How Existing Payments Infrastructure Drives Innovation at Scale

The way money moves is evolving at a rapid and exciting clip.

Fueling its rocket-ship acceleration are the twin engines of behavioral expectations grounded in digital convenience, and an increasing boom in the technical infrastructure capable of supporting the realities of those growing expectations.

“I can’t remember the last time I wasn’t connected to my phone, or able to do something 24/7,” Katelyn McCarthy, vice president of strategy and business development at Discover® Global Network, told PYMNTS.

“The ubiquity of connection, of mobile devices, and the pandemic-fueled explosion of online, omnichannel and fluid headless commerce have driven expectations around a completely frictionless experience that requires as little thought as possible about what to use for payment, or as little time or effort as possible to fill out payment details,” McCarthy said.

This puts the onus on payment firms to cater to these new demands and support this emerging need for frictionless transactions.

This shift in focus is not limited to FinTechs alone; Big Tech firms, traditional banks and networks are all working toward the same goal of providing transparent and effortless payments to their end-users.

Tokenization Is the Ticket to Frictionless Payments

By leveraging innovative solutions, merchants are bringing the point of sale directly to the customer, turning any device into a seamless transaction platform.

McCarthy noted that payment firms and adjacent ecosystem players are increasingly focused on “simplifying or minimizing” the need for end-users to input their information before being able to safely and securely complete transactions.

This shift toward convenience and accessibility is made possible through the implementation of secure and compliant strategies, such as tokenization, which streamline payments and modernize the transaction journey.

“Everyone’s focused on that tokenized frictionless experience,” McCarthy said. “The Big Tech firms are trying to drive a frictionless tokenized experience in a device-based way, or some are driving that through a browser experience. Other firms are enabling your frictionless experience through their native eCommerce platforms. Traditional banks are working with wallets. Networks are providing their own tokenized services.”

By collaborating across FinTech alliances, the payment industry can streamline payments modernization.

“Everyone’s driving toward the same end goal, which is to meet consumer expectations for an endpoint — and that also requires firms to move the frictionless experience down the tech stack as they look to translate that frictionless payment experience from online to an in-person or an omnichannel occasion,” explained McCarthy. “Strategic firms are fighting for ways to be at the top of the wallet in relevant ways.”

She added: “They want to partner with those firms that have the payments infrastructure expertise and the payments assets to actually build out what they need, so they don’t have to be the payments expert and can just solve the money movement problems and serve as the business expert.”

Bringing Frictionless Solutions to Market

This partner-forward ecosystem has led to the development of innovative solutions, such as frictionless, walk-in, walk-out in-person shopping experiences, where consumers can be charged for their items later, eliminating the need for traditional checkout processes.

“There are instances where merchants are taking advantage of solutions to turn any device into a point of sale. So, tablets, phones or the traditional point-of-sale infrastructure are now bringing the point of sale to the customer rather than making it a physical step that you have to take before you exit the experience,” McCarthy said.

In this new landscape, payment firms need to “come to market with real differentiators,” she said, noting that things like rewards programs, loyalty platforms, value-added features for consumers and for merchants are rising up the priority list.

Already, organizations are starting to integrate formerly online-only strategies — like using targeted data and analytics to drive conversion — into the in-person shopping experience.

But while innovation continues to blaze a path across the consumer payment journey, McCarthy points to commercial use cases as “being far more interesting.”

“Consumer use cases drive and set the standard, but I think B2B will naturally demand to adopt what is productive and expected from that consumer standpoint, so the idea of frictionless payment experiences in the B2B context is also going to be expected — with an added element of expectations of business workflows needing to be optimized around the payment,” she said.

As for what the Discover Global Network leader sees happening in the future?

“The payments sector will continue to experience growth in digital payments, and there will be opportunities in a couple of different areas. First, consumers will continue to demand a frictionless experience, so those firms that can bring the best of the online experience into the retail setting, the restaurant setting, the service setting will gain traction. Second, consumers will want frictionless payment experiences no matter what kind of payment instrument they want to use. They will demand more choice, and everyone in the value chain will need to think about the ability to pay with alternative or less traditional forms of payment, which will create some business model opportunity,” McCarthy said.

“Finally, I think there will be real power in firms that partner to develop these novel frictionless, compliant solutions on top of what is existing payments infrastructure, like the network provided by Discover Global Network. Firms that can essentially scale what is incumbent infrastructure by layering in modern capabilities on top that can dynamically adapt to market needs and expectations will do well and create stickier customers,” she added.