Digital payments are already here, whether we are ready for it or not. With every passing day, there are FinTech companies continually pushing the digital payment envelope. New ideas and services are created all the time. We also see non-traditional FinTech companies enter the digital payments space, examples are Facebook and Apple (just to name a couple).
WhatsApp, a Facebook company, is currently providing digital payments in various regions around the globe leveraging their social media networks. Apple has partnered with Goldman Sachs to provide a digital wallet here in the U.S. Venmo and Zelle are also popular digital payment platforms for P2P payments in the U.S. As you can see, digital payments are already here, and you can expect it to grow exponentially with continued adoption and newer solutions.
So, why is this market segment growing so rapidly? There are three simple reasons: Firstly, people love using their digital devices; secondly, people also love conveniences; and, thirdly people love the idea of accomplishing tasks quickly. We can all relate to the sense of accomplishment we get when sitting down enjoying a cup of coffee while paying bills and/or making purchases – how convenient and quick! It simply allows us to have more time for other interests.
Thus, with such wide appeal, it is no wonder that digital banking will be the way forward for all financial institutions (small community banks or large global banks). In order to stay relevant, financial institutions will need to evolve to an institution that welcomes the digital | mobile platform with open arms. It is especially crucial for community banks/credit unions to adapt, as this will provide unique growth opportunities.
Below are some myths that community banks/credit unions need to abandon:
Myth 1: Digital payment platforms are more suited for national and global banks
The digital payment platform provides an opportunity to reach consumers in new settings by providing an easy and convenient mode of connecting with customers. The advanced medium is quite fulfilling in building rich and omnichannel brand experiences. Going digital is almost a necessity for small regional banks. Typically, regional banks provide solutions specifically designed to support their community. For example, let’s say you are a community bank that primarily support farmers and have built financial solutions to address their unique needs. Would it not be great if you can take these unique financial products to other farmers around the world? Well, now that we are in the digital world, it is very possible to do just that. Therefore, regional/smaller banks have an opportunity to increase their revenue in the niche markets they serve at a global level.
Along with being technologically forward, what remains necessary is to enhance and enrich the customer experience.
Myth 2: Digital payments platforms are too complex and expensive
Digital Payment Platform does not have to be complex or expensive. There are many digital payment platform providers that offer solutions in the cloud, thereby eliminating the complexity of hosting and maintaining these platforms. Additionally, these cloud solutions are usually priced by services, which allows you to pick and choose which services you need to support your client base. This approach allows you to adopt digital services at the same rate that your business grows. For many banks, digital payment platforms are a new source of revenue and not considered an infrastructure upgrade with no return of investment.
Myth 3: Digital payments are for the younger generation
The rise of smartphones has been astounding far more than anyone predicted in the past decade. With the network speeds exponentially increasing from 3G to 5G, a host of new mobile applications and services are now available through the device. Making many tasks convenient and fast, be it e-commerce or banking, the mobile services are transforming the lives of all people, the usage of smartphones is no longer limited to the younger generations.
Financial Institutions have noticed it is just not the younger generation that is attracted to the benefits and convenience of digital devices. They have observed an uptick in usage from customers belonging to the 40 – 50 age group, it appears they also like to manage their money via mobile devices, i.e. smartphone, tablet.
Myth 4: Digital payments Increase a Consumers’ Chance of Fraud
Digital payment methods include payments carried on via electronic devices and channels. The most common methods of making electronic payments include credit/debit cards, mobile payment gateways and mobile payment apps. Due to preconceived notions, merchants and customers have hesitated to adopt the latest, digital payment systems. The misconception in their mind that digital payments are prone to frauds, doesn’t hold much value. These e-wallets and digital payment gateways are equipped with robust security features like data encryption, address verification system and Payment Card Industry Data Security Standards (PCI DSS) that make them a safe medium for transferring cash.
In summary, community banks/credit unions need not be concerned and should feel confident about adopting new digital payment platforms. Especially, digital platforms that integrate merchants and customers through a single platform making the process of transferring and receiving cash both contactless and seamless.
Myth 5: Digital payments and Local Payment Methods (LPMs) make global payments riskier
Digital payment technologies and global payment networks are armed with security features like multi-factor authentication that are linked to the specific banks that the individual customers belong to. These payment features can help the U.S.-based online retailers reach the global market. U.S. retailers should no longer restrict their market and continue to root in traditional payment methods.
Thus, by embracing digital technologies, regional banks/credit unions can widen their reach and expand their client base across varied geographical locations. In addition, they can help support their clients’ global aspirations as well. Digital technology is indeed advantageous for community banks/credit unions, which increases their scope and their chances of success.
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