Payments in 2020: Experts share their perspectives on big tech, the cloud and banking as a service (Part 1)
- Tearsheet asked leading experts what they expect from the payments industry in the future.
- This article focused on banking as a service, big tech, and new customer experiences.
We’ve been surveying the fintech landscape as we head into 2020. Using a crowdsourced model, we polled some of the top executives in the payments space on what they expect next year and in the near future. We did a similar piece for 2019 — you can find that here.
Customer focus and the cloud
Scott Mullins is head of worldwide financial services business development at Amazon Web Services
“The industry imperatives for 2020 are deepening the understanding of how financial consumers want to be served, and developing the capability to iterate on and deliver those experiences as quickly as possible. In today’s consumer-focused global economy, as technology improves, customers’ expectations increase at an ever-increasing pace, and beyond the boundaries of what satisfied them previously. The firms that are positioned for success in 2020 (and beyond) are those who realize that customers’ expectations are never static, and realize the need to find a better way to rapidly adapt to meet (and exceed!) those expectations.”
“Financial institutions of all sizes – from challengers like Robinhood and Starling Bank, to systemically important banks including Santander and Barclays, and financial solution providers across banking, payments, capital markets, and insurance such as Temenos, Broadridge, and Guidewire – are using the cloud to both modernize legacy systems and processes, and bring new innovative offerings to market. They’re leveraging cloud-based analytics and machine learning services to better understand their customers, and they’re modernizing core systems by moving them to the cloud to increase resiliency, improve operational efficiency and achieve resource elasticity, all while reducing cost.
“They’re also using the cloud to build new businesses – from idea, to in the market – with increased agility and within timeframes that are measured in months rather than years. As more and more organizations embrace the cloud’s ability to help them deliver on these two imperatives, we’ll see a period of continuous improvement within the industry, one that’s built on a new technical foundation that inspires innovation and changes the way that financial institutions act and think about how they deliver value to financial consumers.”
Banking as a service
Susan French is head of products at BBVA Open Platform
“Banking-as-a-Service has had an incredible year in 2019. BaaS allows any business, from enterprises to established startups, to deliver new solutions to age old financial problems such as consumer debt, simplified savings, financial wellness, or better access to credit. It’s proving to be a way for hard-hit retail banks to stay competitive by diversifying product and revenue streams and for forward-thinking banks to exponentially grow their customer bases through the network effects of third-party BaaS relationships. Companies beyond the fintech industry will start realizing the value of using APIs to offer payment services, bank accounts and debit cards as a native part of their product. Making the move for every business to become a fintech a reality.”
“Innovation in digital payments and mobile banking services is not new, but surprisingly the adoption rate has been much slower than other areas of mobile tech. Part of the issue has been in simplifying the transaction process, because consumers like simplicity and ease. The fewer decisions and redirects a consumer has to endure on their way to checkout — whether that’s a digital checkout through an app or website, or a physical checkout at point-of-sale with a card or phone — the less friction in making a purchase decision and the more likely the consumer will have a good experience they will be willing to repeat.”
“Simplified payment journeys streamlined under a single brand experience (such as those offered by Amazon and Apple) are great examples of how this can be successful, however we have to remember that easy, branded payments experiences come in many flavors. Some, like Apple’s new card, come in the form of a fully owned and branded card ecosystem and experience, and others will rely on leveraging APIs to aggregate transaction options in a single, branded interface. As we move forward and into 2020 we’ll recognize that there’s no right or wrong answer here. Companies will need both options to design the right solution for their unique customer base, business model and objectives. Whichever route they choose moving forward, the consumer experience will be at the heart of it.”
Big tech in fintech
“2019 has been a busy one for Big Tech in fintech, with Facebook, Amazon, Apple, Netflix and Google, otherwise known as the FAANG companies, jumping over each other to announce new banking or financial service initiatives. These announcements are met with a fair dose of cynicism, as FAANG companies struggle to convince consumers they can be trusted with personal data. These headlines will continue to play out in 2020, but if past experience is indicative of future behavior, consumers often choose convenience first. Much of Big Tech’s success in the financial space will rely on their ability to convince customers they have their best interest at heart.”
“In the meantime however, smaller fintechs, who had to work on first building trust in order to grow, will see ongoing consumer adoption. Standout players will be those who take a hard line on transparency, regulation, security and customer service. Other non-financial services companies will ride this wave of growth as well, as they seek to incorporate banking solutions into their apps and websites, making it easier to keep the customer relationship within the brand.”
