by Nadine Volz, Solution Manager – Banking, SAP
Millennial customers expect the same level of service when making payments regardless of how, when, where, and why the payment is initiated.
Banks must decide whether they want to fight for a share of this market, as way to grow or maintain their overall market share. To do this, they must first have a holistic view of all their channels and products to achieve consistency and transparency across all them. Then they must innovate their payment value chain to offer comprehensive products and services to their customers across their channels. But what attracts the millennial consumer to use alternative payment services from non-banks, such as PayPal, ClickandBuy, or Square Inc.?
First of all, they provide improved convenience and security on different platforms whether it is via mobile or Internet. Consumers do not have to provide account or credit card data to the seller for each transaction, and many payment service providers offer buyer protection. One example of a technology-enabled payment system is NFC or near field communication, which is expected to fuel the mobile payment market in the next few years. Consumers are able to make payments by bringing their NFC-enabled mobile device close to another NFC-enabled device. And in terms of virtual currencies, Bitcoin is poised to make a dramatic impact on the payments market.
Customers are likely to want to pay for such services in the future due to the increased convenience and security. Banks may further benefit from such an approach to payment processing that enables them to increase their fee-based income and differentiate their services from those of other banks. If banks therefore want to compete in this market segment they must establish a unified IT architecture and robust product management governance. With these in place, banks will have the flexibility needed to innovate their payment value chain to meet the (changing) requirements of the millennial customer. Furthermore a consolidated infrastructure can help banks achieve increased economies of scale to drive down costs per transaction as volumes rise. If they cannot keep up with the new service offerings and convenience that other payment processors offer, customers could easily decide to switch to other payment providers who already offer or will offer full banking services. There is also the risk that new payment service providers could make the move to obtain a bank license and begin taking deposits.
We will be exploring the topic of Centralized Payment Processing: A Deeper Look into the SAP Solution at Sibos 2013 on Wednesday, September 18 at 3:00 p.m. If you are planning to attend, please register for this session by emailing firstname.lastname@example.org. I look forward to meeting you there!