which shows how cardless transactions jumped 45% from 2019 to 2020. Amex has seen an explosion in payment volume thanks to its partnership with PayPal and Venmo, he added. .
Gebb said consumers are demanding more options than ever before and therefore the onus is on merchants to provide them. Consumers want to pay using whatever method they choose, whether it’s a specific credit card, their choice of bank account, or some other emerging method.
Consumers are also demanding greater security in digital transactions, leading to the adoption of new concepts such as tokenization, where Amex facilitates a transaction using a single virtual card number.
“Scenarios like this, where safety is at the forefront of customer concerns, will increase,” Gebb said. “Also, this notion of having your customer’s back will become more important as payment options develop and become more complex. “
Call for Clarion merchants
The result is that merchants must prioritize innovation in digital payments or could risk losing business to those who do. Gebb sees innovation across the entire value chain as essential, from product sourcing and display, sales channels and maintenance monitoring.
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“Traders need to innovate across the spectrum, and this is what we see happening among the most successful,” Gebb said. “And the absence of it will certainly be detrimental.” The good news is that most traders seem to be receptive to this need.
Gebb said there will continue to be a proliferation of rail types and payment options as payments continue to transition to the digital realm. It sees even more growth in terms of open banking interfaces, cryptocurrencies and BNPL.
There will also be more demand for borrowing services and those who want a return on the dollars they hold, Gebb believes, and security will continue to be a major focus.
“This kind of arms race will develop between companies who want to protect their customers, pushing the boundaries of security faster than fraudsters can operate in the ecosystem,” Gebb said.