At a time when the global pandemic and ensuing economic upheaval have blurred the boundaries between traditional means of payment, the CEO of global payment- and banking-solution provider i2c says the biggest business opportunity ahead will be in credit, with mobile becoming the biggest game-changer.
“The stars of financial services in 2021 will have something to do with credit,” i2c CEO Amir Wain told Karen Webster, saying the days of the simple checking or demand draft accounts (DDA) are over. “You can’t be a star with the DDA in 2021,” he added.
Whether it’s increased demand for debit, installment plans or buy now, pay later (BNPL) arrangements, consumers today need multiple types of financial services, rather than a simple DDA account.
“Now we have a couple of dozen neobanks doing the same thing, calling a prepaid card a neo bank account,” he said, warning that in the same way that subtleties between prepaid and debit were misunderstood, so are the nuances between debit and credit.
“The same thing is happening with credit. Everyone who is doing prepaid processing today claims that they can do credit,” he said — but when you dig deeper into the requirements of a credit-processing system and associated regulations, it’s a very different product than prepaid or debit.
All About Mobile
When it comes to innovation in the credit space — including acquisition, provisioning and engagement in particular, Wain says mobile technology is a game-changer that must be seen as the new normal.
“If I were to issue a million [physical] cards or provision a million cards on a phone, my cost structure is very different. My time to fulfill is very different and that also leads to activation rates, engagement, usage and so many other things,” Wain said. “So mobile is an extremely important aspect that one has to consider as the new norm.”
He uses the friendly, in-person relationships of a credit union as an example. “Credit unions have taken a lot of pride in the relationship with their members [who] can walk in and talk to someone who knows [their] name and so on,” he said. “Well, COVID just put a stop to all of that, and people now realize that maybe it’s not so important for one to go in and talk to someone.”
This change is actually an opportunity for financial service providers, not just from a profitability perspective, but also from a product competitiveness standpoint.
Not About The Size of Your Bank Branch
One of the most common concerns new and smaller financial institutions voice, Wain said, is the difficulty they face in competing against “the big guys” who have huge budgets and better access to tech.
“You can’t beat the big guys by using the same processor with limited access to capabilities and not having the budget [to build on it],” he said, adding that the good news for smaller players is that this is a technology-driven business where innovation matters more than the size of your branch network.
“With mobile as your branch and ‘the branch’ in the hand of every one of your customers and prospects, you are very well positioned to really expand the size and scope of your customer base,” Wain said. He added that outsourcing technology to someone with an agile platform is one way to equalize the playing field and beat the big guys at their game.
But while some might think the mobile banking innovation trend is a U.S.-dominated advancement, Wain said that is a mistake.
“Mobile isn’t a U.S. phenomenon. Mobile isn’t a developed market phenomenon. Social media and getting comfortable with [digital interactions] are not developed world phenomena,” he said. “The underlying trends that we’re talking about are so global and so pervasive that we are seeing the same thing across the globe.”
Where’s The Growth?
Wain sees continued innovation in the credit space on the consumer side of the business. However, he believes the “huge opportunity” for i2c and the industry right now is on the commercial side.
“I think there is even a bigger opportunity [on the business side] in the sense that that market is so underserved and there are very few solutions,” Wain said, saying it was less serviced than the consumer credit side.
And as much as the pandemic has accelerated the use and embrace of technology, Wain feels that underlying demographic changes are as much of a change-driver as the coronavirus. He points to his own kids as an example.
He said if you step back and look at how kids operate today, chatting with 3,000 friends on social media and instantaneously texting, it’s just a different generation.
“So for us to think that the same old financial services, infrastructure, products, and way of service delivery is going to work, is just misguided,” he said. “So it’s not just pandemic. It’s just a whole different way of doing things.”