Today, our cardholders (consumers and businesses) expect instant gratification as they are used to instant messaging, instant delivery of music and videos, instant booking, and even instant payments. This means that real-time is now applicable not only to payments and money movement but to every product offered by the payment industry. Consequently, acquirers, merchants, and the whole payment ecosystem are required to consider real-time execution/delivery and make sure to implement it to boost transaction volumes and retain their consumer base.
For push and instant payments, we have identified two interesting trends that we believe will shape the future of real-time payments: interoperability and the so-called Lego-ification of payments. Interoperability is becoming more crucial as it allows different payment systems to work together seamlessly, thereby creating a more inclusive and functional payments ecosystem. Simultaneously, Lego-ification is referred to as the process of breaking down complex systems, products, or services into smaller, more modular components that can be easily assembled and reassembled to create new and different products or services – and it has been used to create innovative and customisable payment services.
Interoperability is directly connected to another important concept, ubiquity. As said, consumers and businesses expect to pay and be paid easily, everywhere, and in real-time. Every day, new services and products are created to support this demand from many players and providers.
Interoperability refers to the ability of different payment systems to work together seamlessly. This is essential for creating a more inclusive payments ecosystem, as it allows acquirers to offer merchants and cardholders the best modern technology, the most convenient payment methods (the ones they prefer), regardless of their bank, card issuer, market, and so on. There is no need to rely on a single provider’s existing capability, as the main objective is to put the client at the centre and combine capabilities. Simultaneously, that can be offered by multiple providers, in one integrated solution.The collaboration between fintechs, networks, and others within the payments ecosystem, supported by standardisation, is essential for creating better payment products that acquirers and merchants can offer to their clients, increasing inclusivity, performance, and quality of life, for both consumers and businesses. For instant payments, this is reflected in several partnerships and cooperation initiatives between payment schemes and providers, for example, extending the reach of card schemes to facilitate payments to bank accounts or digital wallets.
The Lego-ification of payments is the 23rd century version of the Pareto Principle, also known as the 80/20 rule. As said, all the parties and products can work together for mutual benefit – and to benefit the customer base by combining their capabilities and what they do best. For instance, in payments, Lego-ification can be used to create new and innovative propositions and services that meet the needs of today’s consumers by combining existing products with new ones:
Virtual cards can be combined with biometric authentication and instant salary payments: virtual cards are already a popular security measure for online purchases but, by adding biometric authentication, businesses can take the security of virtual card payments to the next level. And, by offering the option for instant salary payments, businesses can provide employees with faster access to their funds.
Real-time payments combined with payment orchestration and Buy Now, Pay Later (BNPL) options: real-time payments allow for almost instantaneous transfers of funds, making them a convenient option for businesses and consumers alike. By using payment orchestration to combine real-time payments with other payment methods, businesses can create even more flexible payment solutions. And, by offering BNPL options, businesses can give customers the option to finance their purchases and pay later.
Open Banking with fintech and payment orchestration: Open Banking enables businesses to access financial data and initiate payments through APIs, while fintech brings new and innovative payment technologies to the table. By combining these two forces with payment orchestration capabilities, businesses can streamline their payment processes and create disruptive payment experiences.
All the above will benefit acquirers, merchants, and their clients, allowing them to offer payment services that will be easily accessible and customisable. At the same time, users will be able to pick and choose components that best meet their needs. This will further empower merchants to benefit from tailor-made financial solutions, resulting in more efficient and cost-effective transactions.
The future will be marked by increased coopetition (cooperation between competitors) and collaboration among various players in the industry. As payment systems become more interconnected and modular, new opportunities will emerge for fintechs, payment providers, and banks to work together, driving the development of new products and services.
This collaborative environment will also encourage the sharing of expertise, resources, and technology, fostering a spirit of innovation that benefits the entire payment ecosystem. Simultaneously, the increased competition will drive merchants to continually improve their offerings, ensuring that customers receive the best possible products and services.
As payment systems become more interoperable and modular, ensuring the security and trust of these systems will be of paramount importance. At Discover Global Network, we believe that in the future, advanced technologies like artificial intelligence (AI) and machine learning (ML) will play a crucial role in enhancing the security of payment transactions and protecting users’ data, allowing merchants to focus on their core business and less on frauds.
This editorial piece was first published in the Payment Methods Report 2023, which provides an in-depth overview of the latest worldwide developments in how people pay, the payment methods space, the innovative technologies that these methods work upon, and the best strategies on how to win at conversion and retention.
Andrea Plos has over 30 years of experience in the banking and payment industry. He launched one of the first Internet Banking services in Europe, developed key products in the areas of debit, credit, and prepaid, and supported the commercial launch of Visa Direct at Visa Europe. Today, Andrea is responsible for the Emerging Transactional Products (A2A, RTP, QR payments) and Enabling Technologies for Discover Global Network and Diners Club International®.
Discover® Global Network, the global payments brand of Discover Financial Services, processes millions of cardholder transactions each day. With industry expertise, innovative technology, and a closed-loop infrastructure, Discover Global Network provides effective, customised solutions that evolve as needs change. Discover Global Network has alliances with 25+ payment networks around the world – and is led by three Discover businesses: Discover Network, with millions of retail and cash access locations; PULSE®, one of the leading ATM/debit networks; and Diners Club International®, a global payments network with acceptance in over 200 countries and territories.
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