We’ve entered the era of payments modernization, including real-time payments. Today’s technology advances at lightning speed, and new systems and solutions—leveraging that very technology—continue to emerge to improve the payments process. All of this being driven by the customer/member, who demands fast, safe, convenient, and personalized transactional experiences.
And financial institutions will be the force to usher us into the modern payments world.
While FinTechs might be driving the technology behind the modernization, financial institutions have the customer/member relationship; they’ve earned the trust. Customers/members rely on banks and credit unions for their financial needs and to keep their data safe. This confidence in FIs drives acceptance of new products and solutions, which leads to adoption, and ultimately use—all of which must be in place for us to truly enter the era of modern payments.
Certainly, FinTechs bring advantages to financial institutions in this age of modernization. They are not hampered by legacy systems, so they can oftentimes build and develop with ease. In addition, FinTechs are not always subject to the same regulatory requirements as other financial services firms, so they can be nimble and move more quickly. And they do technology well with in-house expertise. As niche organizations that focus on building financial technology, they can hire and retain specialized resources to develop specific tech and implement and maintain it for clients and users.
But financial institutions complement these skill sets with their unique qualities. Established players with brand recognition, financial institutions have insight into customer/member payment behavior through a vast set of historical transactional data that allows for personalized services. In addition, banks and credit unions can provide custom solutions through-face-to-face interactions. And while they might not always have technology expertise on staff, they have knowledgeable financial experts who can support customers/members with an array of financial needs. Above all, banks and credit unions have customer/member trust, a true necessity whenever personal data and money is involved.
So, what results when you bridge that customer/member trust with technological prowess and agility? For one, we witness a very powerful financial institution/FinTech union. By partnering with FinTechs, financial institutions can harness their unique qualities (without the need for significant internal technology investments, infrastructure improvements, or resource acquisitions) to make modernization a reality for their organizations and their customers/members. And even if new partnerships are not a possibility, cores—FIs’ first FinTech partners—are also working to implement technological advances that can support modernization efforts for their financial institution clients.
With payments modernization well underway, financial institutions should further explore how FinTechs can play key roles in their efforts. To hear a deeper dive on this topic, check out Finastra’s Open Payments podcast, featuring Tim Mills, vice president of business development and product management at The Clearing House; Robert Mancini, head of payments, Americas at Finastra; and me. In a three-part series, we take an intimate look at real-time payments and payments modernization and what’s needed to get there.
Without giving everything away, our message is this: Trust coupled with tech can lead to modernization success.
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