Why New Payment Methods Matter: The User Demand for Change

The drive for change in payments is inspiring businesses to focus on customer experience and fostering innovation in fintech verticals like crypto and open banking

Photo of two people's hands. One using a smartphone NFC feature to make a contactless payment, while the other one holds out the payments processing machine.

The payment landscape is changing. Consumer demand for new payment methods is shifting towards more innovative, digital payment solutions.

This change presents both an opportunity and a challenge for fintech businesses: on the one hand, they need to offer their customers the payment options they want to stay competitive; on the other hand, implementing these new payments can be complex and time-consuming.

This article explores why new payment methods are essential and discusses some of the key challenges businesses face when implementing them.

An apparent demand for change in payments

There is consumer demand for new payment methods. In fact, in a recent report by Onbe, 74% of consumers choose to pay using digital processes rather than legacy forms such as cash or cheque.

Often the most popular reasons for wanting a change in payments are due to wanting more convenience, security, and speed. With this in mind, it is easy to understand why the demand is most likely to increase.

New payment methods improve convenience

One of the critical advantages of new payment methods is that they improve convenience. For example, contactless payments allow consumers to pay for goods and services without carrying around cash.

In addition, mobile wallets such as Apple Pay and Google Pay mean that consumers can make payments using their smartphones. This method is particularly convenient when paying for small value items, as there is no need to fumble around for change.

Furthermore, with the rise of mobile commerce, it is now possible to make payments using a mobile phone even when people are not in a physical store. This option means that people can make payments anywhere, at any time.

New payment methods offer security

Another key advantage of new payment methods is that they offer security. For example, smartphone-based NFC payments are more secure than cash, as there is no risk of losing one’s card or having it stolen.

In addition, many mobile wallet providers use fingerprint or facial recognition to verify a user’s identity before a payment is made. It is much harder for someone to steal someone’s card details or make a payment without their permission.

Finally, new payment methods such as blockchain-based payments are virtually impossible to counterfeit. This makes them much more secure than traditional methods such as cheques or banknotes.

New payment methods are faster

Another advantage of new payment methods is that they are often faster than traditional methods. For example, mobile wallets allow people to make payments without entering their card details each time, which means that people can make a payment in just a few seconds.

In addition, mobile wallet payments are often processed instantaneously, meaning that there is no need to wait for the payment to clear. This agility is particularly beneficial when making online purchases, as it means that goods can be dispatched immediately.

Finally, some new payment methods, such as blockchain-based payments, are quickly processed. This speed is because there is no need for a third party to verify the transaction, which can sometimes take days.

Key challenges businesses face when implementing new payment methods

Despite the clear advantages of new payment methods, companies also face some critical challenges when implementing new payment methods.

One of the biggest challenges is that new payment methods can be complex and time-consuming to implement. This challenge is because businesses need to integrate them with their existing systems and processes.

Fintech companies can make this process easier by providing a more straightforward user experience and working with businesses to ensure a smooth integration. Video tutorials, online support, and live chat are all ways fintech companies can help companies to implement new payment methods.

Another challenge businesses face is that new payment methods can be expensive to implement. This issue is because businesses need to invest in new hardware and often need to pay transaction fees.

Finally, businesses face another challenge: new payment methods can be disruptive. This issue is because they can change the way companies operate and how consumers behave.

Despite these challenges, there is clear consumer demand for new payment methods, which means that businesses need to consider how they can utilise them to improve convenience, security, and speed.

Customer experience comes first when it comes to payments

It is important to remember that customer experience comes first regarding payments. This priority means that innovation plays a critical role in the payments industry.

Fintech companies are at the forefront of this innovation, as they are constantly developing new payment methods to meet the needs of businesses and consumers.

“The sweet spot in payments innovation is the removal of friction between the customer and the merchant,” said Ian Parke, Founder and CEO at Fin-Pay. “And businesses that are digitally-enabled in this way are already seeing evidence in terms of increased customer spend and transaction value.”

