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Payments 4.X: Payment institutions must transform to survive

Payments 4.X: Payment institutions must transform to survive

Paul Jennekens


12 October 2021

Payments 4.X: Payment institutions must transform to survive


The financial world is heading into an era in which payments are not just fast, easy, and invisible anymore. With experience, a fourth component is being added to the mix, which leads us to the so-called Payments 4.X era. This is one of the three major conclusions from the annual World Payment Report (WPR), which was published today by Capgemini. In this article, Jeroen Hölscher, Head Global Payments & Cards Practice at Capgemini, further elaborates on the results.

Capgemini has published the WPR every year since 2005. It provides extensive practical insights into the financial market and consists of three parts: own research into the market, interviews and a survey of relevant payments experts, and a voice of customer survey. This year, the study resulted in the following conclusions.

The financial industry transforms into Payment 4.X
The payments industry has been transforming for years. Originally, it was just about payments, but then it had to be quick payments. This was followed by easy payments and then the payment aspect had to be invisible in the customer journey. The WPR now shows that the customer experience has become essential, meaning that payment must be embedded and frictionless.

This Payment 4.X era applies both in B2C and in B2B and is a combination of all the aspects mentioned above. Nobody likes to pay, but it is necessary to complete the process. Therefore, it is important to make payments as invisible, easy, and efficient as possible. To be successful in this area, banks and other financial institutions should pay attention to the four Payment 4.X pillars:

1.     Data
By gathering data from transactions, banks and financial institutions can collect useful information about these transactions and the related customers. With this, they can offer added value to their clients and optimize their services.

2.     Shared infrastructure
It is all about efficiency, as regulators and the industry are working to standardise at the back office. This leads to embracing a shared infrastructure, to avoid reinventing the wheel over and over again.

3.     Robust platform capabilities
A strong and fast platform is necessary for companies to be able to offer new payments methods and other innovations through a robust partner ecosystem

4.     Embedded finance
The checkout is the place where financial institutions can offer added value to their clients, such as online shops. For instance, this can be done by offering options like ‘Buy now, pay later’ or adding actions that ensure customer loyalty. Financial institutions should definitely be present at this phase of the customer journey, as it provides them with an excellent opportunity to help their clients and understand them better.

Growth of non-cash payments slows down due to COVID-19
One of the important pillars of the report is the way in which non-cash transactions are growing in volumes compared to cash payments. Over the last few years, non-cash transactions– which includes cards and online payments – has experienced accelerated growth. The expectation was that non-cash would again grow by double digits, around 15-16%, in 2020. However, due to the pandemic its growth slowed down to 8%. As card payments are still dominant within non-cash transactions, the main reason for the growth to slow down is the fact that consumers used their debit and credit cards far less due to lockdowns and travel bans.

Still, the first signs for 2021 show that the growth of non-cash transactions will pick up again, now that the COVID-19 restrictions are increasingly easing. The main drivers for this growth are the increasing popularity of e-commerce and the rise of new payment methods, such as digital wallets.

Existing financial institutions must transform to survive
With customer expectations increasing, legacy payments infrastructure is being stretched. To keep up with the rate of change, financial institutions need to get ready for implementing Payments 4.X and the other financial trends. Aspects like cloud-enabled, data-driven, microservices APIs, and processing power are becoming increasingly important for the next few years, and existing financial institutions have challenges to easily offer these services while moving away from legacy. Therefore, this transformation is crucial for them to become or remain successful.

This transformation is far from easy, however, as the financial industry must also comply with strict regulations. The regulators are introducing more and more demands and financial institutions are obliged to comply with these. In other words, it is a challenge to respond to market movements and innovations when one also has to comply with an ever-increasing number of regulations. Still, financial institutions should find ways to see these new rules and guidelines as an opportunity to further develop their business as well as their services.

Are you interested in the full World Payment Report 2021? You can download it for free via