Payment infrastructure may not be ready for IoT
The introduction of new payment types has created a greater need for a strong, flexible card infrastructure than ever before. That’s easy for issuers to lose sight of; mobile services are new, exciting and backed by demonstrable customer demand.
Fundamentally, however, mobile services rely heavily on card payments.
All this innovation is pushing and pulling card infrastructures in ways no one could have predicted a decade ago. Mobile banking, e-commerce integration, loyalty and rewards schemes and even IoT payments all link to cards. That’s a lot to ask of a back-end system.
So the question is, how can issuers balance a need to be perceived as innovative with providing a reliable, compliant and fit-for-purpose payment infrastructure?
Payment revenue is falling, so issuers’ profit margins are being squeezed. Technological change is advancing faster than internal systems can be updated, and the demand for developers with the skills to design and implement back-end solutions is growing faster than supply.
As a result, the most forward-thinking banks are taking a critical look at their go-to-market strategies, and questioning if a business model where they design, implement and maintain their own systems is still feasible.
Take payment gateways as an example. Banks need a payment gateway to the card schemes as they are the backbone of broad e-commerce payment acceptance for their customers, thereby enabling banks to benefit from the international e-commerce market — set to grow to $4.5 trillion by 2021.
To avoid locking themselves in with a single scheme, these gateways must also be card scheme agnostic. Issuers now have the choice of whether to develop and maintain these gateways themselves, or to prioritize reliability and time to market by working in collaboration with a trusted partner.