The world of payments has been a strange and confusing place over the past 10 years. With alternative payment options like PayPal, Klarna, Cryptocurrencies, Zelle, and hosts of new services entering the space looking to disrupt cash, cards, and other legacy payment systems, it becomes confusing to understand how and where banks fit into the ecosystem. Well not to worry, as at the back end of all of this sits the long-standing institution of banking. The question that I have been asking myself is, why are banks not more active on the front end.
It Starts with the Bank
When any person or business starts to buy or sell services, they all begin with a bank account. This fundamental service is a near necessity for any human being and certainly for every business. In the last 25 years of my work in payments, I have seen legacy banks sit quietly as the intermediary in the payment ecosystem working both the issuing and acquiring sides of the business. Only in the last 5 or so years have we seen new fintech, digital and challenger banks enter the scene offering consumers and businesses alternative ways to bank with new tools and services that not only add value to their clients but add substantial non-interest income revenue.
Mobile Banking
Today, almost every bank provides its customers with a mobile banking application. For digital and challenger banks that have no retail presence, mobile banking is the only way. In 2020, nearly 87% of Americans used their mobile banking service, and over $503B in payments were made through mobile devices. With such an enormous adoption of mobile banking, you might be surprised to learn that there is not one bank that offers a solution to take card payments in their mobile app. Instead, it seems, banks are content with letting companies like Square, PayPal, Stripe, and Shopify take all of that business.
The Square Effect
Small businesses love Square. Why? It is simple, convenient, affordable and they have no other option other than going to a traditional merchant processing account. But where do these businesses start? Considering that before someone can get services with Square or PayPal they have to have a bank account, so everyone begins with the Bank.
Enter Felix.Terminal SoftPOS for banks
Tap to Phone technology is an emerging solution that turns any NFC-enabled smartphone into a secure payment terminal, enabling any user to accept contactless card payments. Essentially, it is mobile POS but, unlike Square or PayPal, Tap to Phone does not require a separate card reader to be connected. What’s more, Felix.Terminal SoftPOS Tap to Phone technology offers the ability for mobile application providers to securely integrate an embed into their existing app.
The Perfect Storm: Tap to Phone in Mobile Banking
Consider you go into your mobile banking app and there was a feature there that was already active saying “Accept Payments”, which then launched a payment terminal application to allow the user to accept card payments. Not only would this allow the bank to provide a far more convenient solution for bank customers, but would provide an instant revenue uplift for the bank. Further, being the bank already has the customer’s financials, KYC, and other important financial insights they could provide a much more competitive rate structure and secure the retention and lifetime value of their customer.
From my perspective, a SoftPOS for banks brings an immensely valuable proposition that should not be ignored. With increasing competition, lower margins, and diminishing trust, banks are perfectly positioned to take advantage of this powerful new technology to not only boost revenue but to deliver services that their clients obviously need and want.
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