Why consumers will be able to pay anyone they want, immediately and in any currency.
The biggest single trend in the world of payments today is the empowerment of consumers. The impact of the well-known M-Pesa money transfer service that is offered by mobile phone companies to their customers in East Africa is an extraordinary example. It is also a key concept underpinning the European Union’s revised Payments Services Directive (PSD2), which seeks to promote competition and innovation in the payments industry.
Consumers are not the only winners…
However, the latest generation of payments platforms and solutions do not just thrive because they deliver convenience and value to consumers; they also provide significant benefits to merchants – and, in the B2B world, to corporate treasurers as well. In essence, lower costs, faster payments and receipts, and greater information in real time about cash positions have a positive impact on the bottom line. Large and small businesses integrating their external payments platform with their global supply chain should be able to reduce the cost of generating working capital and minimize financial risk.
Today, merchants or any business working with an external payment processing platform have several options in relation to the financial benefits that are generated. The benefits can be retained, with the result that operating profit is higher than it would otherwise have been. The benefits can be passed-on to consumers in the form of lower fees for payments that are made through the platform. Or, the benefits may be given to consumers in the form of valuable “reward loyalty points”.
Loyalty points by definition benefit the consumer. However, they can also be used by the merchant offering them to build brand awareness or to gain competitive market share. In essence, the loyalty points are a mechanism whereby reduced payments costs can easily be used to fund business development. The benefits of loyalty points can be deployed and transferred across a network of participating merchants – which increases the value of the loyalty points and increases the probability that the consumer will actually use those points.
…and banks are not necessarily losers
Providers of payments platforms are often seen as being FinTech disruptors. This is because they are not banks, yet are dedicated to activities that are generally and traditionally undertaken by banks. The implication is that the payments platforms are in competition with the banks and are encroaching in their business. This is partially true.
Payments platforms are better thought of as counterparties to banks rather than commercial rivals. Suppose a payments platform operator transfers money in one currency from a party in country A to a party in country B. The payments platform operator will need to have established correspondent banking relationships in both countries, A and B. In other words, the correspondent banks will receive fees as a result of the transaction. In the event that the currency in country A is different to the currency in country B, the banks should also receive fees for managing the FOREX exchange process involved.
And if the payments platform operator is clearly and effectively handling all the Know Your Client (KYC) requirements, any bank can transact with that operator with the security that all parties to a transaction have been properly identified. Over time, it is becoming easier for payments platform operators to deal with KYC issues because of continual technical advancements and improvements such in facial recognition, and other biometric technologies. From the point of view of regulators and law enforcement agencies, the rise of the payments platforms makes it easier, not harder, to keep track of money that is moving through the financial system – and, not least, because of the reduced usage of physical notes and coin.
More “wearables” means easier (and more frequent) payments
Biometrics is not the only area where technology and innovation is having an added impact on payments. For years there has been a general tendency for payments to be possible through computers that are smaller and more portable than previous generations. Transactions involving cash withdrawn from an ATM gave way to internet banking via desktop computers. Desktop computers yielded to laptops, which were followed by tablets and smart phones. Payments platforms have long been agnostic in relation to the hardware through which they are accessed.
And they will need to remain so. The rise of wearable technology means that consumers are able – and expect to be able – to conduct transactions through smart watches, bracelets, necklaces and other devices that they keep with them at all times and all places. Biometric temporary tattoos appear to be the ‘next thing’ in wearable technology.
In short, several forces are moving the world of payments towards a point where all consumers will be able to achieve instant payment execution and therefore, instant gratification. That is the point in which a consumer can, instantaneously, make a payment in any currency to any person or business, no matter where they might be in the world. Meanwhile, he/she will come to expect that the payment (or, indeed the receipt) will be handled through whichever device he/she prefers.
OlePay is a Global Payment Pooling Platform which offers merchants in 281 countries the privacy and security of a closed network. Merchants benefit from instant receipt of payments from clients/buyers around the world; instant currency exchange, and lower processing costs. Consumers also benefit from security, privacy and payment device flexibility. They may make payments from their computer, tablet, smart phone, classic (vintage) phone, or even wrist band or necklace. They earn loyalty and reward points from individual merchants that can be used to purchase merchandise or redeemed for respective currency; System Points.
In short, OlePay combines a stored payment value account which includes all the payment processing features for both global and local merchants in tandem with meaningful marketing and branding value. OlePay is a part of the WorldPayU network and supports many different payment, gift and loyalty systems.
Chau Nguyen has been Managing Director of OlePay and OleGroup since early 2007. For 16 years previously, he was President of Great Western Group.