Money talks. Some say it’s a gas. And these days it’s drawing a growing swarm of bankers and technologists to Sin City every year to talk about its future. This year’s Money 20/20 event in Las Vegas drew a massive attendance with 11,000 individuals, 4,500 companies, tons of new technology, and a mind-blowing expanse of collective brain power. The event’s level of growth and sophistication since its inaugural event in 2012 is truly impressive.
The underlying theme my Cornerstone compadres and I picked up over the four-day event was the financial industry’s growing resolve to create “frictionless, personalized payments.” Every discussion and presentation focused on the challenges and innovations financial institutions are tasked with to create “frictionless” experiences. This theme was sparked by keynote speaker Frank Abagnale, author of best-seller “Stealing Your Life.” Abagnale talked about the paradox of our hyper-connected society today, noting, “We complain about people stealing our identity and yet we give it away.” Facebook posts, text messages, tweets, etc., never really go away, even if they’ve been “deleted.” My colleague Ryan Rackley summed it up perfectly when he referred to social media as the “new tattoo.”
While consumers and payment providers may hope for frictionless payments, the execution path will require new capabilities and deployments in fraud mitigation, cyber security, open APIs, and enhanced interoperability. The complexity of this future vision underscored the importance of partnerships between the FinTech world and financial institutions to get this vision from cool demo to reality. Some of the best discussions from Money 20/20 centered around three key megatrends:
Megatrend #1 – Retailers Want the Smart POS
Retailer perspective sessions emphasized improving the consumer’s buying experience versus the payment experience. Many of the sessions stressed the importance of understanding and addressing customers’ pain points rather than just providing them with new, shiny objects, a key theme in Walmart Director of Payments Kara Kazazean’s session. Kazazean talked about the importance of understanding what drives a desired shift in customer behavior prior to deployment. Kazazean shared the new Scan & Go app recently made available to Sam’s Club members. The app allows customers to scan items for purchase and bypass long cashier lines. Walmart eliminated a customer pain point and made the shopping experience quick and easy. Nice.
Poynt introduced its Smart Terminal, an all-in-one, handheld device that accepts payments on an open platform. The company’s marketing message is that their merchant POS devices can be as smart as consumer devices. Unfortunately, during a live demonstration, the product experienced technical difficulties and failed to accept the mobile payment, forcing the presenter to use a card to complete the transaction. How ironic is that in the journey to frictionless?
Megatrend #2 – Secure and Compliant is a Non-Negotiable
According to biometric company BioConnect, 63% of confirmed data breaches involve weak, default or stolen passwords. Because standalone biometric authentication has proven to be ineffective, BioConnect announced it is partnering with Visa to provide a multi-factor authentication solution aimed at streamlining the authentication process and phasing out static passwords. Cornerstone agrees that this deal could go a long way in helping combat cybercrime – as long as we keep in mind that current methods are not foolproof. There is still a lot of development and adaptation ahead for this effort.
We were intrigued by what regulatory technology companies NICE Actimize and Trulioo had to say about partnership opportunities available to FIs to help implement regulatory requirements. RegTech companies like NICE Actimize and Trulioo provide cloud-based platforms intended to simplify and standardize compliance processes through automated mapping of regulatory risks. Cornerstone can see how RegTech partnerships could help banks and credit unions more efficiently and effectively manage, monitor and adapt risk management functions by cutting back on manual processes and duplicated checks. However, just like CRM or business intelligence, RegTech will require strong design, process ownership and widespread adoption by employees to make any dent in reducing the growing compliance burden.
Megatrend #3 – The Search for the Next Killer App
In our never-ending search for notable innovation, we heard a lot of buzz surrounding real-time payments, P2P and the launch of Zelle, the highly anticipated “Venmo killer,” in early 2017. After Zelle announced 19 confirmed FI partners, we heard mixed reviews regarding the true value and use case of this new P2P service. We are not in a hurry to call Zelle innovative, nor do we expect to see a shift in customer behavior when Zelle begins to compete with established players. For now, this appears to be only another option for customer payment fulfillment.
Alipay, China’s “Global Lifestyle Super App,” is definitely on Cornerstone’s radar. This is not just another payment option, but a third party online payment platform with no transaction fees and integrated lifestyle management tools. Today, Chinese consumers can look up transportation schedules, make dinner reservations, receive local merchant offers, schedule doctor appointments and pay for services. Since the initial launch in 2004, Alipay has grown to 450 million users, $180 million in transactions per day, and it controls more than half of China’s online payments market. Keep your eyes on this innovator.
Douglas Feagin, head of Alipay International and SVP of Alipay’s parent company, Ant Financial, told us the company’s mission is to buy and sell globally and provide financial inclusion and customer service worldwide. With an “open philosophy,” globalization is a key component of Alipay’s plan to expand to 2 billion users worldwide in the next 10 years. Alipay is currently used by 300 international merchants, 65 financial institutions, including Visa and MasterCard, and it supports 14 major foreign currencies. Recently, it announced partnerships with First Data and Verifone. We don’t expect Alipay’s emergence into the U.S. market will be very far away.
The best things in life may be free, but for now bankers have a huge and growing focus on money – frictionless, smart, fast-moving and secure money. Hats off to Money 20/20 for helping to further the strategic conversation for everyone in the payments industry. There’s a great deal of opportunity and a ton of hard-nosed execution challenges on the horizon.
-EW
Payments revenue accounts for 25%-50% of an FI’s non-interest income
Tightening up your payments program can have a huge impact on your bottom line. Cornerstone Advisors can work with you to evaluate your cards and payments data and maximize non-income opportunities.
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