Banking on You: Personalised Payments and the Future of Banking

By Nicholas Holt, Head of Solutions and Delivery, Europe, Marqeta

New technologies harnessed by fintechs and the current trend for personalisation in payments are set to shake up banking. For instance, in the UK there are currently 52 different card providers. These range from traditional banks and building societies to fintech start-ups with a few familiar consumer brands.

In much the same way, any brand could also become a card provider. This is not new of course, UK retailer M&S founded its banking arm in 1985 and initially focused on extending credit via proprietary store cards. It has since diversified its offerings to include a spectrum of financial products, and recently announced plans to launch a banking and loyalty ‘superapp’. M&S Bank though has a banking licence and is currently operated as a joint venture with HSBC.

The current threat to banks stems from the fact that brands no longer need to outsource payments to a third party, enabling them to provide customers with contextualised offers to create a hyper-personalised shopping experience.

The AI revolution

Nicholas Holt

Hyper-personalisation uses data analytics and AI to provide customised payment experiences to individual consumers. The ability to understand every customer’s unique needs and preferences means that brands can deliver tailored products and services, quickly and through preferred channels.This also enables non-traditional card providers to offer their customers enhanced payment services, allowing them to provide experiences that legacy banks cannot.

AI has the potential to introduce innovative credit options like “Predictive Credit Cards,” which adjust credit limits and rewards based on past consumer behaviour. In this way, enhanced automation and data analysis could revolutionise credit application processes by considering a wider range of information beyond traditional credit scores.

Furthermore, AI has the potential to reduce fraud. By training advanced machine learning models, AI will be able to identify anomalies in data using device information and third-party checks to spot suspicious patterns, and then instantly investigate the context by analysing sequential data to determine fraudulent activity.

Customer spending data could also be leveraged by brands to deliver flexible payment options such as buy now pay later (BNPL) to the checkout process. Current economic conditions are such that the ability to offer BNPL and microcredit would be attractive to consumers struggling to access credit through more traditional means. Recent Marqeta research determined 38% of UK respondents had used BNPL services to make ends meet in the past 12 months, increasing to 61% among 26 to 34-year-olds.

This gives ground to the assertion that banks must adapt to the personalisation and flexibility trends within the payments space to stay relevant to consumers.

Embedded finance and the future

Consumers are becoming increasingly comfortable using financial services from brands. Embedded card services enable brands to offer contextualised, competitively priced credit, rewards, and incentives seamlessly integrated into the shopping experience. Credit cards are poised to become the new centrepiece of brand interaction.

Recent research on embedded finance reveals that nearly a quarter of UK consumers own brand-affiliated credit cards, with 54% considering themselves brand customers rather than bank customers. This trend is poised to accelerate as more brands offer embedded credit card services, leveraging personalised transaction data to enhance experiences.

With technologies such as open banking initiatives and APIs, mobile payment solutions and digital wallets, peer-to-peer lending platforms, and personal finance management tools, financial services are becoming a truly innovative arena. Coupled with the advent and advances in cryptocurrencies, virtual reality and biometric authentication, the payments landscape in 10 years’ time will look very different than it does today.

By reducing barriers to entry, such as high fees and strict eligibility criteria, the democratisation of payments will empower individuals to conduct transactions conveniently and securely, fostering financial inclusion and economic empowerment on a global scale.

More established banks could take advantage of this momentum in embedded finance, and leverage their strong brand and loyal customer base to focus on providing these popular products and services.


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