On our show today, I'm joined by Michael Miebach, chief product officer at Mastercard. Along with the Harvard Business Review, Mastercard released a survey of financial services professionals around the world. The idea was to stop and take a look around at the impact fintech has had on their businesses to date and to then look forward to see their perspective at what the world will look like in just a few years from now.
I'll let Michael fill us in on what they found but I think it's really interesting to hear how deeply the industry is changing in terms of its approach to new models and collaboration.
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The following excerpts were edited for clarity.
Fintech's disruption to date and in the future
Fintech's been around for decades. In effect, I'd argue Mastercard is one of the first fintechs ever. It's a fascinating time in the space. Consumer expectations are changing as their lives are impacted by these new digital experiences. Around financial services, consumers are asking if they have the same experiences. Regulation is also changing with open banking in Europe.
Given our global business model of connecting payors and payees, buyers and suppliers -- we have 27,000 customers and 2.5 billion cardholders -- we took a step back and asked the question with the help of the Harvard Business Review: what is really going on? What do we see and what does everyone else see?
Some pretty cool insights are coming back. When you look at the impact the fintech revolution has had, it's been a fairly limited impact. 300 executives all around the world, including middle and senior management, said the impact we've seen until today hasn't been dramatic. But when you peel back the onion and start looking toward the next three years, the majority of executives do see a significant impact to their revenues and earnings from fintech. It's also exactly what we hear when we talk to our customers.
Financial services response to the fintech evolution
I think the best positioned company out there realizes what's happening around it and is asking the right questions. It starts with realizing that we don't have all the capabilities and answers today. That's not surprising. There are fintechs out there today picking a particular part of a consumer journey, making it more intuitive through technology.
If you're a bank, doing that is very hard to do given how integrated the whole journey is. Secondly, the technology stack might be legacy technology with a large backend banking system. Realizing this as a reality is a good starting point. Our best positioned partners have been investing in their technology and gradually modernizing it over the years. Banks have to do this gradually as they pace themselves against quarterly earnings expectations. Making this investment and planning ahead is now table stakes.
Partnerships and integrations
There are also companies out there that realize they don't have all the answers and then look to companies like Mastercard to see how we can help them. We can offer a set of open APIs where we can deliver to partners a great loyalty experience. You don't need to worry about that or safety and security. We've built Mastercard ID Check where a customer looks into a camera and authenticates herself like that. You don't need to worry about building stuff like that. Looking for partners is critical.
You can also take the partnership further. A bank can recognize that to deliver great experiences, it has to get closer to where the customer goes in the end. The customer goes to book a trip through a travel website. They don't typically go to a banking website to do this. So, to be more contextual, a bank should look for partnerships like that, connecting retailers and customers, using APIs. Customers generally want to do something else and the payment is a means to an end.
Data and creating personalized offers
I think the best positioned players are the ones that realize that a personalized solution is a key element of delivering against changing customer expectations. Nobody wants endless offers from their bank. They want a contextual experience that's truly personalized. Banks have a great starting point versus fintechs. They have the data and understand their customers better than anyone. Having the right talent in-house, the data scientists, the investment in data analytics, AI and machine learning -- well-positioned players are already on this journey.
Even better positioned players understand that speed is of the essence and they're looking for partnerships. These are the critical initiatives.
How fintechs can compete against banks
I would ask myself what's the one thing I do well. Is it technology? An understanding of a specific consumer's needs or experiences? But then you need to build a business out of it. You need a path to scale and there's a lot of smart money going into fintech.
Maybe, a partnership with a range of banks is the best way to impact and scale. That's where I think the opportunity is. We have our own incubator to help startups. Fintechs look at our 27,000 customer relationships to banks and look to us to help them develop partnerships. It's collaboration versus competition. The most successful models in our space of payments work out like that.