What are the impacts of payment changes in the Internet era?

The progress of Internet technology and the popularity of the application are not only changing people’s way of life and production, but more importantly, profoundly changing people’s way of thinking and behavior. In such a context, many industries and markets are undergoing huge changes, causing widespread concern in society. The series of changes occurring in the payment field and payment market are also an important part of it. A correct understanding of this series of changes, as well as the development trend and the resulting impact on the future development of the payment market, to better play a payment service economic and financial and social life has positive significance.

First, the value of payments will go beyond the payment itself. The role of traditional payment is the transfer of monetary claims from the payer to the payee in order to finalize the transaction between the two parties. In this process, the bank, as a payment intermediary, has a single purpose and the information it has is very limited. In the Internet era, especially to meet the needs of the rapid development of e-commerce, although the purpose of payment has not substantially changed, the customer information, transaction information and other kinds of information that can be grasped by payment activities have greatly increased, making the value of payment no longer limited to the payment itself, and the basic function of payment has been dramatically enlarged. Through the collection, collation and analysis of such data and information, it is possible to have a comprehensive understanding and mastery of customers’ credit, behavior and hobbies, thus providing the necessary basic support for other businesses and providing effective guarantee for payment service providers to target marketing customers, maintaining customers and promoting products and services. Now, many commercial banks have established or are planning to establish e-commerce platforms. If the purpose of the bank’s “e-commerce” is only to enhance customer stickiness, provide value-added services to customers, or use it to expand the bank’s intermediate business such as payment and settlement, then the ultimate success of this e-commerce platform is not very likely. The real value of the bank’s e-commerce platform lies in its ability to make full use of the payment services and other functions provided by the e-commerce platform, and to pay attention to the mining and utilization of accessible data.

Second, the change of payment will help improve banking services. From the perspective of payment, the birth and development of non-financial payment service institutions deserve profound reflection by banks, the traditional payment service providers. There are factors such as banks’ failure to grasp market changes and technological developments in a timely manner, but it cannot be simply attributed to banks’ inaction in the payment field. A more objective view is the practice of the long tail theory brought about by technological progress in the field of payment services. Payment services are an important part of banks’ intermediate business and the basis for all other types of business. However, due to technical constraints and based on the principle of cost-effectiveness, it is impossible for banks to take care of all their customers and provide them with a full range of payment services. That is why non-financial payment service providers have been created and developed. In the Internet era, technological advances have given banks the ability and the conditions to take care of the payment service needs of more customers than they could ever have. Market segmentation, customer segmentation, and service segmentation have become more available. As a result, banks of different sizes can provide more differentiated payment services and other financial services according to their own strategic positioning. At the same time, the realization of such differentiated services will also contribute to the improvement of the inclusive financial system. Of course, the key to this also lies in the business philosophy of bank managers and whether they can have the conceptual changes brought by Internet applications. On the other hand, on the whole, in the process of differentiation of bank payment services, non-financial payment service providers will also be in a complementary position, and the two are in a competitive and cooperative relationship. The dominant player in the future payment service market will also be banks, because in the face of Internet development, banks will also change and are changing. In fact, looking back on history, it is not difficult to find that the breadth and depth of application of new technologies by financial enterprises, including banks, has never been active and fruitful.

Third, the trend of cardlessness will be further accelerated. With the development of electronic payment methods, in the field of retail payment, the payment tools are rapidly changing from paper – based to card based. However, with the advent of the Internet era, the card-based payment tools with bank cards as the main form of expression are going to the top. Although the emerging network payments are still hardly independent from bank cards, their dependence is decreasing with the development of cardless payments. And the pace is accelerating due to technological advances. The diversification of payment instruments and the trend toward cardlessness may require payment service providers to shift their attention to the account service itself and, as a result, to consider business innovation, product innovation and security mechanisms. One of the most typical features of the so-called Internet finance under discussion is financial disintermediation, but in the case of Internet payments, disintermediation will be a very long process. One of the important reasons is the bank account service. No matter what kind of payment instrument and payment method, the initial and final transfer of funds must be done through banks. Unless the current legal tender issuance authority and currency issuance mechanism is radically changed or the payment institution is legally transformed into a bank. Of course, by providing payment account services, non-financial payment service providers have, to a limited extent and to a certain extent, achieved payment “disintermediation”. Because of this, the formation of payment institutions and banks in the payment market competition.

Fourth, mobile payment will dominate the future direction of retail electronic payment development. The speed of mobile communication terminal equipment and mobile communication technology development, we have felt, we are all witnesses to this part of history. From the analog terminal to the digital terminal, and now the intelligent terminal, and now the speed of upgrading the intelligent terminal and the popularity of mobile terminals, its development speed far exceeds people’s imagination. From a luxury item in the 1980s, cell phones have become a daily necessity for almost everyone today. And every cell phone may become a mobile payment tool. In the face of the fragmentation of people’s lives in the Internet era and the increasing number of random transactions, only mobile payment can meet the need for payment under such special conditions. With the development of modern mobile communication technology and mobile Internet, the foundation of mobile payment will become more and more solid, thus making it easier to turn the possibility into reality. At the same time, the value added by mobile payment will be much more than the Internet payment.

Fifth, the contradiction between security and convenience will become more prominent. The pursuit of security and convenience has always been the goal of payment, and is also the two main issues of particular concern in people’s payment activities. At least from the current point of view, banks and non-financial payment service providers face their product design and innovation, there are major differences in the concept. Security is the primary consideration for banks, and this philosophy permeates the entire product design process, which has an impact on product design, speed of launch, and customer experience. Non-financial payment service providers, on the other hand, consider factors such as convenience and customer experience first, and therefore respond to the market faster and their products are easily accepted by customers. In the Internet era, people demand more convenience, but they also have more security concerns. How to deal with the relationship between the two is a difficult problem that payment service providers cannot avoid, and is crucial for Internet payments. Emphasis on security, necessarily at the expense of convenience. Emphasis on convenience will also be at the expense of security. While trying to find a balance between the two, payment service providers need to pay special attention to the construction of risk control and risk compensation mechanisms. Emphasis on security is not a little loss does not happen, not a little risk event can not afford. The key is the ability to manage risk, especially the management of customer capital risk, information risk and credit risk.

The impact of the changes in payments in the Internet era is not only limited to payment service providers, but regulators are also facing great challenges. The concept and method of supervising and managing the emerging payment service market by treating traditional payment supervision and management is obviously not feasible. Faced with the development of the emerging payment services market, regulators first need to have a tolerant, prudent concept, to believe in the market, rely on the market, respect the market, pay attention to the market, to protect consumer rights and market fairness as the focus, rather than focus on to supervise a payment product or a certain payment method. Should be cautious of market innovation, more observation, more research, see the right problems to propose norms and measures, the establishment and continuous improvement of the relevant regulatory and institutional system. At the same time, regulators should also play the role of payment service organizer, promoter and guide, coordinating all relevant parties, including government departments and relevant market participants, to provide effective protection for payment service innovation, payment product innovation and payment market innovation.

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