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The global real-time payments landscape is transforming every day, as the world moves toward payments that offer a multitude of digital payment overlay services that drive consumer experience and adoption. But what are digital payment overlay services? They are ancillary services that often ride the real-time payments rails, and can be flexible, nimble drivers of innovation. These digital services – piggy-backing on the standard real-time payments rails – not only add value to core payments, but also bring about convenience and ease of use for all participants in the payments ecosystem.
So, who can use these digital payment overlays? They can be for customers, merchants, banks, corporates or fintechs; they can be used on multiple front-end channels like mobile phones, laptops and tablets. And to reiterate, these digital capabilities are enabling banks and financial institutions to innovate and differentiate their products and services in the market.
Digital overlays deliver value to the banks as they can improve customer service and, in this highly competitive market, enable them to retain their customer base. Such digital services create additional revenue channels and empower the banks to compete with fintechs, eCommerce players and the social media giants. Some examples of bank overlays can be simplified mobile applications and merchant servicing systems. Merchant overlays enable seamless payments acceptance and help merchants to embrace instant and digital payment methods. Some examples can be merchant applications enabled with immediate payments and merchant self-service applications. Digital overlays are a great value-add for the bank’s corporate customers, too. Corporates can now keep track of all their payments and collections, giving them better visibility of their payments position. Overlays like invoice management and invoice reconciliation help corporates with eBookkeeping, vendor management and reporting as well.
For consumers, overlays are all about the innovative front-end channels, either mobile or web-based, which simplify their payments journey. Some examples of consumer overlays can be payments using social media applications or seamless payments using a bank application.
Digital payment overlay services have become a global phenomenon, with globally accepted use cases that are driving customer experience – and steering other stakeholders in payments. Overlay services are being leveraged across the globe; though extensively used in some markets like India, Malaysia and Singapore, they remain nascent in other markets like the U.S. For banks and financial institutions, overlay services make the real-time payments value proposition much stronger. While payment processing lies at the heart of immediate payments, these supplementary services enable improved customer service and faster speed to market, open new streams of revenue and capture ever-changing market requirements.
Overlays enable banks and financial institutions to extend frictionless user experience through simplified mobile applications, web-based interfaces and enable a 360-degree view of real-time payments through dashboards and reports.
These services also enable immediate payments on various channels and platforms like social media payments, payments using bank applications, in-app payments, eCommerce, point-of-sale (POS) payments and QR payments with a simplified use of application program interfaces (APIs) and software development kits (SDKs).
One of the areas that is witnessing a lot of innovation around digital overlays is Request to Pay (a.k.a. “Collect” in most markets). Request to Pay (RtP) is a service that enables customers and businesses to collect payments in real-time, which can be one-time or recurring.
For example, a customer purchases a pair of socks using a merchant’s mobile application; the customer chooses an option to pay using immediate payments, following which the merchant initiates a Request to Pay to the customer’s bank or fintech application, then the customer logs into the application and authenticates the transaction. In the above example, all the front-end channels for the customers and merchants are digital payment overlay services that connect real-time payments to a purchasing or collection experience.
India has become a global leader in digital overlays, and by rolling out the Unified Payment Interface (UPI) in 2016, it now boasts the world’s leading real-time payments systems and is a paragon for other markets around the world. Processing around 1.3 billion transactions worth a little more than 2 trillion Indian Rupees per month, and with 140+ banks live on the system, UPI has shown an exponential growth curve. Although numerous reasons can be cited for such phenomenal growth of UPI, such as simplified design, regulator push and bank-fintech collaboration to name a few, one of the driving forces has been the host of overlay services and capabilities that have simplified real-time payments for all.
In the consumer space, it’s the fintech giants that are revolutionizing the way payments are done through apps like Google Pay, Walmart’s PhonePe, Amazon Pay, etc. Merchant servicing has also become digital and merchants now have a host of digital channels to accept and monitor real-time payments like merchant mobile applications, immediate payments enabled at the POS, merchant portals and QR-based payments. Overlays have simplified the workflows for banks and corporates, too. Banks in India use various digital services to simplify real-time payments for their consumers and merchants and accelerate adoption. Some overlay services accessible to banks are white-labelled mobile applications, merchant management portals, dispute management systems and API and SDK-based integration channels. Overlay services can be an absolute value-add to corporates, too, as a lot of the mid-sized and large corporates are struggling to get a clear picture of their cash inflows, invoice payments and reconciliation. Corporates can avail digital services like invoice presentment and collection portals/mobile applications, extending front-end channels to end consumers and partners that enable them to pay, provide dashboards to track payments, etc.
Real-time payments are growing by the day, with more markets globally investing in this space, regulators promoting it, and banks and fintechs working relentlessly to bring seamless payments and collections to customers and merchants while opening new streams of revenue for themselves. As the immediate payments rails grow, the need for these nimble, agile and configurable digital services will continue to rise, making them inevitable for end consumers.
It is these digital capabilities that enable financial institutions to transform real-time payments and bring in customers – and delight them. As new use cases emerge, there is an opportunity for the banks and financial institutions to experiment with digital overlay services, which is absolutely essential to staying relevant in the long run.