Do you remember the days everyone paid for their shopping, or made investments with cash or by cheque? Well, if you’re memory doesn’t go back that far, surely you remember debit, and credit card payments. Gone are the days of in-person, contact payment methods, with a range of modern payment systems in place.
Modern payment systems have gone from cashless to contactless in a blink of an eye, Furthermore, this shift has dramatically transformed the way businesses operate.
What do Modern Payment Systems Look Like?
Modern payment systems look drastically different from traditional payment systems in many respects. While traditional payment system strongly relied on cash-based transactions, modern systems use cash-substitutes instead. Payment methods such as credit cards, direct banking, online transactions, and internet banking have become commonplace. Does anyone use a cheque to fund a stocks & shares ISA any longer?
Even as we speak, virtual payment terminals are becoming increasingly popular. It’s easy to see why – you no longer have to carry your wallet with you when you go shopping! Similarly, businesses no longer have to wait for cheques to be processed or for account transfers to go through.
With the advent of modern and electronic payment systems, monetary transactions have become quicker, easier, safer, and more accessible. This is clearly why contemporary management consultants encourage that new businesses build their transaction business model around digital payments by default, and discourage businesses from seeing payments as an ‘add-on’.
The Shift to Digitalization
The major changes in payment transactions have come as almost all businesses have shifted towards digitalization. Business models and payment methods are closely related. If a business model changes, so do the payment methods and vice-versa.
As new eCommerce platforms began to emerge, we have seen a gradual shift from traditional cash payment systems to digital payment systems. The initial push towards cashless transactions came in the form of debit and credit cards.
This shift widely occurred due to the increase in large transactions that consumers were making. Most of these transactions had to be supervised, and direct investment banking payments were the best way to do that. Moreover, card payments are more convenient for large transactions since the buyer does not have to carry large amounts of cash with them.
The increase in globalization has been a key economic force leading to the rise of modern payment transactions. Digital payments can be performed across borders and great distances and hence bring the world closer together.
The impact of modern payment systems on business
We’ve already seen how closely related payment systems are to business models. As one changes, so does the other, tied in a constant chain of transformation. Following are a few changes that many businesses have undergone with the modernization of their payment systems.
With the advent of digital payments, this has expanded the scope for businesses to deliver and receive payments through traditional channels. This allows businesses to operate coherently and consistently over several channels, improving customer satisfaction and customer retention. Customers get the flexibility to use their platform of choice, allowing businesses to attract more customers, generate more sales, and get an edge over their competitors.
Digital payments have made it easier than ever for businesses go global. Since customers are not restricted to paying in person, they can make payments to anyone from the comfort of their own home. This allows businesses to operate on a global level with the scope to receive immediate payments, regardless of the customer’s location.
Improved APIs and Collaborations
Financial services have become much more collaborative and more evolved thanks to modern payment systems. Europe’s PSD2 and other such regulations allow businesses to collaborate through Application Programming Interfaces (APIs). This is mostly because digital payments make tracking monetary transactions between various organizations simpler through proper data entry and sharing.
Possibility of offering quicker and newer services
Digital payments are only a small part of modern payment systems, but they are highly influential. Their quick accessibility and responsiveness means that businesses can now offer new services quicker and easier than ever. In the past, launching new services was much more time-consuming and exhaustive due a more limited scope of monetary transactions. Now, the diverse range of payment options enhance workflow so that investment efficiency can be realized much more quickly.
As any business book will explain’ all new business ventures involves a degree of risk. Industries change quickly, and even minuscule changes can bring about a massive change in the business environment that can turn everything upside down. Since modern payment systems are much more secure from financial crime than before, allowing all transactions to be tracked, businesses at least have one less risk to worry about. Fraudulent monetary activities such as investment scams can be traced in no time, increasing the chances of receiving all payments owed.
Every business has its own unique way of adapting to the constantly changing landscape. In recent years, we’ve seen a host of new payment systems introduced with the rise of globalization, changing customer needs, and the advent of technology. With these modern payment systems in place, businesses can reap a range of benefits and have undergone major transformations.