In the age of digital commerce, legacy financial institutions (FIs) have ceded ground to tech-savvy upstarts.
To regain some of that ground, Connie Davis, senior vice president at FIS, told PYMNTS in a recent interview, FIs — particularly credit unions (CUs) and community banks — must transform the way they think about digital offerings and connected experiences.
The competitive landscape, she told PYMNTS, shifted “the moment that the banks and Apple ended up on a stage together [for Apple Pay].” As Davis noted, larger banks, including regional players, tend to have their own technology platforms — and direct integrations into their own networks — to enable mobile and contactless payments. That means they can compete more effectively against digital-only competitors.
But FIS’ client base of community banks and credit unions, while adept at providing value-added services to end customers, are not always mobile phone experts.
Often, these smaller FIs are inundated with projects that are specific to the legacy products they have offered to the market, said Davis. They are not always fast followers of newly introduced products and services from their larger banking brethren who operate on a national scale. Though there has been an increasing spirit of cooperation between FinTechs and traditional FIs, there’s still a lot of ground to cover.
“There’s always a curve, a lag, to the adoption cycle in this community,” Davis said of smaller FIs.
And against that backdrop, these smaller firms seeking to modernize banking and payments must understand — and offer — payment experiences that tap into a consumer’s entire life cycle, not just financial services.
Davis pointed to Amazon Go as one example, where payments truly are frictionless and are part of the overall commerce experience. The consumer who is used to the Uber experience expects to have similar app-driven and mobile phone-based seamless interactions with their banks.
“But before all that can happen,” she cautioned, “we have to look at and be aware of the infrastructure banks have at the community level.” Dig into that infrastructure, she said, and there can be a range of different vendors across core operations, mobile banking, online banking and payments processing.
With such fragmentation, it can be a struggle for FIs to put everything in place to remove friction and serve their end customers in new ways and in real time.
Charting The Path
But in following an evolutionary path — and to modernize payments, wholeheartedly enable digital commerce and move away from cash and checks — these FIs must often overhaul their infrastructure.
To modernize payments and the user experience, Davis said it is critical to consolidate processes and data aggregation. Adopting FIS’ new modernization components such as Payments One or Code Connect to integrate siloed data streams and processes using application programming interface (API) gateways can provide a holistic view of the end customer as they interact with various products offered by the FIs.
“The modernization aspect could be, ‘how do I get my card to all of the digital commerce platforms and stored on file?’” Davis told PYMNTS. Driving payment card utilization and promoting the financial institutions’ brand can be made a bit easier by leveraging technologies such as EMV, contactless payments and tokenization, she said, which makes transactions faster and, of course, more secure.
Addressing infrastructure on a component-by-component basis can enable community financial institutions to better troubleshoot transactions when they fail and to answer cardholder questions when they arise.
Davis offered an example where if a cardholder blocks their card and is using a self-service app rather than using a call center, and in response, a financial institution has the option to provide a new card digitally through a similar self-service app.
Digital issuance, she said, represents a “horizontal journey” for the cardholder, marked by a sequence of events. The individual has already established a relationship with the bank and opened an account, and would expect to receive and use a credit or debit card that ties in with that account. Here, the API can onboard customers, coordinate data between “functional events” and accelerate the journey from beginning to end — to a point where the card can be issued digitally or printed on-site at the bank branch.
“The technology has moved with the times,” Davis told PYMNTS.