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Cloud Technology Drives Financial Institutions To Innovate Payments

In A Decade of Digital Transformation in 12 Months, 46 C-suite executives spoke with PYMNTS for its Q2 eBook on what the world will look like as recovery rolls on and the next iteration of normal rolls out. In this excerpt, Mark Smith, head of payments for AWS, discusses how cloud technology has accelerated the commercialization of new platforms for payment acceptance and made the notion of “invisible payments” possible within eCommerce. 

Read the entire eBook here.

Consumer demand for a frictionless and secure customer experience from their financial institution is growing, leading some to pursue closer integration and collaboration with non-financial brands. For example, contextual commerce companies that provide buy now, pay later (BNPL) options at the point of sale, “push-to-debit” that allows gig-economy companies to send real-time payments to their drivers, and peer-to-peer (P2P) providers adding cryptocurrency offerings. Higher consumer and regulatory expectations will further drive financial institutions to innovate in areas like one-touch and cashierless options, emerging payments options (voice, QR code, contactless) and instant settlement.

This drive is enabled by the continued adoption of the cloud. Cloud technology has accelerated the commercialization of new platforms for payment acceptance and made the notion of “invisible payments” possible within eCommerce. New modes of access, omnichannel distribution (including mobile payments) and the provisioning of “card-on-file” accounts are all providing consumers with easier ways to pay.

For example, BBVA started investing in its journey to become a digital data-driven bank in 2007. Continuing on this path, the company acquired 33 percent of new [retail] clients through digital channels in 2020, and by Q1 of 2021, this number grew to 56 percent versus the prior year. BBVA also announced a new cloud-based technology for the equity markets area of its corporate and investment banking unit in November.

Durable Change Post-Pandemic

Data has been used for acquisition and engagement for years – but in payments, data analytics are focused on two key use cases: preventing fraud and extending credit.

With regard to fraud prevention, financial institutions are using the cloud to help protect financial services customers by detecting suspicious transactions while minimizing the number of customers whose transactions are declined when they should not be. Artificial intelligence/machine learning managed tools and services help identify anomalies in the data and reduce the number of false positive alerts. For example, Fraud.net, the world’s leading crowdsourced fraud prevention platform, uses the cloud to aggregate and analyze large amounts of fraud data from thousands of online merchants in real time, protecting more than 2 percent of all U.S. eCommerce transactions.

When it comes to extending credit, Indian FinTech KreditBee aims to increase loan eligibility for students, self-employed users and newly banked individuals not integrated into the formal banking system due to a lack of proper documentation. The company enables financial inclusion by extending consumer credit for its four million users. KreditBee’s goal is to offer different types of microloans, valued up to about $2,500, to pay for medical expenses or university tuition for its target segment. Customers can complete the entire loan process — from initial application to disbursement of funds in their bank accounts — in under 15 minutes, compared to weeks.

As open APIs and microservices continue to grow, leading to greater payments collaboration between financial and non-financial providers, we’re experiencing more third parties using APIs and microservices to conduct transactions with/through financial services firms. This means that while payment transactions may become more of a commodity, the data itself that is captured in the process could drive drastically different business models, and are key to creating new and customized experiences for customers.

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