A Finextra member 26 September, 2014, 17:05 2 likes

A very solid white paper – thanks. The core message I found in this is captured in this quote:

'Banks and other providers currently active in the payments business must become increasingly aware of the dynamics ... that will fundamentally redefine the marketplace by 2020. Institutions seeking to truly lead – and profit from – current and future developments, must work actively to evolve their propositions in ways that are more aligned with the emerging expectations and needs of end-clients.' (Ref page 42).

How to finesse payment products for successful user experience and adoption, in a way that is cost-effective and scalable (and also secure!) seems to me to be the seminal problem for banks who have been used to a 'one size fits all' approach to payments products.

So I'd add to the paper the following recommended strategies that can help set payments innovation free from many of the constraints of the IT department.

1. Use PCI-compliant cloud-based services to massively reduce the capital investment needed to obtain new products. For example, if you want to introduce a new disbursement or purchasing product for your corporate or SME customers, using this approach massively reduces capital costs and time-to-market. You could consider bringing it in-house when it's making money/proven in the market. A veritable App Store of payment products is available on this basis - even on a single platform - including commercial and consumer payment products.

2. Build in self-management and self-service wherever possible. Corporate customers want greater flexibility than many legacy payment programs can offer - often simple things like being able to change the country limitations on a particular card themselves or changing the promotion displayed on a corporate cardholder's account page. Such simple requests can take ages on PCI-compliant websites looked after by the IT department and eventually clients may go elsewhere. But payment products that enable banks to offer this level of flexibility to its business customers while keeping the project request queue for more serious stuff, are available.

3. Adopt and 'open' approach wherever possible. Enabling your customers to self-manage and customize and enabling your own non-technical staff to customise and deploy to your customers could be interpreted as being more 'open'. But the headline of 'open' is the technical IT matter of enabling easy communication with and manipulation of supplied functionality by third-party developers. As recommended by Gartner, the provision of APIs with, say, a payment product, is one way a bank can enable third-parties to do so and typically can be used to enable corporate customers to integrate the product with their CRM, for example. But for payment product development, APIs are too powerful to give to other than trusted parties - handling sensitive transaction/identity data - and this will often mean staying within the bank. But tools that enable transactional apps to be developed without compromising security – like the PAYML extension of HTML from Ixaris that enables web developers to design and implement great UX without actually accessing the sensitive data (and without the limitations of tokenization) – are now available too. And soon there will be tools that enable non-technical staff to combine and customize different components from several payment products to create new payment offerings. An 'open' approach offers huge potential for product development by those closer to the customer and free from many of the constraints of IT – just like apps in an app store.

These ideas have been promoted by Gartner and others for some time now. And they are no longer just ideas – the products are available. I hope we will see more banks adopting some or all of the above approaches and 'disrupting back', to defined and grow.

As this report suggests more alliances between banks and tech companies will help – so protocols to enable such alliances to work in practice, like those described above, will be essential. 

gerry.cavander@ixaris.com