The rise of the convenience economy and the fall of legacy finance tools

The convenience economy is primarily a service economy — An economy where the consumer is in charge. Today’s customers expect to be empowered as they purchase their goods and services. They want their purchases to be convenient: when they want it, how they want it, and where they want it. The organizations who accommodate consumer demands will win and those who don’t will wither away.

The convenience economy brings two new perspectives to the fore. First, the emergence of new radically different experiences due to the democratization of technology. A driver-partner can provide a frictionless and predictable riding experience because of the Uber platform that allows him to capture and service the demand, and receive the payment. A frictionless experience creates more demand, which creates more earning, which creates more supply, and this creates a virtuous growth loop.

Second, goods or services that were only accessible to a certain segment of the population have now become affordable to larger segments. The virtuous loop of demand and supply reduces the driver downtime, increases their earnings, and brings down the prices. At a lower price point people who never booked a taxi before, now Uber, and this is only the beginning.

The virtuous loop of demand and supply reduces the driver downtime, increases their earnings, and brings down the prices. At a lower price point people who never booked a taxi before, now Uber, and this is only the beginning.

The impact of the convenience economy on today’s finance teams

In today’s world, the ease of discovering a product along with the convenience of completing the purchase and predictability of post-sales experience is driving the real revenue and retention for businesses. Businesses are pursuing omnichannel acquisition and engagement strategies in creative ways to drive conversion and retention. A user/customer is interacting with a business across all online and offline channels — website, an aggregator, a mobile app, an offline store, etc 24 hours a day, 365 days a year non-stop. To top it all off, these channels are expanding everyday. As a result, we now have applications with financial workflows embedded, for everything — to order food, to invest in mutual funds, to pay your bills, to play a game, to shop online, and so on. The way we knew commerce is fundamentally changing. It is omnichannel now, and these channels will only grow in numbers.

These applications are powered by digital payment rails to capture the payments. The ease of making a payment has a very high correlation with the orders you receive and this creates enough incentive for an organization to invest heavily in ironing out the customer payment flows and giving that customer a suite of payment instruments that he can use to pay for that transaction.

The presence of an application for everything a customer wants and the presence of a seamless payment flow has shot up the low ticket size transactions volume. And this volume is distributed across multiple channels, and each channel has its own financial, data, and commercial nuances.

Trends leading the evolution and modernization of the financial domain

Customer convenience will lead the way

Over the last few decades, there has been a steady increase in mobile applications that provide services around ride-hailing, food delivery, grocery shopping, etc. The proliferation of these applications and the adoption of digital payments have shot up the volume of low ticket size transactions. COVID 19 has further accelerated the adoption of applications and digital payments.

Fintech platforms are focusing on open and flexible APIs to get a larger share of the customer wallet by integrating with other digital partners in the ecosystem; without compromising on customer experience. Ease of use is directly proportional to the increase in orders placed. This forces businesses to focus on building intelligent and convenient customer payment flows along with a plethora of widely used payment options to close the transaction. As the financial transactions transcend multiple channels, each channel brings in complexity that the finance teams have never experienced before. Modern finance teams need to adapt to these customer preferences and evolve everyday.

As the financial transactions transcend multiple channels, each channel brings in complexity that the finance teams have never experienced before. Modern finance teams need to adapt to these customer preferences and evolve everyday.

Every company will be a fintech company

Every fast-growing internet company today is re-looking at its financial processes and planning on how to manage changing customer expectations. Embedding contextual financial workflows in their core applications is a game-changer as businesses compete for wallet share — Be it adding payment options for a food order, making a payment for unlocking a game level, buy now pay later, investing in the stock market, sending a friend a payment link, subscribing to an on-demand video app, providing working capital — The use cases are endless.

The last few years have seen an exponential rise in fintech startups. These startups are directly acquiring customers and providing them with options to leverage financial services at the tap of a button. Advancement in financial technology and open platforms has brought to the fore the need to bring together disparate pieces of the new-age financial landscape — commercial agreements, business events, entity state changes, and application-level interactions.

Advancement in financial technology and open platforms has brought to the fore the need to bring together disparate pieces of the new-age financial landscape — commercial agreements, business events, entity state changes, and application-level interactions.

Digital, Cloud, Collaboration, No Code

Businesses across the globe are looking for ways to reduce redundant costs and make their workforce more productive and resources more optimal. Covid-19 has highlighted the hidden internal and external financial incompetencies across business processes and customer experiences. Stuck in the past with legacy skills, software, and processes around financial operations, companies couldn’t have been exposed to a more brutal truth.

The enterprise software industry has evolved to be customer-centric and focused a lot on user experiences. Companies such as Figma, Segment, Slack, etc have reimagined components of the enterprise stack and made it simple, intuitive, and powerful. Products can now go-live with minimal to zero involvement from the engineering teams.

Financial technology is slowly but steadily catching up with this trend. Demystifying technology for non-technical users around productizing complex operational workflows, data querying via simple dashboards, real-time financial insights are now possible because of the presence of application frameworks and on-demand storage and processing power availability.

Real-Time payments, Shooting transaction data volumes

The volume of data that we see today is more complex due to the rapid digitization of consumer behavior. We, collectively, have generated more data in the last year as compared to the data generated in the last 100 years. This data resides in data warehouses, data lakes — on-premise or cloud — and is massively siloed. Traditional and rules-based solutions are increasingly becoming obsolete due to the increasing complexity of various financial use cases such as reconciliation, payouts, etc.

Traditional and rules-based solutions are increasingly becoming obsolete due to the increasing complexity of various financial use cases such as reconciliation, payouts, etc.

Finance teams are used to spreadsheets and the exponential growth in unstructured data makes it impossible for them to ensure business integrity, comprehensive financial controls, and identify growth avenues with an increase in margins. One small mistake can wipe off months of profits. The velocity of payments has increased but finance teams still work on a monthly or quarterly cycle. This puts finance teams under pressure to move to a real-time model to mitigate risks and financial discrepancies. They however lack the adequate tools needed to make this transition. That’s where innovation comes in.

Emergence of robust data security measures and compliance standards

Audit controls and governance measures are becoming more and more critical as organizations manage finance transactions across their internal and external ecosystems. Pro-actively architecting and designing financially-compliant processes that monitor non-compliant behavior or fraudulent transactions and trigger rule-based warnings is a must in today’s mobile-first world.

Corporate compliance and service quality are usually at loggerheads as businesses inject checks and balances against high-speed growth. It essentially boils down to one thing — the ability to utilize relevant and secure data, across all levels of the organization to ensure legal compliance and excellence, along with the potential to spot optimizations along the financial operations value chain.

The tomorrow of finance teams is very different from today

The evolution of the convenience economy and the changing customer needs coupled with rapid financial technology advancements create countless opportunities for businesses as they transform their financial processes. With these opportunities, comes a plethora of uncertainties and risks.

Legacy tools are taking a backseat and new technologies that disrupt the financial operations landscape are changing what finance does — and how finance teams get things done — in countless ways

But you are not alone. Legacy tools are taking a backseat and new technologies that disrupt the financial operations landscape are changing what finance does — and how finance teams get things done — in countless ways. Over the next five years, these same technologies will be available to organizations of all sizes with the promise of making Financial Operations better, faster, and accessible to all. So far, no solution we know of has put all the pieces of the puzzle together. Not yet. But you can see it coming.