The war on the future of digital payments has begun. The digital payments ecosystem already started building arsenals of digital financial products and services, maneuvering resources directing towards acquisitions and mergers, and gearing up to be compliant under Payment Card Industry Data Security Standard (PCI DSS) and Banko Sentral ng Pilipinas (BSP) standards. The war on digital payments will do good more than harm for the Philippine economy if BSP will be the governing body only to the extent of overseeing the transition stage, building trust, and preparing the rules of the game. Financial inclusiveness and cashless society are the primary end goals. All Filipino citizens must be able to go digital and use digital payments anytime. Cashless society is achievable, but it requires the process of creative destruction. Moreover, cash is not the enemy of the poor and financial inclusion, but a friend that needs to retire soon. The real enemies are the associated burden of acquiring a financial account particularly a bank account by the poor and having few players in the financial institution that have cutting-edge technology to innovate centuries-old financial products and services available for the poor. Financial Technology (Fintech) will pave the way towards financial inclusiveness.
Therefore, in the fight for the future of digital payments, three crucial points or “battles” must be waged. The first battle to win is the battle of reliability, internet speed, internet cost and coverage because unlimited data connection is the future. Internet service providers are required to provide a minimum service reliability of 80% which translate that users of digitals payments can process and accept payments most of the time wherein in fact it should be all the time like the use of cash. The speed of internet is already at the acceptable speed to process digital payments. But the crucial aspects to focus is the cost of internet and island-wide coverage as an additional way to achieve digital financial inclusiveness. To win the battle, the digital payments ecosystem must lobby along with the BSP to eliminate the oligopolistic nature of ISP providers. Furthermore, the Philippines Competition Commission must ensure that strong competition is present in this market. The presence of other competitors in the market will break the chain of price control, will encourage product and services innovation, and will increase physical capital allocation. In addition, ISP providers may adopt a non-bank financial institutions with quasi-banking functions (NBQBs) model to empower Fintech players in reaching digital financial objectives.
The second battle to win is the battle of frictionless digital payments. The digital payments ecosystem’s products and services should be approaching frictionless stage. Transaction costs must sustain a level in which users of digital payments will not be burdened to use and transact payments. Users of digital payments are price sensitive. But the transaction cost must still be present, ensuring market attractiveness to innovators of digital payments. Hence, to win the battle, the players must take advantage of economies of scale and gamification. The players of the ecosystem must accommodate a large volume of transactions to decrease transaction cost with the help of gamification strategy to attract more users and make users brand sticky. The Filipino consumers have a strong sense of brand loyalty provided that consumers really get the value for their money. Filipino consumers are now prepared for the gamification strategy. The craving for gamification is at its peak ready for exploration. The strategy will encourage users to use digital payments over cash to transact. The future of gamification strategy towards digital payments is now.
The third battle to win is the battle of customer journey. The digital payments ecosystem must provide and fulfil the digital lifestyle the users deserve. Customer journey is the delineating factor of the digital payments players to be on top of the ecosystem and that will separate the amateur from the big guys. The end goal is to provide fast, reliable, excellent, round-the-clock customer service across all channels. Any delay or gap in processing inquiries and concerns will generate poor customer service. And to win the battle, digital payments players must take advantage of AI-powered onboarding platform, ticketing platform, AML and KYC platform that will automate and consolidate manual transactions. Furthermore, digital payments players must never abandon the human touch in delivering customer service. The future is AI with a heart.
The battle of the future of payments is tedious yet exciting. There will be casualties and winners in the battle. But the most important part is that we achieve our objectives of financial inclusiveness for all and a cashless society.
Editor’s Note:
This piece was originally published on LinkedIn on April 4, 2019.
Originally published here.
