Data may be the new currency, but it is mobility that will help leverage that data to forge the connected economy.
To that end, a trio of payments professionals told Gloria Colgan, senior vice president, global product at Visa, that digitized B2B interactions help firms reimagine cash collections, loyalty programs and ultimately, the consumer experience.
At a high level, the panelists said, the global pandemic has catalyzed digitization across business functions. Overnight, businesses were reinventing themselves, reimagining their operations, improving how they pay and get paid — all in an effort to survive and ultimately thrive in the new world.
No matter the type of transaction, data plays an important part, aiding enterprises in pursuit of context, innovation and embedded payments.
Panelists remarked that although the great digital shift has been underway through the last 18 months, the world is still in the beginning stages of its move toward truly cashless and contactless interactions.
In some cases, the road to digitization has been paved by mandate. As Sightline’s Satter noted, the U.S. Supreme Court struck down a law that had effectively prohibited states from offering legalized sports betting within their jurisdictions. Along the way, there’s been a confluence of sports, media and entertainment.
For the first time ever, Satter said, physical sportsbooks are opening inside arenas, bettors can place wagers from their seats, and mobile gaming/betting is on the rise. He added that it may be the case that cash never truly goes away, always having some place within betting, at least here and there.
The challenge remains that companies have to modernize payments and move toward digital and contactless options. We’ve seen the openings of the first truly cashless casinos in last several months, Satter said, and hundreds more are likely to follow suit within the next few years.
To get a sense of the great digital transformation that is taking shape, Satter noted that the entire gaming industry, historically speaking, has been built around cash — handled by 2 million workers across the gaming industry.
“There’s around $250 billion of cash in the North American gaming industry,” said Satter, “and our goal along with a number of our partners here is obviously to ‘electronify’ and digitize that.”
The ultimate result is that a consumer placing a bet on an NFL game at home would gain loyalty points, and if that same user walked into a casino and bought dinner, they would also be rewarded with additional loyalty points. Along the way, Satter said, the ecosystem is tied to delivery mechanisms that include cards, phones, and even biometrics via mobile devices.
“The key is money and loyalty following you as you conduct the activities you want,” Satter said.
Driving the Connected Economy
As for the connected, mobile economy, nowhere is mobility more apparent than with the car. Car IQ’s Pratz noted that his company has developed a payment network for cars that allows drivers to connect directly to merchants and pay for services — spanning fueling, tolls and even insurance — without the use of a card.
The greenfield opportunity for a similar ecosystem developed on the road is significant, said Pratz. Drivers would love to be able to pay for a range of services from their place behind the wheel.
As it currently stands, payment modalities are either decentralized or — as Pratz puts it — “terrible from a consumer perspective.” Consumers and commercial enterprises buy vehicles to the tune of $650 billion annually, which translates into a slew of transactions at the pump and at the toll booth. This “vehicle as a wallet” opportunity is also significant, worth perhaps more than $450 billion each year.
Pratz noted that Car IQ is working with original equipment manufacturers (OEMs) to embed identity and payments functionality into the actual financing of vehicles.
As he told the panel, “In many ways, our message is ‘ditch the card but continue with payments.’” Illustrating a use case that spans the digital and physical realms and spotlights the seamlessness of the connected economy, Pratz said Car IQ is able to “see” vehicles’ sensors and emissions data.
“That means we now can communicate directly with the DMV and not only register the vehicle from a license and location perspective, but we can also then give it a certificate [of official emissions inspection] that can be approved because we have all the parameters,” Pratz said.
The Critical Data
No matter the ecosystem being forged, data serves as “currency” that enables machines to talk to one another, create identities, satisfy know your customer (KYC) mandates, complete payments and even help merchants tailor loyalty and rewards programs.
In the connected vehicle space, Pratz said that “level four” data can help embed payments within workflows. By establishing a vehicle’s “identity” at the pump, companies can offer rewards in real time, incentivizing a driver to transact with a merchant or brand within a store that’s on-site.
“Data provides the ability to go beyond Google, so to go beyond intent to buy and go right into in the real purchase and transaction,” and to improve the commerce experience itself, Pratz said.
Pratz relayed another example where a car’s sensors relay how low the fuel levels are and relay that data not only to the merchant to craft an offer but also to the card-issuing bank, who now has better visibility into the transaction they are underwriting.
The Role of the Networks
Satter said that in helping shape these new connected economies, networks and their interoperability help balance the needs of merchants, issuers, acquirers and consumers.
“We all bring something unique to the table and that’s what really makes innovation happen,” said Fifth Third’s Chayt. “Whether it’s a client base, a capital base, a brand, it’s already leveraging an opportunity for scale.”
Elsewhere, Early Innings
Chayt noted that other verticals are also in the early innings of contactless adoption, even as they pivoted relatively early in the pandemic to upgrade operations. She pointed to entertainment, healthcare and insurance as examples.
In other verticals, paper-laden and manual processes are ripe for a digital overhaul, said Chayt. Media, telecom, title and escrow services all want to unlock data and payments while being heavily dependent on credit, making that data critical.
No matter the vertical, she said, “as companies tried to figure out some way to connect with their customer or their supplier through software, they realized that they were becoming a payments company in some way, shape or form.”
That pivot gave tailwind for enterprises to work more closely with traditional financial institutions to upgrade their internal processes and customer-facing initiatives in order to acquire new customers and build customer loyalty with existing installed bases.
Banks have an inherent advantage, as they’ve gained the trust and confidence of end users across the decades, Chayt said. As consumers are increasingly comfortable with wielding mobile devices in the service of commerce, they’ll be increasingly comfortable with trading safeguarded data for streamlined and rewarding commerce experiences.
Chayt also said faster payments result in faster insights, to the benefit of all stakeholders in a commerce ecosystem. “We have long believed that most of the value of real-time payments, and faster payment rails, lies in real time data and its application,” she said.
The value inherent in real-time data, real-time insights and banking/enterprise partnerships, Satter said, can be seen in recent joint efforts between Sightline and Fifth Third.
Satter said that across the hundreds of thousands of slot machines on site at casinos across the U.S., the cash collected from gamblers sits for as long as five days between being physically collected and deposited in a bank. That equates to about $20 billion to $30 billion of “dead cash” sitting in those machines that could be put to use as casinos’ working capital, said Satter. Working with Fifth Third’s treasury management solutions, the casinos have been able to be credited for those cash holdings in real time.
As Chayt observed, “We’ve learned over the past 18 months that portability is critical for all types of activities — whether it’s the movement of money or anything else.”