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Nov. 03, 2023
We have been experiencing an acceleration in innovation since the start of the pandemic. MuleSoft reported that in 2022, 72 percent of customer interactions occurred over digital channels—nearly double that of 2021—proof that we are living the digital-first experience.
That’s what I discussed with Damon Moorer, president and CEO of TCM Bank N.A., ICBA Payments’ credit card bank, as we continued the conversation started at the Community Bankers of West Virginia convention. What follows are a few notable developments in the payments space as community banks seek to address customers’ evolving payment expectations.
Giorgio: As we look to the future of digital payments, the cornerstone of the customer experience will be the digital wallet vis a vis a wallet that not only allows for payments at the point of sale but allows customers to control their payments, manage their finances, apply for and open products, and everything else associated with their interactions.
Moorer: I agree 110 percent.Customers have always demanded convenience, speed, and reliability. Over the last few years, that did not change; customer expectations have just leveled up. The focus now is on individualized experiences—custom payment options and rewards. Gen Zers, in particular, are choosing brands that offer personalization—and they expect any experience to be seamless and immediate.
Giorgio: Speed and convenience continue to drive payments through non-bank providers. Super apps, like PayPal with up to $3 billion and Cash App with $1.5 billion in their digital wallets, are drawing deposits outside of banks. What can community banks do to keep those payments in the bank?
Moorer: Looking at the bright side, in those wallet scenarios, there’s still a funding agent that enables the transaction. Customers still are selecting credit as a preferred payment instrument, and when credit card transactions can address some of the experiences we talked about before—personalization, custom rewards—they create surprise and delight moments for customers that will keep their bank’s card top of wallet. That’s one way to ensure community banks stay in the game.
But as we discussed previously, innovation will be key to supporting customer payment demands today and into the future.
Giorgio: If we get more specific, do you see gaps in what community banks are offering today? Are there payments products or solutions that are must-have for community banks to continue to compete?
Moorer: When I think about the proliferation of technologies on the market today, it strikes me that it’s less about gaps and more about needed change.
For instance, many banks are held back by manual, legacy processes and procedures. There is a need for solutions that automate and streamline internal operations to increase efficiency. New products, like those that support data management and business intelligence, are really about looking at our information in new ways. It’s using technology to drive the mindset shift that’s necessary.
I still believe we have a service gap, however, which could be filled by APIs offered by core providers to support custom solution development and provide access to best of breed payment solutions from other providers.
Giorgio: You’re right. Community banks are largely dependent on their service providers—in many cases their core providers—to introduce new offerings. But that also cuts both ways. Case in point: We are hearing from community banks about challenges implementing FedNow and RTP.
Service providers have introduced a range of options for financial institutions to connect, each with their own benefits, drawbacks, implementation timeframes, and cost structures. Community banks have to sort through each of these choices to determine how they will integrate with existing technology, processes and budgets.
At ICBA Bancard, we are continuously evaluating community bank interest and viable solutions to offer to our members. In the meantime, community banks looking for more information can visit Bancard’s instant payments resource page, where we have curated materials and educational resources to support community banks in their next steps.
While Damon and I covered a lot of ground in our discussions, if there’s a takeaway from our conversations it would be one salient point: Community banks must continue to innovate and grow their payments offerings and evolve to meet customers where they’re at and safeguard those payments relationships into the future. And know that ICBA Bancard is here to help every step of the way.