Claiming the Customer Interface in the Future of Payments

Payments serve as essential conduits in the financial landscape, mirroring the critical nature of services like plumbing, they facilitate the seamless flow of money. Disruptions in this flow are as impactful as interruptions to utilities like water, immediately felt and significantly disruptive. Positioned atop this financial “plumbing” is the customer interface, often taking the form of a payment card, which allows the customer to execute transactions. Controlling the customer interface holds significant value, enabling brand promotion, data collection, marketing influence, and monetization of customer behavior.  

We witness a remarkable diversification within the landscape of payments, with various customer journeys unfolding simultaneously. For some of these journeys, payment marks the conclusion as the customer “checks out”, when paying for an item in-store. Conversely, emerging payment models, akin to those used by Uber or Amazon Go, weave payment so seamlessly into the customer experience that it becomes almost invisible. This marks a departure from conventional “check-out” paradigms to ones where customers “check-in” at the beginning, without a noticeable “check-out” at the end.

These “check in" journeys present a paradox:

• While advancements in payment technology facilitate these journeys, the act of payment itself fades into the background.
• Despite consumers becoming more aware of payment options, the act of payment becomes nearly invisible.

The shift in payment methods extends beyond new transactional journeys to include alternative form factors, such as smartphones and wearables like watches and wristbands, in traditional “check-out” scenarios. This evolution presents a challenge to banks, which have traditionally dominated the “check-out” customer interface. Payments via smartphones or wearables often leverage third-party e-wallets as the primary interface, with that third-party’s branding being front and center. Nevertheless, banks are not simply conceding their position; they are innovating in response, notably by launching their own e-wallets. Pix in Brazil and Swish in Sweden are two highly successful examples, with Pix reaching over 140 million users—approximately 80 percent of Brazil's adult population—within two and a half years of its launch, and Swish amassing 8.4 million users in a country of 10.5 million. Major US banks are also set to introduce Paze, indicating a similar strategic direction. Given that a vast majority of consumers would prefer a wallet from their bank over a wallet from anybody else, this presents a huge growth opportunity. In addition, banks are also enhancing the user experience by reimagining payment cards with elaborate designs, offering personalization options down to the individual level, and employing premium materials like metal. Metal cards, distinguished by their distinctive weight, sound, elegance, and allure, have captivated customers globally, driving improvements in customer acquisition and spend for banks and other payment card issuers offering metal cards to their customers.

The battle for the primary customer interface is intensifying in the future of payments. Banks, armed with their own wallet products and sophisticated payment cards, are strategically positioning themselves to ensure they remain more than just operators of the underlying infrastructure. By enhancing the customer interface, banks aim to elevate their role within the evolving payments ecosystem, ensuring they provide not only the essential 'plumbing' of financial transactions but also a distinguished, customer-centric experience that fosters brand loyalty and customer engagement.