So, what does this all mean for businesses and consumers? Well, it’s a win-win situation.

Businesses can utilise new payment methods to improve customer experience, increase sales, and reduce expenses. Consumers can benefit from increased convenience, security, and speed.

“The key to staying at the cutting-edge of the payments industry is keeping a finger on the pulse of customer experience and demands,” added Jeffrey Kump, President of Forte Payments SSU at CSG. “This means offering an enhanced experience across channels, including digital, web, IVR, devices, and mobile.”

He added, “End-users appreciate access to a range of modes of payment (think direct card, ACH, virtual mechanism, or digital wallets) and the ability to seamlessly transition from one mode to another, even upgrading to advanced modes like cryptocurrency.”

Hearing the voice of the customer through surveys and data

Data-focused fintechs have the opportunity to listen to the voice of the customer and help businesses understand their needs when it comes to payments.

“The voice of the customer has never been more important in banking, and advances in technology and data utilisation are giving financial services providers a dramatically deeper and more refined understanding of their users’ needs and preferences,” said Trish Cox, Chief Operating Officer at Galileo Financial Technologies.

Looking at data can help businesses understand what consumers are using new payment methods and where there is demand for change. Finding patterns in the data can help businesses make strategic decisions about which new payment methods to implement.

Data can also help with security, as fintech companies can use it to identify fraud and prevent it from happening.

“A significant trend in monitoring risk for fintech companies is the innovation of using artificial intelligence to monitor new and emerging risk patterns,” said Heather Randall, PhD, Chief Compliance Officer at Sphere Commerce.

She added, “Historically, risk monitoring has been based on static rulesets and historical patterns, but the integration of artificial intelligence in this process is an emerging and important development for leading organisations who wish to be more proactively and effectively managing risk.”

The case for open banking

As the fintech industry advances, open banking is becoming an increasingly popular topic. Open banking is the practice of sharing financial data with third-party developers, and this data includes transaction history, account balances, and bill payments.

Open banking has the potential to revolutionise the way people manage their finances. It could make it easier to switch banks, get a better deal on products, and track spending.

Tom Pope, Head of Payments and Platforms at Tink said, “There is clear consumer demand for new payment methods. Not for a new brand at the point of payment that people haven’t heard of before, but demand for a better, slicker user experience, and that is what open banking can provide.”

He added, “Often called Pay By Bank; open banking payments are helping transform experiences by seamlessly transferring money from one bank to another. You don’t need coins, notes, cards, or a good memory for long numbers; all a payment needs is your permission, which is granted directly using the provider people trust the most – their bank.”

“Where open banking payments are booming is in cases where the user journey of the incumbent payment method is deficient. For example, current account top-up and bill payment experiences can be pretty painful. Open banking can transform a neglected user experience and make the payment process a competitive advantage.”

Streamlining the user experience with open banking

Open banking can help streamline the user experience by making the process of verifying things much faster. It can also help reduce the number of steps involved in making a payment.

Ben Ford, Head of Growth at open banking fintech Frollo said, “When a business signs up a new customer they can use open banking to verify bank account ownership automatically and in real-time. And when they debit their account, they can use open banking to perform a quick balance check to avoid failed debits or overdraw fees for the customer.”

So, what does the future of payments look like?

The future of payments looks set to be more convenient, faster, and more secure. Especially considering that new payment methods are being developed to meet the needs of businesses and consumers.

At the same time, it’s important not to rush into things. As Alex Kwiatkowski, Director of the Global Financial Services Practice at SAS said, “Every fintech dreams of being an industry disruptor. The truth is few of these dreams ever come to fruition. It’s time to retire this overused ‘fintech disruption’ mythos and embrace the reality of technological Darwinism. If a fintech is good enough, it will survive – and thrive. If it fails, that’s part of the circle of life.”

Meticulous planning, execution, and a focus on the customer experience will be critical to success in the payments industry. With that in mind, it’s exciting to see what the future of payments will bring.

What are your thoughts on the future of payments? Let us know on LinkedIn and Twitter!