If you’ve ever built a personal computer from scratch, you know how satisfying it can be to purchase and install new components, boost the power supply and upgrade the memory or graphics card. One would think it’s complicated but, these days, it’s fairly plug-and-play, whether you add, subtract or exchange.
Not so for payment platforms.
Although most consumers still use cash, check, ACH and debit cards to make loan payments, demand for more modern payment options continues to increase. While alternative payment types such as digital wallets are gaining adoption by the direct auto and personal lending space, that isn’t necessarily the case for financial institutions. In fact, a recent loan payments survey revealed very few banks (less than 1 in 10) are expanding options for how their customers can pay, including popular alternative methods such as Venmo and PayPal.
The challenge is that banks are adding payment platforms ad hoc, rather than integrating all available payment types onto a single, unified payments platform. This is evidenced in the aforementioned loan payments survey where 77 percent of consumer lending executives interviewed said their financial institution manages multiple payment platforms to present more payment options to their customers.
Managing multiple payments platforms can come with some serious pitfalls. For example, this approach often:
1. Delays access to the new payment types.
Managing multiple payment platforms is cumbersome and inefficient, making it hard to expand payment types and channels. That can make it challenging for current customers without demand deposit accounts to pay back loans using the payment method they want. It also puts you at a disadvantage in attracting new customers. If you’re not offering customers the option to make their loan payment the same way they purchase goods and services — for instance, using a digital wallet or payment app — they may look elsewhere when shopping for other bank products.
2. Makes it far more complex to collect and clean data.
In an age where data opens the doors for so many important functions, it’s important to take steps to make the data that’s available to your bank easier to use. When data is being funneled through multiple platforms, it requires extra work to consolidate it, clean it and remove duplicity so it’s ready to assist with decision-making, benchmarking against industry norms, customer engagement and more.
3. Creates obstacles to democratizing data.
Data is only helpful if it’s accessible to all of the stakeholders who need it and presented in a format they can digest. When data comes from multiple sources, it complicates this process, resulting in multiple reports that must be laboriously consolidated into one. This could cause bank leaders to miss out on timely, comprehensive insights that better data management can offer.
4. Increases risk of data breaches and compliance issues.
Whenever you have loosely connected, rather than fully integrated systems, you add risk. It’s simply harder to apply comprehensive oversight to ensure every disparate platform is airtight against a cyber attack, and all privacy and data handling regulations are thoroughly addressed.
5. Reduces CX by adding unnecessary friction.
A third (34 percent) of respondents to a survey of financial institution executives said a single platform is necessary for quality CX. We agree. The more ad hoc and complex the payments system, the more friction and potential points of failure. That frustrates consumers who are used to a seamless e-commerce payment experience and expect the same, high-quality payment experience from their bank.
6. Prevents the adoption of AI/ML models.
AI is poised to revolutionize bill payment by enabling a hyper-personalized experience and improved self-service functionality. For instance, a customer waiting on hold to make a payment will first connect with an AI-assisted virtual agent who offers to send a link to help them pay independently with only a few clicks. However, AI/ML models rely on high-quality, up-to-date data sets. That’s made more difficult when that data must be constantly pulled from multiple platforms rather than funneled into a single data warehouse.
Offering a wide range of payment types is an important step toward giving your customers the best possible service and tools they need to pay independently and on time. The key is to expand strategically, by connecting payment types through a single API. You don’t have to accomplish this in-house. It may make more sense to partner with a payments provider that already has the technology and expertise in place to enable more payment options as well as provide data analysis and AI/ML tools.
Either way, you’ll enjoy the benefits of having a single, well-functioning platform and the access to data it provides.
Anne Hay is SVP, chief marketing officer at PayNearMe, where she is responsible for marketing strategy and research initiatives. With more than 20 years experience in B2B SaaS marketing, including 16 years in payments technology, she has driven growth for organizations servicing the bill payment, eCommerce, online banking and iGaming and online sports betting markets.