It appears financial institutions have become complacent in the marketplace to just simply “offer” the products that their vendors offer rather than thinking through what the customer really wants from them. If that statement stings a little, that is probably a good thing for everyone involved.
Over the past few decades there hadn’t been a tremendous amount of change in the types of products and services that financial institutions were offering, specifically when it came to the payments sector. In fact, in that same amount of time, financial institutions have done more to educate their customers to become payments professionals rather than focusing on simplifying the experience. Some of this may be due to older deprecated technology that was hard to customize, or maybe it was the interpretation of rules and regulations by their compliance and legal organizations that were interpreted to pass on liability to their customers, or quite possibly it was just the lack of focus by many financial institutions on payments as a strategic opportunity.
No matter what the reason, as financial institutions have been required to change due to the need for digital transformation or because of new instant payment capabilities like The Clearing House’s RTP® network or the Federal Reserve’s FedNow® network, financial institutions have fallen into the same old paradigm of presenting payment product offerings to their customer like a Fast Food value menu.
This approach only complicates customers' lives and puts the task on them to understand the nomenclature we finance, and payments professionals must learn to do our jobs.
This was really crystallized for me in a board meeting a few years ago, where one financial institution was talking about how well they were doing in selling RTP to a large corporate customer. While I was happy to hear that the network was being used, I stopped the meeting and pointed out that how they were driving these new capabilities in the marketplace was contrary to the vision that we all had laid out in the Faster Payments Task Force and in the development of the RTP network.
”If you are a financial institution and you are selling RTP or FedNow to your customer, you are doing it wrong.”
The value proposition of designing a new network like RTP or FedNow was to bring payments into the 21st Century allowing them to be integrated, automated and largely disappear into the background of a customer’s real intent, whether that is to fund an account, pay a bill, invoice a customer, pay an invoice or refund a customer.
Yes, you read that right, I used the intent of the customer to explain what we should be doing. This means that as you continue to digitally transform your financial institutions you should focus on building experiences that meet customer intent, which may mean a complete rethink about how you offer products to our customers.
My colleague JP Nicols penned an article earlier this year with some good guidance as to how financial institutions should think about this journey.
My mantra for over the past decade has been ”A Payment is a Payment is a Payment” and while I recognize that accomplishing this goal for customers has some hurdles (rules, technology, product design) it should be how all financial institutions think about their strategy and what they should strive to deliver to their customers either directly through online tools or indirectly through API interfaces you build that enable business customer applications to connect through their applications.
To achieve this, you must be better at building products that accomplish the tasks that your customer needs to accomplish rather than just enabling the products that vendors provide to us via upgrades to our systems.
The industry needs to make sure that their senior management & boards are aware of the strategic role payments play for their financial institution, but more importantly the role they should be playing in their customers’ payment lives. Remember, as financial institutions you have three main jobs in your customers minds:
Store/Protect Money
Lend Money
Move Money
‘Move money’ is the one where I think most of the industry has been complacent. While deposits may appear to be staying strong, the data could be showing that customers are quietly quitting by moving their transaction processing to other companies. Now is the time to address that problem, but it starts with the right product mindset!
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Peter Davey, "the Payments Jedi", is the Head of Payments and Identity for Alloy Labs, where he leads all the activities in payments and identity, with a focus on building out platforms that help community banks and credit unions succeed in payments.
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