5 key themes for FIs looking to create next-generation payment experiences

Bhavin Turakhia is co-founder and CEO of Zeta

The pandemic precipitated a surge in contactless payments as most businesses moved online and dramatically accelerated the digital shift in the retail payments industry. More than 75% of Americans use some form of digital payment, with more than 50% of American consumers shifting their online purchases to physical stores since the start of COVID-19, according to a recent McKinsey report.

The gap between what customers want and what financial institutions can deliver with their legacy platforms continues to widen. Customers – influenced by the experiences they have at tech companies like Uber, Amazon and Google, as well as new financial technologies – expect their banks to replicate the same level of digital-first experiences, personalized and “in the moment”.

When it comes to those ubiquitous pieces of plastic – credit cards – what cardholders carry in their wallets today differs very little from the credit cards that were first created in the 1950s.

Image credit: historyofinformation.com
Image credit: dinersclub.com

A map today basically looks and functions the same as it did 50 years ago at a time when almost everything else in our world has changed. What should be the next step in the evolution of these card experiences?

How can FIs fill this gap?

We have identified five key themes that banks need to address to deliver future-proof retail and card payments experiences:

  1. Now, not later;
  2. User-managed controls over customer service;
  3. Dynamic vs static security;
  4. Hyper-personalization for ONE’s customer segments; and
  5. Present when and where needed.

Let’s consider each of them in detail.

1. Now, not later

Customers today are used to experiences and offers delivered in real time, which is no different with retail payments and credit cards. Forty-four percent of the people interviewed in the Deloitte Consumer Payments Survey 2021 strongly indicated that instant issuance would improve their payment experience. As with issuance, issuers need to make the payment process smooth. This includes offering customers the ability to transfer their cards to their digital card wallets and preferred merchants.

Financial institutions are not and never have been limited by their imagination or their strong will to offer immediate solutions to their customers. However, they have been undermined for years by legacy technology platforms that date back to the dawn of the internet age and were never designed for the immediacy that today’s customers expect.

2. User Managed Controls Over Customer Service

As fraud rates continue to rise, customers want to stay in control. More … than 60% of Millennials and Gen Z customers say they are likely to use card controls. In recent years, issuers have responded to this expectation by offering controls such as the ability to block transaction types and freeze cards – but these have become table stakes. Customers now expect even greater control and transparency over their cards and payment methods, including geolocation limits, individualized spending limits, time-of-day controls, merchants as well as specific merchant-related limits.

Customers want the ability to control their cards as well as the ability to do so from their mobile devices. They no longer want to wait in call center queues to have their cards blocked/unblocked or set transaction limits. The value proposition speaks for itself. McKinsey found that the cost of serving customers (100 being a market average) is below 40 for fintechs (which rely solely on digital support channels), around 55 for top performing banks (which have well-defined digital support channels) and of 100 for the best performing bank (with average or underdeveloped digital support channels).

3. Dynamic vs Static Security

Current card security features are static and prone to fraud. All security features of a credit card today are static in nature, including PIN (four to six digits), fixed card number and CVV (three digits) – all of these features have a lower level of security than a typical customer’s Netflix account.

A sophisticated fraudster can easily bypass these security features and cardholders are naturally concerned: 77% of them consider security as one of the most important things they look for when choosing their payment method in the future.

Issuers have the ability to get ahead of this trend and offer dynamic CVV, PIN, and expiration dates that change every 30 seconds, making it difficult for anyone to access data in the event of a breach of their information. Another innovation is to instantly issue unique and secure virtual cards that can be issued instantly for one-time use to prevent the card number from being exposed. And that’s just the start – all together, these features can help to fundamentally nullify fraud.

4. Customize for a segment of ONE

Customers demand greater personalization. According to EY, 81% of Gen Z customers believe more personalized service can help deepen their relationship with their issuer4. Therefore, issuers need to think about how they can expand their ability to offer personalization across many variables, including form factor, merchant category, transaction amounts, demographics, location , etc., providing unique experiences for each customer.

An example is digital art. Issuers could offer customers the ability to personalize their digital cards through digital art and micro-animations, adding additional layers of digital experience. Likewise, rewards programs and fees can be tailored to the needs and personality of a specific customer and create truly tailored and enjoyable value propositions.

5. Present where and when you need it

In the past, people fetched water from lakes and rivers. This same water now flows into our homes when and where we need it. Banking, too, is undergoing a similar transformation – where customers previously visited branches and physical locations to pay and transact, they now want to be able to make payments, convert purchases into loans, receive offers – in a contextual and temporally relevant way.

The most sophisticated FIs recognize this and have invested not only in building their own digital channels, but also in collaborating with distribution partners, i.e. fintechs, co-brands and suppliers who can distribute their card products as the bank becomes more integrated. This allows them to both generate greater customer acquisition and also creates joy when customers experience a credit card or other financial product (e.g. BNPL loan) as part of a purchase, or a visit to a store, or at a time when they are actively engaged with a partner’s brand.

What is the next step ?

If banks can deliver and build on these experiences, they can not only meet changing customer expectations, but also future-proof their business against emerging digital competitors.

However, with the legacy platforms that financial institutions rely on today, this is nearly impossible to achieve and it is difficult to quickly tackle changing market realities.

Meeting next-generation customer needs requires a next-generation platform. Card processing platforms like Zeta are built from the ground up with cloud-native, API, and digital capabilities, and come preconfigured with rich customer experiences and the ability to hyper-personalize offers, empowering issuers to truly shape a better future for their customers.

Bhavin Turakhia is co-founder and CEO of Zeta, a unicorn of banking technology and prover of next-generation credit card processing.


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Elaine R. Knight