The digital shift brought on by the coronavirus has caused treasury banks to reprioritize their support of digital payments as consumers and merchants increasingly demand fast, easy and secure ways to get their money. And while the origins of that trend pre-date the current crisis, Silvana Hernandez, senior vice president of digital payments at Mastercard, tells PYMNTS that the pandemic has sped up the process.
“I think it all starts and ends with the consumer — and what we’re seeing is that consumers, more than ever with COVID, want digital experiences,” Hernandez said.
She added that as consumers lean on merchants, those merchants have started to lean on their banks to offer solutions that are faster and more convenient than simply moving money by check or ACH. But as Hernandez noted, the fact that many treasury banks still have complex legacy systems in place — often located in different parts of a bank — can make it more difficult to put together a fast, cohesive and competitive money-moving operation.
“It’s challenging for them to put everything together [and] do it at speed, especially when you compare treasury banks with FinTechs that are trying to solve similar problems,” she said.
The Value Proposition
Hernandez touts end-to-end solutions like Mastercard Send as the kind of solution that many treasury banks are adopting.
She said Mastercard is aiming to optimize payment strategy with the objective of bringing customers an easier experience through the use of things like intelligent routing and a new push-payments partnership, which Mastercard recently announced with Ingo Money.
While Mastercard originally launched Mastercard Send with consumers in mind, Hernandez said the company quickly expanded the product to include small-business debit cards — and it’s been growing Mastercard Send use cases ever since.
For instance, she noted that “for a number of years now, we’ve been helping the insurance industry with the challenges of dispersing money to consumers, like paying a claim.” The system can provide insurance-policy holders with claim payments in near real time using their preferred payment method.
Additionally, the initiative can serve the gig economy through offering real-time payments to any account. And ticket resellers who typically face a multi-day set-up process to get paid can receive funds quickly by providing just a debit card number.
Other examples where the speed of digital payments is preferred and growing include the dispersal of funds in emergency situations like natural disasters or COVID-19, as well as the payment of legal settlements.
B2B use cases that are also benefiting from rapid digital money movement include reimbursements from merchant purchases, as well as loan disbursements.
“Once a loan is approved, the small business owner doesn’t have to wait for a check to arrive in the mail or for an ACH transaction that is going to take a couple of days to clear,” Hernandez explained. “They can get access to that loan immediately.”
More Than Just Speed
While digital payments’ speed is certainly a core value for merchants and consumers, Hernandez said there are huge cost savings involved in not having to process checks or manually conduct other tasks.
“Checks are expensive; they require a lot of back-office processes,” she said. “So moving into digital payments also brings cost efficiencies for companies.”
In addition, Hernandez said that better satisfying consumers’ demands for digital payments can translate into new customers, increased loyalty and competitive differentiation.
“We’ve heard of disbursers that are willing to change banks or at least try new relationships if they’re not getting what they need to satisfy their consumer base,” she said. “So for a treasury bank, I think it’s important to keep evolving the value proposition to maintain that relationship with the corporate customers.”
Don’t Forget The Data
Beyond the cost and operational efficiencies and the client-retention benefits, Hernandez said companies shouldn’t ignore the data possibilities that come with embracing digital payments.
Doing so enables companies to collect richer data on consumers that’s easier to analyze and access, she noted. That allows firms to better understand consumers’ behavior and, in turn, design products that are better aligned with their needs.
Taken together with the added catalyst of COVID-19, Hernandez said the way forward is clear. As she put it: “I think we’ll continue to see the importance of enabling digital experiences.”