Streamline digital payments
“2019 has been a big year in the digital payments space, with the introduction of new players and significant movements from big tech companies. Despite so many choices and seemingly never-ending hype, consumers will ultimately settle on one or two payment solutions that they use regularly, everywhere. In 2020, we’ll see more consumers choose payment solutions that they see as ubiquitous, simple, and easy. Those are not likely to be retailer-specific experiences.”
“Consumers will choose the likes of Apple Pay, Google Pay, Venmo or PayPal because they require little thought or planning at checkout, always work and are becoming more widely accepted. Those businesses that have successfully kept consumer payments inside their branded experience — think Starbucks, Target or Amazon — do so because they have figured out how to provide the consumer with enough extra benefits that it is worth the extra effort at checkout to choose a brand-specific option. What companies are realizing, however, is that this requires a non-trivial investment in both dollars and attention. For this reason, most businesses will likely choose to focus on their products and services and not on trying to own the customer payment journey.”
Banking as a service leads convergence
Cristina Vila is the CEO & founder of Cledara
“With Banking-as-a-Service lowering the barriers to entry, simple use cases like mobile-first bank accounts for consumers and SMEs are becoming very crowded. The challenge will be for new entrants and incumbents alike to combine financial capabilities in other user journeys that helps people achieve something they want or need, not just store their money and make payments. The number one trend we are starting to see is that a race has begun between non-fintech businesses adding banking and payment capabilities and fintech looking to add non-fintech features. The question is who will figure out the others’ area of core expertise first!”
Big tech launches more banking products
Omri Dahan is the Chief Revenue Officer at Marqeta
“There’s been a longstanding narrative that tech giants will become banks, and with Google announcing it will begin offering checking accounts in 2020, some may see this as finally coming true. But what this development shows us is that there’s a path to market now for tech giants to offer banking products without becoming banks at all. Google is looking to partner with Citigroup and Stanford Credit Union, taking advantage of the backing of an FDIC-insured settling bank and new modern technology platforms to create a modern banking product within the Google customer experience, without the same bureaucratic burden.
I think in 2020 this will become an attractive model for other major tech giants, allowing them to innovate in the rapidly evolving digital banking space and providing in-demand services for their users. At a macro level, this will further push banks into more of a utility and bring into question the power of their brands with consumers.”
Robert Anderson is partner at FTV Capital
“Integrated vertical software with payment functionality, especially for small and mid-sized businesses, will continue to experience significant growth. As electronic payments grow towards ubiquity, the integration of payments into value-added software solutions provides tremendous value for businesses. Most merchants already have point-of-sale systems, but often lack purpose-built software to run, manage and grow their businesses while putting the customer first.
For example, the owner of a hair salon who rents out all 10 chairs to 10 different stylists, can use one solution to manage appointment bookings, stylist calendars, CRM/notifications, email marketing, promotions, inventory and handle payments. These vertical software providers not only more intimately understand their target markets, like health & wellness or retail, but also give SMBs more control over how they interact with customers and streamline the payments experience. The next generation of SMB payments will be characterized by valued-added functionality and vertical expertise.”
Will Reeves is the CEO of Fold:
“One of the biggest trends in payments that we will see continue into 2020 is adoption of credit card alternatives by vendors. Merchants like Walmart and Target have realized that by incentivizing their customers to use their own payment rails, they can avoid costly credit card fees and chargebacks, thereby generating much better ROI. As more companies discover the benefits of credit card payment alternatives, we will see development of more merchant-agnostic software that can be adopted by any vendor as a payments solution. Additionally, consumers will save more by taking advantage of the special discounts and rewards offered by merchants to encourage them to choose their payment method.”
David Poole is the head of the Financial Services Center of Excellence at Publicis Sapient
“The biggest payment trend for 2020 is simplicity. The rapid pace of payment innovation has resulted in a proliferation of new ways to pay making the point-of-sale cluttered with logos and complex and confusing for customers. 2020 will be the year it starts to get simpler. We’ve seen the first instances of a combined click to pay button with the EMV SRC logo, live now on a few sites with more to come in 2020 replacing Masterpass and Visa Checkout.
We’ll see fewer buttons, fewer steps in the process with increased adoption of stored payment within the browser, and fewer separate apps, replaced instead with effective one-stop services. A great example is PayPal acquiring coupon-ing service Honey, where the frustrating task of finding a valid coupon is now built into checkout. Expect more mergers and acquisitions to offer one-stop convenience. These lighter, accessible experiences will ensure payments are relegated to the background, and the emphasis can shift instead to using customer data to add value before and after the transaction, adapting the experience to the way the customer wants it and is most confident in how to access it.”