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Digital banking Act. 22 Aug 2017

The 6 characteristics that payment channels must have to conquer the market

bank mobile banking technology internet apps innovation bbva

One of the debates in the financial sector is the inclusion of new payment channels that are changing the system as it was known. Virtual currencies, payments through mobile devices and online payments – new players have entered and these are the six characteristics that new payment channels should have to succeed.

85% of transactions worldwide are still made in cash. Cards represent 9.1% of payments, direct debits 4.6% and checks 1.2% according to estimates in the PwC study Los medios de pago, un paisaje en movimiento (Payment channels  a moving landscape). In this scenario other payment channels are coming into play that can revolutionize this picture.

In recent years there has been a strong growth in electronic payments, i.e. payments made via the Internet, as well as payments through mobile devices (either with a smartphone or another mobile device), although both modes are closely related. This has provoked most large banks to adopt a strategy geared toward an omni-channel approach.

According to this report, electronic and mobile payment channels are starting to replace cash, but not cards. "New payment channels will gradually replace conventional methods and there will come a time when almost all operations will be conducted online, especially through mobile devices."

Though few venture to predict what this transition process between payment channels will be like, there is consensus in the characteristics required from a new payment channel to conquer the market:

1. Universal

It must be widely accepted in many countries and businesses and also allow payment in both physical stores and online.

2. Regulated

To ensure this universality, it must comply with regulations and the most common international standards.

3. Secure

The transaction must be secured, as well as the means and devices that may be involved in the payment process.

4. Practical and simple

The means of payment must be easy to understand and execute, procedures that are not strictly necessary must be eliminated.

5. Cheap

A high fee or a complex operational infrastructure (terminals, computer systems, etc.) can become barriers to implementing any payment channel.

6. Rich user experience

New technologies offer the possibility to improve this payment experience: real-time purchases, chance to finance purchases, sending notifications or offers, etc.

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