Over the course of 2020, it has become evident that world trends are shifting due to the impact of the pandemic and other global events. The payments industry is at the forefront of this change, and it has seen a significant uptake in terms of adoption of innovative payment methods that better address evolving customer needs.  A key part of this has been nonfinancial services brands delivering payment solutions to customers as part of an overall solution – what many are calling ‘Embedded Finance’.

Understandably, many of us now prefer contactless payments. According to Juniper research, global contactless card transactions reached USD 1.7 trillion in 2020. Furthermore, according to the 2020 Worldpay Global Payment Report, in 2019 approximately 65% of all e-commerce transactions were made with an alternative payment method. As such, it is becoming clear that the world is shifting to new experiences, and payments is playing a major role in it.

When it comes the emerging markets like the Middle East, Africa, and some regions in Asia, the majority of firms still use Automated Clearing House (ACH), checks, and other legacy payment methods to make payments. While such systems are still being heavily utilized, most businesses are dissatisfied by the inefficiency of such solutions.

For instance, although ACH/Checks are better suited for batch payments, they lack the ability to make customizable payment experience. Furthermore, they offer very little visibility on transaction data and are both time-consuming and costly with quite a bit of back-end work and maintenance issues. This needs to change if we truly want to accelerate adoption of digital innovation in the financial sector.

For fintechs and many nonfinancial services brands that are looking to customize their customers’ payment experience, this is the time to consider a modern issuer processor. This is the technology that powers cardholder transactions, and it is crucial for the payments process. Using Banking-as-a-Service (BaaS), modern issuer processors can deliver complete embedded finance options – that is an end-to-end solution without the need for multiple partners. This delivers the vital connectivity between a fintech and its issuing bank. It also connects them to the relevant payment networks like Visa or Mastercard to authorize transactions and enable cardholder interaction.

With that in mind, an increasing number of brands, legacy banks and fintechs in the region are moving away from legacy payment systems into modern card issuing and BaaS solutions. The reason is that legacy payment solutions are very limited in addressing today’s needs. Let us take legacy issuing platforms as an example, they have a one size fits all architecture, the APIs they provide show very little visibility and lack much of the customization needed to create truly innovative payment experiences. As a result, consumers and businesses are demanding new payment solutions to create these new experiences to better serve the evolving demand.

Modern card issuing platforms are answering this demand by enabling businesses to streamline and simplify payment processes using cards to increase their chances of success.

Below are three major components that allow businesses in emerging markets to innovate without friction to be able to deliver fast digital banking services to a largely underbanked population.

1-      Built-in partnerships

Fintechs thrive on speed and agility, leveraging the capabilities of partners to do the heavy lifting and remove as much friction as possible. Let’s take the Middle East and Africa region as an example, democratizing card issuing in MEA’s fragmented market is extremely challenging for fintechs. Each country has its own set of laws and regulations which effectively presents fintechs with many obstacles when scaling their business models.

To solve this pain point, enablers such as NymCard need to establish pre-built partnerships with issuing banks across the region to create a frictionless process so that fintechs do not need to go through that hassle. They just have one relationship with one partner that could take them across the whole region – a complete end-to-end BaaS solution.

2-      Modern open APIs

The one size fits all model for issuing cards in the region maybe be fast, but it faces limitations when it comes to customizing payment experiences. For instance, you can build and launch a card program that works only at certain merchants, but if you are looking to customize card transactions to work only during certain business hours or days of the week, set dynamic spending controls, associate a higher card value for certain merchants and a lower value for others, you will need an advanced open API platform to configure your card program.

A modern open API platform enables you to develop your own card program, tailored to your customer needs and based on the logic of your own business model or use case. If your business evolved to require new uses cases, you can simply revisit the open APIs to amend according to your new business needs with minimal adjustments.

Modern APIs are the fundamental building blocks to any innovative payment card product.

3-      Data insights

Data is everything. Deep insights acquired from transaction data is key for any organization’s growth. You can use data from spending behaviour, geographical locations, or merchant data to improve your product offering and make well-informed business decisions. Believe it or not, this is something lacking within legacy issuer processor technology.

Having access to transaction data gives you a competitive edge. Improving customer experience, preventing fraud, reducing operational cost, and enhancing product offering are a few perks of using data insights to make crucial business decisions.

Concluding lines

Card Scheme Rails i.e. Mastercard/Visa are a powerful method for businesses and consumers to make payments whether by card, phone or other device. Regulators and banks are jumping onboard with modern issuer processors to facilitate the delivery of such innovative payment solutions. For emerging markets, the ability to create scalable card programs to serve underbanked populations and other evolving use cases will spark an unprecedented economic growth.