The coronavirus has been a catalytic moment for financial services and digital payments in particular. Many financial institutions were not prepared, but as painful as this process has been, the struggle to adapt to the new normal has created a powerful momentum for the adoption of digital that didn’t exist before. There is a huge opportunity for financial institutions to leverage new consumer behaviors for faster adoption of digital payments technology.
Many financial institutions had digital upgrades on their roadmap for 2020 but were forced to speed up the process in order to keep up with consumer demand. Now many of them are trying to accelerate out of the initial phase of digital adoption in order to better meet the needs of their consumers. Doing this is considered paramount to the long-term success or failure of many financial institutions.
Rise of Contactless During Pandemic
Contactless payments have been on the rise for a while globally. Since the beginning of the pandemic, however, the popularity in contactless technology has been growing even more dramatically. A Mastercard survey done in March and April found 82% of consumers view contactless technology as the cleanest way to pay.
Amazingly, many retail outlets have not caught up with this trend and have failed to enable the contactless capabilities at their check-out stations, meaning consumers still have to physically touch the keypads when they type in their PIN numbers during a transaction. On some level, the ability to pay with contactless technology is very much a factor for consumers when deciding where to shop.
“Since the coronavirus first entered the United States, many consumers now expect a germless payments experience,” says Melissa Kopp, Director, Business Strategy at FIS, speaking during an Ondot webinar on payments. “Digital payments are clearly the most practical way to do this.”
Even before the pandemic, Visa experienced 150% growth in contactless payments between March 2019-March 2020. Once the virus threat was more widely recognized, adoption of contactless was even faster; and the Mastercard survey found 74% of consumers would continue to use contactless technology after the coronavirus threat has passed.
Best Practices for the Digital Journey
The first step towards embracing digital payments is to allow consumers to sign-up quickly and easily. The importance of the first-time user experience when attracting new consumers cannot be overstated.
When a consumer goes through the initial on-boarding process, it needs to be as fluid as possible. Everything a consumer needs to know has to be presented in a comprehensive enough way to inform yet easy enough to absorb without feeling like a burden.
Achieving this can be challenging. Sometimes new users have to be guided through the on-boarding process, even using short videos to educate on how to get the most out of digital-first technology. As noted, contactless payments in particular have had a slow adoption rate among retailers, so offering a map to illustrate which merchants accept contactless payments could be helpful to many users.
“Convenience is the new loyalty among most consumers.”
— Stirling Ogden, Utah Community Credit Union
Lengthy processes are needless barriers to a financial institution’s success when offering digital payments technology. According to Stirling Ogden, Head of Online Services at Utah Community Credit Union (UCCU), who also spoke during the webinar, consumer loyalty is tied directly to ease-of-use and making sure their issues are being taken care of.
“Convenience is the new loyalty among most consumers,” says Ogden. The easier financial institutions can make payments and managing money, the more loyal people will be to a particular institution, he explains. People expect these capabilities, says Ogden, and if they don’t get it, “most people will just move on to another financial institution.”
Continuous Improvement Now Expected
Modern consumers are much more aware now of what their options are throughout the marketplace for financial services and won’t hesitate to go elsewhere if another organization seems to offer better options.
“Every financial institution assumes they offer a better-than-average user experience but they are no longer just competing with financial institutions in their own neighborhood,” Kopp states. “Now they have to offer an experience that can match what is offered from national banks or even technology companies like Amazon, Doordash, Apple or Samsung.”
Big tech companies in particular have really raised the standard for customer experiences. These companies have been successful by leveraging innovation into user experiences that constantly evolve to become even more useful and even enjoyable to consumers. And they are bringing this capability to the financial industry.
Financial institutions are now expected to match this continually improving experience. In the payments space, for example, consumers in the past were happy with basic card controls, where they could turn a card on or off using their phones. Now many consumers want to provide feedback on what features a digital banking solution offers and how it is used.
“Financial institutions need to be in a position where they can take suggestions and turn them into something that resonates with users quickly,” suggests Ogden. “Consumers can then become a virtual focus group and enable financial institutions to proactively anticipate their needs and offer automated solutions that guide them through potentially complex decision-making processes smoothly and without hassles.”
Financial Institutions Have an Advantage
The pandemic has exposed many more consumers to digital payments, and as mentioned, surveys indicate people are willing to use digital more in the future. However, many consumers have worries about their level of control over their payment credentials, which are often stored in 10-20 different websites. Consumers are becoming reluctant to store payment information because they feel keeping them on file in too many locations, many of which they can’t even remember, is not secure. This is an opportunity for banks and credit unions.
“Most financial institutions are uniquely qualified to offer a single place to manage digital payments for consumers because they can provide a list of all sites on which payment credentials are saved,” says Ogden. “In many cases consumers’ problems stem from the fact they can’t recall which sites have their credentials, so seeing a list like this provides a sense of control most of them want.”
Clearly financial institutions in the middle of their digital journey need to be prepared for some adjustments. Many institutions have been forced to completely rewrite their plans for their 2020 digital journey because of the sense of urgency caused by the coronavirus and will need to remain flexible as they continue the process.
“Financial institutions need to be prepared to accept that the next best step in their own digital journey may be very different than originally planned,” says Ogden.