Fintech customer focus taps digital payments evolution

Tap on, tap off payment cards have been a big success on public transport, but they are just the beginning in a wave of fintech innovation that’s bringing improvements for both passengers and operators. Today, the smartphone is becoming the number one choice for making digital payments. And contactless metro cards, despite doing a great job of reducing ticketing pain points for travelers, are likely to go the way of paper tickets. “Consumers want solutions that are interoperable and open loop,” Vijay Sondhi, CEO of NMI, told TechHQ. “And to have the whole transaction completed with the phone.”

For travelers, the most appealing solution is one that works across all transport modes nationwide, rather than just on services in a single city. “There’s been a paradigm shift over the past ten years and transportation operators are much more focused on the customer experience,” said Sondhi. Putting wind in the sails is the transformation in customer experience that’s being driven by neobanks. Consumers are becoming used to financial transactions that are much easier to execute and keep track of. And they expect ticketing to be the same.

Supply chain wins

At the same time vendors are benefiting from changes in how point of sale (PoS) service are being delivered. “The sector is moving from proprietary hardware to open hardware that has the payments software running on top of it,” said Sondhi. Stock hardware has a number of benefits, beyond just keeping costs low. From a supply chain perspective, having solutions that can run on Android devices gives vendors more resilience against shipping delays as the hardware isn’t tied to a single provider.

Even the use of third-party dongles to accept payments is making its way out. In 2021, NMI teamed up with Mastercard and Global Payments as part of a ‘Cloud Tap on Phone’ pilot that showed how merchants could accept payments directly to their phone without a card reader. “Tap on phone transactions are protected by the same security and encryption technology offered with EMV (Europay, Mastercard, and Visa) chip cards throughout the world,” writes Casey Merolla of IT services and consulting firm Accenture. “They use the same secure transaction process as traditional point-of-sale transactions.”

From a waste point of view, moving towards common hardware platforms and removing (or at least reducing the number of) plastic payment cards represent positive steps. According to ABI Research, more than 3 billion payment cards will be shipped in 2022. And Thales, which offers financial services operators payment cards made from bio-sourced, reclaimed, and recycled plastics, notes that traditional cards add up to a carbon footprint that’s equivalent to hundreds of thousands of passengers flying from New York to Sydney.

Cardless future

The convenience of smartphone services such as tap to pay mean that on many occasions shoppers don’t even take a physical card with them as they go out and about. And vendors unable to accept payments such as Apple Pay, Google Pay, and other smartphone-based virtual card solutions could lose business. Customers will choose to order their coffees, and other items below the tap-to-pay limit, elsewhere from retailers whose payments services are up to date.

And this is where payments processing platforms provided by firms such as NMI, and others, fit in. These solutions, which are often termed middleware, are an abstraction layer that sits between the retail solution and the bank. They contain all of the ‘financial plumbing’ necessary so that customer purchases happen seamlessly and merchants get paid for the goods and services sold. Payment gateways give developers easy access to hundreds of payments processers, not just enabling transactions in physical stores, but serving online retail too. NMI’s platform, for example, integrates more than 125 third-party shopping carts.

“The world of financial technology is working towards making the user experience more streamlined,” comments NMI’s Sondhi. “And upgrades to the payment rails behind the scenes will be invisible to most users.” Increasingly, developers make use of API’s that interact with cloud services. But there are other options, including software development kits that embed payments software within other platforms that may need to be more sandboxed – for example, solutions that are wired up to hospitals or GP surgeries.

Big data insights

Another benefit that comes with improved ‘wiring’ of the various payments layers, making it easier for merchants to adopt the latest digital services, is the insight gained into customer behavior. Leveraging anonymized tap to pay data gives transport operators a much clearer picture of how services are being used and where to direct future investment to maximize impact. And when travel delays do occur, the information can help to provide timely and accurate information to passengers.

Investments made in innovation by financial services providers have paved the way for more convenient, and potentially less wasteful, contactless payments that come with a variety of added benefits for customers and merchants. And future developments don’t stop there. Other areas of interest include blockchain-based tools, which despite attracting mixed views given their association with the speculative world of cryptocurrency, could have a positive impact on the financial sector.

In principle, standardized and interoperable solutions based on such distributed ledger technology could help to make the financial sector more resilient and reliable, protecting digital identities and enabling traceability. Considering the pace of innovation over the past decade in digital payments, it’s a safe bet that financial services will continue to evolve and become more appealing to customers.