From the customer-facing side of payments to the back-end infrastructure, demand for – and availability of – simplicity in design is growing, and is rapidly becoming an important feature of all payment platforms. Many of the most successful payment plays in recent years have focused on offering a growing array of payments functionality wrapped up in an easy-to-use package. With payments essentially becoming a buyers’ market due to the growth in competition, the key currency in payments is a streamlined and simplified experience.
Payment providers must counter growing complexity with simplicity
End-user expectations around payments are shifting rapidly; the expectation today is for things to “just work.” This holds particularly true for payments, where there is growing intolerance of laborious processes and delays. Once given the taste of a more streamlined, functional but effective service, customers quickly come to expect it.
The most successful payment developments in the last few years have arisen on platforms that offer the least resistance to enabling a transaction. PayPal may have originally grown via eBay but its growth beyond that depended heavily on its reliance on a username and password, rather than a 16-digit card number (plus expiration date and CVV code), a model now being imitated by Visa. PayPal is now developing this further with Touch payments across the digital commerce space. Amazon is taking this to its most extreme with the development of physical Dash Buttons.
A similar push for streamlining is now occurring in the acquiring space. The success of both mPOS and the new generation of online payment gateways such as Stripe and Braintree depend in large part on their ease of merchant enrollment and ease of implementation. Rather than a long, laborious process of signing up for an acquirer, with a paper-based approval process, these providers enable any merchant to accept payments rapidly with minimum fuss. This is particularly true for new marketplace business models such as Airbnb and Uber, for which traditional acquiring simply wouldn’t work. The fact that payments are seamless within the experience is critical to these platforms’ broad success. The recent successful IPO of tech “unicorn” Shopify is testament to the growing demand for simplified merchant acquiring and retail infrastructure services – a trend now being pursued by larger merchant groups.
Even within the financial services space, interest in streamlining is now taking hold, driven by the growing complexity now emerging in payments. The newest generation of payments infrastructure, such as payment hubs and switch platforms, is increasingly focused on agnostic design including high levels of modularity and flexibility. New functionality and complexity can be developed significantly more quickly and easily than on legacy platforms, with a focus on development by business users and not specialists. The spate of acquisitions in recent years among incumbent payment vendors, expanding their capabilities as full end-to-end providers, further highlights the appetite for simplifying payments; these providers are increasingly focused on becoming full end-to-end service providers. With payments becoming more complex, for many banks and acquirers finding efficiencies of any kind is critical.
For payment vendors, this poses a challenge: user expectations are rising for a simplified, streamlined experience that is capable of handling an increasingly complex range of emerging payment technologies. Removing the frictions, for consumers or payment providers themselves, must now be a focus for all payment technologies.
“Payments innovation needs to go global for true disruption”, IT0059-000009(April 2015)
2015 Trends to Watch: Payments, IT0003-000628 (November 2014)
Gilles Ubaghs, Senior Analyst, Financial Services Technology