THE BLOG

The Payment Services of the Future

20/02/2014 14:51 GMT | Updated 21/04/2014 10:59 BST

How times have changed; the way we pay for things as we know it has evolved and it's becoming easier and quicker to handle and transfer money through digital means. And banks and payment services brands are voraciously looking to extend beyond being transaction facilitators. This year, we will continue to see some of the sector's biggest players adding deal services to their marketing mantra of ease, convenience and flexibility. With a host of new entrants to the market, financial services are getting clever in the way they do business with customers and many are reaping the dividends by putting digital at the heart.

Cheques are out and mobile transfers on-the-go are in. The emergence of payment services built purely for a digital world is bringing new founded speed and convenience to consumers' banking needs. Take Square Cash, which allows you to email cash directly from your debit card to anyone else's, regardless of what bank each party uses. There's no login or password to remember and no special software or hardware required -- you just use email. It works on both ends using any email service or programme on any email-capable device, whether a computer, a smartphone or a tablet. And then there is TransferWise, a peer-to-peer money transfer service launched in the United Kingdom, which allows users to transfer money between countries and make foreign payments using the mid-market or interbank exchange rate. The app known as Venmo is bringing out banking's social side by allowing you to exchange payments with people in your social circles via your smartphone. The app links your Facebook friends and email contacts to your bank account. Friends you've opted to "trust" can automatically withdraw money from your account. The proverbial "cashless society" is becoming more real than ever.

Retail banks have started to mirror the convenience and added value that online payment service companies provide by putting digital firmly at the centre of their infrastructures. Last year we saw Barclaycard launch Bespoke, a website that promises to offer recession-hit UK consumers thousands of personalised promotions from the likes of Tesco, Starbucks and Shell and followed it with a major push for its Freedom Rewards cards, which awards users points after a purchase using the card that can be redeemed at thousands of retailers. Elsewhere, MasterCard launched a service that will see shoppers targeted with offers from retailers as they pay for their parking as a result of a global tie-up with parking services provider Parkeon. Paypal, meanwhile, has been trialling a FourSquare-style app for use in local, independent shops that allows users to check-in when entering or approaching a store. Each is intended to offer customers and retailers, the two constituents of payment services brands, added value. For customers, it's the feeling that their provider is giving as well as taking. For retailers, it's the data insight and a boost to trade.

Just this week, Lloyds Banking Group announced that it's plotting a digital overhaul over the next 12 months to ensure it delivers its products to customers "through the channels they prefer". To "capitalise" on its achievements to date, Lloyds has created a new Digital, Marketing and Customer Development function to "focus [its] investment and ensure [its] success in retail is replicated by sharing digital product development across all divisions". The bank said it has over 10.5 million active internet banking users, as well as four million customers who regularly use mobile banking services. Banks are beginning to act like retailers where digital is placed at the heart of the business. Digital technologies are advancing at an exponential rate and digital needs to be beating at the core to ensure that banks meet the needs of tomorrow's consumer. It's not just about being ready for today, but thinking about the next technology that is going to capture consumers' imagination and taking the necessary action to gain a presence in this space.

But of course, there is still a need for banks to be on the high street. The reasons that consumers choose to visit a bank in person, for that face-to-face interaction, reinforces the importance of customer services in this sector, which is not set to disappear just yet. Metro Bank has put all focus on customer service , where branches, or "stores" as they are known are open seven days a week - the only bank to do so - and staff are trained to give a warm welcome. However, the bank should be exploring how this can be enhanced through the move to digital. This means understanding how their customers are interacting with the brand outside of the store and bringing this to life in-store. This includes finding ways to successfully integrate the in-store experience with other services offered by the company, such as mobile banking. What is fundamental is that there is seamless cohesion made between online and offline so that the customer journey is made effortless.

With the emergence of nifty payment services following customers online and on their mobile, the retail bank of today must work harder to make its branches digital destinations that cater for a different type of consumer. As more devices become connected, consumers are finding new ways to interact with banks. These channels need to be optimised and used to engage with consumers in the most relevant way. But in order to do this well, the approach requires the financial services industry to rethink their business models to place digital at the core, by adopting the right infrastructure to react to the changing digital world.