Taking the plunge into digital payments: What companies need to know

There are payments, and there are digital payments. One of the pandemic's lasting legacies will be the global shift towards cashless transactions as millions across the world shop online or shun physical cash.

Take the United Kingdom, for example. Cash payments plunged 35 per cent in 2020; the number of people claiming to lead a "cashless life" doubled.

Adoption of digital payments continues to rocket in the Eurozone and across the world, as consumers and companies alike grow accustomed to the convenience and explore new services and possibilities, say experts at Thoughtworks, a global technology consultancy that integrates strategy, design and engineering to drive digital innovation.

This shift is not just making transactions faster or more efficient - it's redefining the ways in which people interact with money.

Consumer - and increasingly business - expectations mean most enterprises have no choice but to adopt a digital payments strategy. It's not just a question of keeping up; innovative payment systems can pave the way for entirely new business models and markets.

"The replacement of traditional debit or credit cards with things like 'buy now, pay later' products means the point of purchase for many consumers is now completely different," notes Mr Ian Kelsall, product principal for banking, financial services and insurance and fintech at Thoughtworks. "Greater convenience and options are changing how consumers structure their payments, exchange funds and receive goods. And not just consumers, we're seeing this in the business sector as well."

But introducing new digital payment technology is only the first step towards success. Each organisation needs to understand how different solutions meet their specific needs. With its global network of more than 12,000 employees in 17 countries, Thoughtworks has the insights and experience to help. Its experts have identified five questions for companies to ask that will lay the ground for their entry into the world of digital payments.

Q1: How can organisations align their digital payment and commercial strategies?

Given the levels of innovation in the payment space, defining your business requirements and understanding how payments fit into that is critical, says Mr Kelsall. "Organisations need to go back to basics and define what constitutes payment for their business," he says. "Is it the point of sale - that checkout experience? Is it the exchange of funds? Is it the actual financial product that might sit behind some of that? There are multiple layers that may or may not be relevant."

Once you have established your requirements, you can then think about whether it makes more sense to develop a proprietary system or adopt an existing solution. For instance, an online retailer may find a bundled payments solution an ideal fit, while a bank aiming to innovate in the payments space, by contrast, is more likely to require a full platform refresh.

Q2: How can digital payment systems be designed so that they are secure and compliant with existing regulations?

When it comes to handling payments, it goes without saying that security is paramount. But to deliver proportionate security, any organisation handling payments, it needs to understand what data is being collected and stored, and what risks are associated. This analysis should be used to define policies and processes for every point of interaction with data to ensure that the organisation is accountable to customers and complies with regulations.

Payments data is particularly valuable and sensitive because of the depth of customer insight it provides. Because of this, we are seeing increasing willingness from regulators to mandate good practices. One example of this is Australia's Consumer Data Right, which gives consumers greater access to and control of their personal data.

Privacy and security concerns aside, companies need to deliver a seamless payment experience to meet customer expectations. The focus has to stay on how payments enhance convenience for the customer, and not the organisation or merchant.

Q3. How is your company planning for the growth in digital payments?

Whether you are planning to enter new markets or deliver new products, you need to be mindful of different regulations and standards in the host market. Oftentimes, the easiest way to do that is through partners who are familiar with the regulations of the countries they plan to operate in.

Striking the right balance between business goals, the client base and the realities of the core technology stack will help organisations decide which payments capabilities should be kept in-house - and where to forge partnerships with third parties.

Q4. How can I choose the right payments partner?

Partnerships need to be based on your unique needs and context to succeed. For instance, for a new business that plans to integrate digital payments, its primary concern will be the method and speed at which payments processed by a third party are passed to the merchant - and that influences their choice of partner.

"There are now a lot of 'banking as a service' providers and offerings throughout the entire space that you can piece together to offer all kinds of payment capabilities as part of production, and it's an easy onboarding process for most companies," says Mr Prashant Gandhi, principal for financial services at Thoughtworks.

Q5. How should the payments system be structured within the organisation for it to be customer-focused?

Given that payments may touch on everything from finance to sales and product development, it is important to define how payments are structured and "owned" within the organisation in order to formulate a coherent payment strategy or product that is truly customer-focused. This is especially critical for firms with structural or technological silos.

Remember your value proposition

There are signs that regulators are beginning to push back against the dominance of large companies in the digital payments space. "There's mounting pressure in markets like Australia to prevent dominance," says Mr Kelsall. "It's a trend any organisation getting into payments needs to start thinking about."

Meanwhile, in the short term, ever more invisible payments and an expanding list of payment options will continue to take centre stage. Over the longer term, Thoughtworks experts say the development of digital payment-linked experiences such as the metaverse, non-fungible tokens (NFTs), blockchain and cryptocurrencies is a space to watch.

Whatever the future holds, payment providers should stay focused on their value propositions when considering the innovations they are bringing to market. Their payments strategy should mirror and contribute to the broader product innovation strategy. "Companies need to think carefully and be clear about what they are providing, what distinguishes it and why it is the best," says Mr Kelsall. Visit this website to find out what Thoughtworks can do for your business.