Payment processes have a long history and people are used to how they function. Anything that differs from the current way of doing things can seem like a hassle or an unwanted complexity. As a result, people tend to stick to the status quo and do things as they’ve always been done.
That resistance can make it hard to recognize innovations. Remember the first time you tapped your phone to pay? Not everyone was excited to join the tapping revolution, or to install the necessary equipment, but now it’s commonplace.
Change can be difficult, but it’s worth it for the benefits innovations bring. Here are some of the main obstacles making it hard for merchants to break out of the old mold – and the solutions that are helping fintech and e-commerce leaders find the energy and support to make big changes in payment technology. First, let’s tackle he challenges.
Infrastructure and integration
Payment solutions run on a combination of hardware and software, from chip readers to Point of Sale terminals, scanners, monitors, and various APIs. If new innovations are challenging to integrate or require new equipment, merchants and customers might hesitate before adopting them. Changing an existing system can be disruptive and expensive, or require new capacity, personnel, or extra training to install and operate it. If a solution already seems to work seamlessly, any of these new elements can seem like a complication – even if it promises new benefits.
Communication gaps in the payments ecosystem
Leading industries need to work together to push innovations forward. In highly innovative sectors, the rush to innovate and differentiate sometimes leaves communication gaps between providers and the customers they serve. Instead of seeing a collaborative industry whose innovations make sense, they see disruption and competition. As e-commerce, retail trends, and digital technology drive change in the payments ecosystem, merchants have a lot to grapple with. Without a clear understanding of how innovations like open banking, mobile payments, or QR code payments, will benefit them, retailers hesitate to adopt them.
Financial technology (fintech) companies in the payments industry need to align their ideas and innovations with existing industry and government regulations. These policies and frameworks have been decades in the making. They’ve been vetted and designed to support the financial system, protect financial and consumer data, and provide a solid foundation for the financial marketplace. New innovations often require policy updates and regulatory support. That takes advocacy and time.
Change can be slow, but advantageous. Open banking policies, for instance, are opening up the financial playing field to new entrants and new services. Regulators are making it easier for payment innovators to optimize cross-border payments, making them faster and less expensive for merchants to transact.
Better communication, integration, and regulatory support are helping merchants see that fintech innovations make the payment ecosystem work faster, securely, and seamlessly. Here’s what’s helping retailers and customers embrace the systems defining the next generation in payment processing.
A unified regulatory framework
Governmental bodies and financial technology organizations are working together to help make the payments ecosystem more transparent and to lower the barrier of entry to more players. The resulting democratization welcomes more activity and innovation in the payments area and paves the way for more partnerships. Emerging solutions, such as India’s United Payments Interface (UPI) and Canada’s Real Time Rail payments system, are initiatives that bring fintech and policy together in ways that support commercial activity and make digital payment processing more efficient and cost-effective.
In the digital ecosystem, a lot of technology adoption happens during online shopping and checkout, or in-store at the Point of Sale terminal. Customers sometimes discover that they need to download an app to finalize a payment. They might learn they need to open a different kind of account or set up a layer of authorization. These new options might carry additional benefits, but the risk for merchants is that they complicate the checkout process. Sometimes merchants are initially hesitant to adopt a payment innovation because they don’t want to risk pushing customers away. Some fintech solutions can be hard to understand. Take blockchain technology, for example. Merchants may not feel equipped – or have the time – to explain the new solution or showcase its advantages to customers.
Fintech providers need to take the initiative and ensure they provide merchants and customers with clear messaging on how new innovations work and the benefits they bring. Technologies people use now without a second thought also had a learning curve. Payment providers need to provide old-fashioned education to get merchants up to speed.
Partnerships between banks and fintech companies
Many retailers and end customers maintain strong relationships with legacy banks. For these customers, dealing exclusively with a challenger bank, payment processing startup, or an established fintech from another region of the world can feel like a difficult or risky move.
At the same time, these smaller organizations are the ones making waves with digital and payment innovations. Smaller organizations are agile and flexible and can respond to customer needs in faster and more cost-efficient ways. To bridge the gap and encourage technology adoption, many traditional financial institutions are partnering with fintechs to offer their customers added benefits inside their familiar ecosystem. These partnerships are helping innovations, such as QR code payments, real-time payments, cross-border payments, and blockchain payment systems, get the traction they need.
Future forward with fintech
Payment innovations introduced by fintech companies are helping e-commerce and brick and mortar businesses streamline transactions, lower costs, and provide seamless and secure checkout experiences.
As the payments landscape continues to evolve, fintech firms are increasingly important in driving innovation and shaping the future of payments. With the right education and timely regulatory support, merchants will embrace the innovations available to them to stay on top in a competitive marketplace.
Want to learn more about how the latest fintech innovations can help expand streamline and expand your e-commerce business? Contact OTT Pay to speak to one of our e-commerce specialists.