The Payments Revolution: Four Key Areas to Watch

Emerging technologies, new industry challengers and shifting consumer preferences continue to drive the evolution of payments. 2019 has already seen its fair share of innovation – look no further than the Apple Card – and it shows no signs of slowing down. Here are four ways credit unions and banks can leverage industry disruption to their advantage, meet consumer demands for meaningful digital interactions and inject value into the payment experience.

Prediction 1: Tap-and-Go Payments Take Off

This year, expect a contactless upsurge, propelled by the increasing use of mobile payments. Consumer appetite for mobile is on the rise, with half of smartphone owners using the method to pay in the last year, and seven in 10 U.S. consumers inclined to pay via mobile more frequently if their rewards and discounts were automatically received, according to Mercator Advisory Group.

With point-of-sale terminals handling contactless requests from NFC-capable smartphones, investing in mobile capabilities will be the logical step forward for financial institutions. There are two main reasons for this. First, it means they can provide a contactless payment option for their customers or members without the need to re-issue plastic cards, and second, by moving their services into the hands of consumers, they can unlock new possibilities to add value and drive engagement.

Prediction 2: The Rise of Point-of-Sale Finance

The growing provision of credit at the POS in the form of immediate one-off finance programs, delayed payments and installment plans offer consumers a fast, stress-free and convenient payment experience – a huge opportunity not to be missed. To date, POS financing has been largely reserved to industry newcomers and their merchant counterparts – think Klarna or PayPal Credit. But now the competition is opening up to banks and credit unions.

This offers immense potential for financial institutions that are making the move to mobile in 2019. When a consumer makes a large payment, financial institutions can step in to help spread the cost of the purchase on the consumer’s terms and the entire process takes place through the app, aided by push notifications. As the credit card competition heats up, card issuers will increasingly explore mobile-based POS financing to keep their cards top of mind and top of wallet.

Prediction 3: A New Strategy for Rewards

A large part of this ongoing market competition is focused on rewards. The proliferation of credit cards has resulted in consumers signing up for multiple providers and cherry-picking which card to use based on the most suitable rewards. In this environment, maintaining expensive loyalty programs is unsustainable.

One way of solving this problem, which I expect many financial institutions will consider in 2019, is to move to an infrastructure where card issuers can share the cost of offering rewards with the retailers. This would be an opportunity for card issuers to lower the cost of rewards, for retailers to reach a wider range of cardholders through an institution’s loyalty-enabled mobile app, and ultimately, for consumers to receive a better loyalty experience where they can collect rewards on payments from both financial institutions and their linked retailers.

Rewards programs will stay at the heart of credit card strategies in 2019, but expect to see innovative approaches emerge to benefit both those providing and receiving the rewards.

Prediction 4: Fresh Impetus for Fintech Cooperation

As consumer demand for sophisticated mobile banking services increases, financial institutions’ own mobile apps will need to move beyond simple money management to solving consumer pain points at every step of the payment process. This includes informing consumers of deals and rewards before a transaction takes place, making the POS experience fast and convenient through contactless payments, and following up large purchases with stress-free and flexible financing options.

But the fast pace of payments innovation means some financial institutions will be struggling to keep up. Working closely with fintechs is one of the few ways to roll out desperately-needed digital services consumers already demand before it’s too late. In 2019, we will see this cooperation intensify.

Beyond this, as the payments experience becomes further linked to smartphones, retailers will also be considering how they can make the most of this changing dynamic. Fintechs can play a key role in connecting both financial institutions and retailers to innovative mobile services. In myGini-powered apps, for example, retailers can already participate in this process, as the loyalty engine follows up payments with rewards and personalized shopping incentives.

Explore Your Digital Future

With the launch of the Apple Card, 2019 has already seen its fair share of innovation and shows no signs of slowing down. In this competitive market environment, investment in digital technologies can be the difference between gaining a member and losing one, between leading or falling by the wayside. As we progress through the year, keep an eye on how financial organizations start leveraging mobile apps to make the most of the convenience offered by contactless payments, POS financing and more engaging rewards programs.

Mehmet Sezgin is CEO and Founder of myGini. He can be reached at mehmet@mygini.com.