As the world continues to transition to a mobile-first and online payments world, several solutions have since entered the market to accelerate this move. From digital wallets to cryptocurrency, payments providers have explored new and innovative ways to engage customer interest and demand.

This includes solutions such as Buy now, pay later (BNPL), Central bank digital currencies (CBDCs), digital wallets and QR Codes. Southeast Asia may have pioneered a number of these solutions, but innovators worldwide are exploring new services and use cases for their subsequent markets.

Supporting the world of alternative payments

Everyday consumers are increasingly engaging with methods classed as ‘alternative payments’ that make paying for goods and services quicker and easier. According to Cornerstone Advisors, a quarter of Gen Zers are crypto investors, and nearly three in ten plan to invest in 2022. These ‘alternative’ payment methods are likely to become the norm. By 2030, 60% of global consumers will have made a transaction using an asset class other than fiat currency, according to an IDC report.  

Despite this growing trend, traditional incumbents are losing their piece of the market share. In 2020, 60% of global consumer payments were handled by non-traditional financial service institutions. Every business must be able to support these alternative payment methods and if traditional players want to compete against innovative e-commerce, fintechs and telcos, they’ll need to adopt the right payment technology that can keep up with a growing number of asset classes.

The hidden cost of maintaining legacy tech

To create these new payment technologies, banks and financial institutions must first modernise their payment infrastructure. Enterprises have done well in this department but FIs are still limited by legacy systems.

Payment workflows and technology design in legacy platforms are steeped in traditional value definitions, creating huge challenges when pursuing new payment methods. Creating new solution sets and updating products and services requires additional integrations and technologies that legacy technology simply can’t keep up with. As a result, financial institutions are using up their budgets to maintain these legacy platforms and this cost is only increasing. In fact, global FI spending on existing payments technology is predicted to double to $80.3 billion in 2030, up from $39.7 billion in 2020.

Embedded finance is in demand and the industry needs new tools and tech to build solutions that will allow businesses to innovate – and fast. Without the necessary capabilities and funds to support, FIs will be unable to revolutionise and complete in the increasingly competitive industry for the market’s share of wallet.  

Creating fluid and customisable payments

Technology platforms of the future must offer flexibility. This means updating existing ecosystems to:

• Offer payments optimisation across a wider range of existing and future asset classes
• Allow the quick configuration of new payments products
• Seamlessly interact with other ecosystem services, such as data and security.

Moving to a highly fluid and customisable payments platform will allow institutions to create innovative payments propositions that meet consumer demand. Breaking free from legacy technology is one change but collaborating with fintechs will help elevate the capabilities of traditional institutions to rapidly develop new go-to-market products and services. 

Unifying old and new payment methods

To effectively compete in the financial services landgrab and grow a share of wallet, payments platforms need to become value agnostic. Offering interoperability and integrating capabilities to develop flexible payments products that bridge the gap between old and new payment methods, across any asset class, is key for future success.

Non-traditional FIs may have had success so far but traditional incumbents have the expertise and consumer trust to take back the reigns, they just need to partner with the right provider to gain that technology know-how in order to win back control.