The Digital Payments Landscape in a Post-Covid World

The global coronavirus pandemic outbreak has forever changed how people behave and interact with machines and each other. Remote working conditions and public fear of getting infected have forced business organizations to accelerate their digital transformation journeys and offerings. It has also forced users to develop an increasing reliance on virtual and mobile channels for their daily operations. 

The rising digital activity has resulted in a higher volume of online payments. With this method of payments projected to usher in the new normal, Covid-19 may very well have transformed the landscape of digital payments forever. 

One crucial detail to remember is that every customer has not shifted to digital payments. Many regions and large groups of people have technological or financial hurdles which can only be resolved at a systemic or legislative level. Several reasons and factors have encouraged greater adoption of digital payments and also a few barriers that prevent mass adoption. 

Obstacles in Adopting Digital Payments

With the world getting more digitized, enterprises are increasingly incorporating mobile transactions as an accepted mode of payment. However, two foundational obstacles prevent users from adopting any digital payment solution. Users either lack financial accounts to make or receive payments or lack internet access at a personal level. These can be shortened to financial exclusion and digital exclusion, respectively. 

Evolving digital customer experience

In a post-Covid world, the physical distribution of banking services will not be as relevant anymore. This transition makes customer experience in virtual spaces a primary differentiator and measurer of competence for banks and NBFCs. As a result, among the highest priorities for financial institutions, as we advance, channels for digital distribution with simple, customer-first approaches will remain at the top. 

Moreover, the benefits of these digital offerings will be measurable. McKinsey has reported that customers who are greatly satisfied with the digital experience their bank offers are 2.5x more likely to create new accounts in their existing banks compared to customers who aren’t as happy. They are also less price-sensitive and spread more positive reviews and word-of-mouth spontaneously.

Evolution from Servicing to Engagement

Another significant payment trend that is set to accelerate the evolution of digital payment services is the shift in banking services from mere services to customer engagement. By the time the pandemic settles down a bit, people will become used to availing of bank services without physically going to the bank. This transition implies that a bank will have to increase sales through digital channels to make up for the reduced physical branch sales.

In a world with a dominantly virtual marketing and sales business model, banks will eventually move away from banking apps meant only for transactions to those that enable engagement with their customers. To make this vision a reality, 

Financial institutions can make this vision a reality by analyzing and utilizing transaction data and user profiles to understand their customers better. A more robust understanding of their banking needs and expectations will help offer personalized solutions and render customizations to enhance the user experience. 

For instance, the Harvard Business Review states that integrating data into more domains and services than ever before will be one of the most significant results of the pandemic. With the implementation of advanced data and analytics tools and campaign management in real-time, financial institutions can derive meaningful insights from their customer data and then use them to render meaningful recommendations to customers. This offering will result in revenue and engagement generation for banks, which will be crucial for them in the new normal.

In addition, the risk and fraudulent activities will become more sophisticated. More importantly, preserving customer identity and data will be instrumental in preventing and managing fraud. As a result, investing in stellar digital payment solutions and customer authentication engines that prevent and manage frauds and provide access to data will be crucial for banking institutions. 

Next-gen Technology Adoption

In the months and years to come, financial institutions will find themselves dealing with a higher speed of pace changing within the market. In the new normal, digital financial service distribution will be imperative with the accelerating competition rate between banks and their digital banking offerings. For this, financial institutions will need to adapt and evolve at the competitive pace of the market. This will strain the infrastructure of legacy technology and usher in a greater demand for digital channels.

To keep up with the rapidly evolving customer needs, financial institutions will need to outgrow legacy infrastructure quickly and adopt highly scalable and agile digital technologies. This includes AI, machine learning or cloud platforms. These technologies significantly reduce processing and storage costs and are more agile and scalable. 

Adopting next-gen technology will help financial institutions to improve how they handle new requests and requirements while adding new scalable digital features at competitive speeds. The higher speed of digital competition will demand that financial institutions should consistently deliver enhancements and offer new features through their digital banking platforms and apps. These new changes will also need to be executed in an agile manner. 

As the global coronavirus pandemic continues, a growing number of customers are bound to switch to digital payments. With the help of industrial and legislative initiatives and evolving technologies, both businesses and consumers are accepting and adapting to the new realities of a post-Covid world.