Leading Again

Jeff Weikert

Jeff Weikert

Rebuilding a reputation as payment innovators

By Jeff Weikert

The payment industry is undergoing a major paradigm shift that will impact payments for years to come. Financial institutions are facing intense competition from alternative payment providers vying to displace them at the center of the payment process. These nonbank players are viewed as disruptive and innovative, a position once held by financial institutions.

Examples of financial institution payment innovations include the development and introduction of Electronic Funds Transfer systems, such as ACH and wire transfers, credit and debit cards, ATMs, online access to services beyond the branch and online bill payment services. Today, as digital and mobile channels expand, financial institutions find themselves at a crossroad to either regain their former reputation as the leaders in payment innovation or yield to the newcomers.

To compete in this dynamic, evolving environment, community banks should convert what they have traditionally done well, offering personalized service, and take a close look at their digital payment experience from the customer’s point of view. They need to start thinking like technology companies, such as Google or Amazon, which start with the customer and work their way backwards. These companies have focused their entire existence on how to make it easier, faster or more convenient for consumers to do the things they do every day.

Similarly, community banks should constantly evaluate how to reduce friction in their payment offerings by making them easier, faster and more convenient for their customers. Each channel should deliver a consistent user experience across all devices, whether over a personal computer, tablet or smartphone. Each channel should have a similar look and feel with clean, consistent branding. Most of all, making payments should not involve multiple or complex steps, but should be as simple as possible.

More technology providers are developing systems that are open and flexible enough to support a user-friendly, mobile-first experience. The key is accelerating their development of more innovative digital banking and payment services. The best way to do this is to leverage technology and payment platforms that support device-agnostic open application programming interfaces that give financial institutions unprecedented control and flexibility to use and connect various software systems. If an institution still uses the same online banking or bill payment system from 10 to 15 years ago (before smartphones existed), it is likely at high risk to lose transactions to alternative payment providers.

Community banks should explore all the payment options available to them, including digital payment solutions outside the fold of their core processor and perhaps even with nontraditional payment services partners. Financial institutions have an opportunity to compete effectively with alternative payment providers, but only if they abandon legacy systems that handcuff them, inhibit innovation and fail to meet consumers’ ever-changing needs.

Community banks and traditional financial institutions have the opportunity to regain control of their destiny in the payment industry. Conducting a thorough evaluation of their current payment experience and their current digital payment technologies, recognizing that legacy payment systems are not the only tools available to them and embracing the results of regulation, are key steps for community banks to regain a place as a payment innovators.

Jeff Weikert (jweikert@payveris.com) is president of Payveris LLC, a company in Rocky Hill, Conn., that provides cloud-based digital payment solutions to community banks.