Payments: From Utility to Experience

For decades and long before the widespread digital transformation of payments and international remittance gateways, electronic payments were in the backstage and banks were merely considered trusted vaults to store cash and valuable assets at least for the retail consumer. Payments were a utility, not a differentiator.

Fast forward to today: banks have moved beyond that and aspects other than reputation and years in the market are now key factors in attracting customers such as the ease of onboarding and robust payment plans. Traditional banks are now competing on more than brand heritage; rather, they are competing on the full end-to-end experience and customer journey.

Enter fintechs and PSPs. They did more than just disrupt transfers and payments, they re-platformed the experience. This leaves us with the competitive question: how can we turn payments into an experience customers can’t live without?

What Changed?

Digital payments are now a primary arena where banks, PSPs and fintechs compete for relevance and customer loyalty. Several accompanying forces are reshaping this shift and are becoming decisive factors in customers’ decisions.

To start with the journey, a fully digital Electronic Know Your Customer (eKYC) onboarding process has moved from a compliance checkbox to a competitive lever, as remote digital onboarding enhances financial inclusion and reduces friction. Digital-first generations tend to avoid visiting branches or having physical interactions; therefore, this has become a minimum requirement for a large segment of potential customers.

Consequently, digital wallets have also taken the lead in daily reliance, as they now account for more than half of e-commerce transactions and about a third of point-of-sale spending, thanks to the fact that they are fast, familiar and increasingly the default on phones and browsers.¹ It is worth mentioning that observations show digital wallets are not confined to developed countries but are becoming a common practice globally.

On another front, globalization and remote work, accelerated by the COVID-19 pandemic, have increased reliance on international remittances more than ever before. To put this into perspective, global remittances surged from just over USD 130 billion in 2000 to an estimated USD 905 billion in 2024, a sevenfold increase over roughly two decades.² The enhancement of international payment gateways and the introduction of new compliance standards and services are enhancing the experience and reducing friction. Yet despite this astronomical growth, international remittances remain far from frictionless. High transaction fees averaging 6.4% globally³, long settlement times in certain corridors and limited interoperability between payment systems continue to frustrate users.

The digitization movement on one hand and the challenges created by banks and regulated institutions on the other have created the perfect competitive environment for fintechs to find their place and solidify their position as the more flexible entities that can serve customers with fewer rules and regulations. For example, by the late 2010s neobanks emerged, and they alone are now serving around 1 billion customers⁴, proving that agile onboarding and in-app support are what customers are seeking.

Keeping Up with the Competition

For banks and financial institutions, this reality underscores an urgent new mandate: not only to adapt their infrastructure to meet the demands of real-time, transparent and interoperable payments, but also to build adaptable systems that allow them to keep up with constant changes and remain competitive, or risk being outpaced by other market players who are already capitalizing on these gaps. Banks now need to be adaptable and flexible to accommodate new expectations, especially those of Gen Z and Gen Alpha.

1. Treat eKYC as a Product, not a Policy

With younger generations, digital onboarding is no longer a luxury but a basic expectation as the first interaction with the bank, and as the saying goes, first impressions last. Innovation in the field of eKYC is ongoing, yet challenges remain due to the lack of official documents. To overcome this, institutions are shifting toward tiered onboarding with instant upgrades upon additional verification. This approach gives customers the satisfaction that their request has been addressed and accommodated, rather than rejected altogether.

Beyond basic verification, the reuse of identity across products and personalized offers can turn identity verification into a strategic asset. Not only does this increase customer satisfaction, it also reduces overhead and operational burden for banks. In doing so, banks can transform the first interaction from a procedural hurdle into an easy-to-use, secure and trust-driven experience that positions them ahead of digital-first challengers.

2. Rethink Retail Payments

With global cash spending dropping drastically from 73% in 2013 to 37% in 2023⁵, payments have become a core part of the customer experience. Modern wallets have set the bar high by making real-time payments, tracking, alerts and status updates the standard. Banks are striving to meet these expectations by offering interactive mobile banking applications that provide smart routing, upfront transparency, fast-versus-cheaper selections using existing payment infrastructure and self-service dispute options.

Mobile wallets are evolving from simple payment instruments into holistic value hubs. Beyond transactions, they now deliver added services such as tracking, receipts, subscription management and personalized insights. They are also continuously improving and incorporating features such as loyalty programs and gamified apps. This combination not only creates an enjoyable and rewarding experience but also plays a vital role in customer loyalty and retention.

In addition, popular tools like Buy Now Pay Later (BNPL) and its emerging counterpart Pay Now Buy Later (PNBL) enhance customer choice and influence spending decisions by providing flexible payment plans with transparent pricing and clear trade-offs to maintain trust. When wallets combine visibility and convenience with meaningful rewards and multiple payment options, they stop being mere payment instruments and instead become holistic ecosystems that build loyalty at every step.

3. Transforming Cross-Border Payments: Interoperability and Transparency

Global payments are only as strong as the systems behind them, and global leaders are racing to improve their international rails. Banks are now focused on modernizing for domestic and global interoperability, harmonizing data with ISO 20022 and exposing open APIs to partners. This enables scheme-agnostic routing, global standardization and near-instant cross-border linkages.

With such compliance in place, it is equally important to address the friction consumers face with international remittances, namely transparency and predictability. Customers want visibility into all aspects of these payments, such as total landed cost, FX fees and charges, and estimated time of arrival before sending funds. Providing this visibility and even empowering customers to choose from different rails based on their preferences gives them greater control, trust and satisfaction.

Despite major progress, in many parts of the world 40% of remittances take more than one day to reach the beneficiary⁶, creating friction for consumers and businesses alike. The advancement of real-time payment corridors, ISO 20022 adoption and open API frameworks will without a doubt pave the way for faster, cheaper and more transparent global transfers.

The Bottom Line

As payments migrate from utility to experience, financial institutions face a strategic choice: treat payments as a cost center to be optimized or as a product to be designed and sold. The institutions that succeed will be those that combine three capabilities:

• Identity as a strategic asset
• Rails that are both interoperable and resilient
• An experience layer that delivers clarity and value with every transaction

Investing in these areas today reduces operational friction tomorrow and converts routine interactions into lasting customer loyalty. The game is about interoperability, transparency and responsible identity. If payments are the battleground, experience is the strategy, interoperability is the logistics and trust is the brand. Build for all three.

Sources:

1. Worldpay. (2023). 10 years of cash, cards and crypto: Worldpay’s global payments report.
2. The Guardian. (2024, May 7). Soaring remittances to developing nations overtake foreign direct investment.
3. World Bank. (2024, June 26). Remittances slowed in 2023, expected to grow faster in 2024.
4. Time. (2024). How Nubank became a global neobank giant.
5. GlobeNewswire. (2024, August 30). The global cash economy in 2024 and the future of cash.
6. World Bank. (2024). Remittance prices worldwide Q1 2024: Main report and annex.