In the last six months, a series of events like the bitcoin surge, movement to Real Time Payments and Open Banking overtures through PSD2 has brought a new alignment of financial forces. Disruptions like IoT, mobile technology and deeper in-roads of smartphones has further skyrocketed customer expectations. Many millennials are expecting their banking experience be seamless and uncluttered as their e-commerce activities.

So, how are banks keeping up with the emerging trajectories? Digitization and mobility pushed a product centric bank to a customer centric vision. But today, banks are moving further ahead with a collaboration centric strategy. This involves heightened cohesion with customers, third party developers, Fintechs and the other players in the eco-system to create a giant network that delivers niche and personalized services.

With the emergence of open APIs, mobile wallets, real time payments, blockchain and Artificial Intelligence, banks have become the platform owners that launch innovative services for payments in the digital world. This can be made possible by understanding what the customer is trying to achieve and how to deliver the best option to him?

This is a significant shift in the payments model. Banks grow from being a conduit for payments to an adviser that delivers contextual information to the customers for payment management. This is a transformative shift that can vastly improve customer services and bring in a re-look at banking service delivery, technological implementation and internal efficiency.

A collaborative payment platform

Banks are emerging as owners of customer relationships with collaborative operations. It is time to leverage the competitive advantages of nimble Fintechs and third-party developers to deliver customer centric services. The successful blue print of a platform model is already available in the e-commerce segment. Payment modernization initiatives like blockchain, Open APIs, Real Time Payments, Mobile Wallets and more are re-defining customer experiences. But customers are demanding more…

So, collaborative banking organizations are opening up their platforms and payment hubs for Fintechs that produce niche services to merchants, corporates and end-users. Other players like payment processors and network schemes will ultimately link up with the bank systems to ensure interoperability and relevance. This is a win-win proposition for all where in banks can monetize API based services that offer choice to customers and ultimately create a giant network of payment services.

Payment infrastructure convergence

The emergence of new regulations and global payment initiatives like open banking, it is imperative to rationalize the existing payment infrastructure to include new players and deliver quicker services. Actually, big giants in the industry are acquiring smaller players to expand their repertoire of services. Mastercard recently acquired VocaLink to bring in fraud management and analytics in to their service portfolio. Similarly, bigwigs like JP Morgan Chase and Amazon are moving ahead the acquisition curve to get more visibility in the payments space. Cross border transactions are also moving towards a uniform payment and settlement system through infrastructure convergence and rationalization.

Frictionless payments with connected devices, wearables and Internet of Things

According to Cisco Visual Networking Index, the Zettabyte Era is already on with wearables, mobility and IoT seeing a quantum jump. M2M connections and IoT will make up more than 50% of connections by 2021 with 27 billion devices in play. Augmented Reality, AI, Video and Voice interactions will see massive growth. So, payments need to re-align itself to the new realities.

Peer-to-peer transactions, contactless wallets and cards and Real Time Payments will be integrated to wearables to make on-the-go payments possible. Alexa, Google Echo and other platforms will deliver the near human touch for payment interfaces. Next generation payments will be simple as fitness trackers, a daily activity mediated by Artificial Intelligence.

Crypto-currency is a maybe, but Blockchain is the way to go

The recent surge in Bitcoins excited fortune hunters world over. However, Crypto-currencies still raise many doubts for traditionalists but banks and financial institutions are excited about the underlying Distributed Ledger Technology or Blockchains. It can offer cheaper, secure and faster services to corporate and retail customers by eliminating intermediaries. Cross border transaction infrastructure will be the biggest beneficiary with accelerated transfers and reduced fees.

Already new kids on the block like Ripple, Wyre, Hyperledger are scripting success stories. But challenges to scalability and standardization are issues that need to be addressed before wide spread acceptance is sought.

A great selling opportunity

Delivering contextual and collaborative services can provide a great opportunity for cross selling and product development. Banks can mimic the Telecom industry by bundling specific services for customers, thus optimizing the service agreements.

Integrating customer centric payment services with existing banking applications does not require much re-invention of the digital cash management platforms. Cloud delivered services with a safe and secure interface will can enable customers to connect safely across multiple transactional touchpoints. Banking organizations are leveraging big data analytics, social media and enterprise data to corelate customers and their preferences.

Heightened customer expectations, the new regulatory eco-system and competition from Fintechs are a catalysts for a collaborative banking and payment eco-system. Here traditional payment intermediaries are bound to fade and those who consolidate and rationalize their infrastructure and use next generation tools will remain to fight another day.

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