Financial Futures Podcast – Season 1 Episode 2
Cash is quickly disappearing as a form of payment. But what will take its place?
Tech whizzes have given us a dizzying variety of devices and apps that make paying for things easier than lifting a finger. We have smartphones, smartwatches, smart speakers, digital wallets, P2P apps like Venmo, and even refrigerators that buy more milk for us when we run out. As different as they are, most of these payment innovations remain linked to that little piece of plastic: a credit or debit card. Just as with cash, new technologies are making plastic cards less and less relevant.
In this episode of “Financial Futures,” FIS’ Melissa Kopp returns to talk about what it means to be a cardholder these days, and why financial institutions and merchants must unify the growing variety of payment experiences available today. We’ll discuss:
- How consumers interact with retailers and financial institutions through an ever-growing variety of digital channels.
- What the “omnichannel” buzzword means and how to create a truly omnichannel experience.
- How APIs can be employed to design cohesive customer experiences.
- Do payment providers really need to go omnichannel?
Miss the previous episode? Listen to Is COVID the death of cash?
Check out the next episode P2P is transforming banking as we know it.
ERIN DANGLER: Last time on the show we learned that cash is quickly disappearing, but what will take its place?Yeah, I think you had talked on our last show about people in Sweden putting implanting a microchip in their hand and just waving it as they go by.
MELISSA KOPP: A little StarTreky for me at this point.
ERIN DANGLER: Not sure I am ready to undergo surgery to pay for my, uh Yopo, but…
MELISSA KOPP: Yeah, yeah.
ERIN DANGLER: So, maybe FIS’ Melissa Kopp and I aren’t ready to become cyborgs just yet, but why would we? We already have a dizzying variety of devices and apps that make paying for things easier than lifting a finger. We’ve got smartphones, smartwatches, smart speakers, digital wallets, P2P apps like Venmo, and refrigerators that will buy more milk for us when we run out. Even the Jetsons would be wowed by these.
Of course, most of these payment innovations are still linked to that little piece of plastic we call a credit or debit card. But, just like [with] cash, new technologies are making that physical token less and less relevant.
MELISSA KOPP: That’s why now more than ever, financial institutions need to think about the experience, because there are multiple places and ways that we can pay. We’ve got to bring it together.
ERIN DANGLER: This is “Financial Futures”, the podcast that charts the frontiers of fintech innovation, where we explore the trends that are already transforming financial institutions and the technologies we will need to prosper in a brave new financial landscape.
I’m your host, Erin Dangler, and today on the show we are exploring how technology has made payments a multifaceted experience that transcends our little pieces of plastic.
These days, consumers are interacting with retailers and financial institutions through an ever-growing variety of digital channels. How can banks and business reach their customers in all these places? How can they combine them into one seamless cohesive experience?
Melissa Kopp, FIS’ director of business development, is back today to help us think through these challenges. I started out by asking her how the ways people use credit and debit cards has changed over the last 10 years.
MELISSA KOPP: Oh gosh. Well, we've managed to migrate ourselves into a digital environment, right? We are still carrying pieces of plastic in our wallets and in our purses, but increasingly – more and more – we are migrating towards digital experiences and at the heart and at the core of what cardholders are looking for is they just want the friction removed. They want a simple flow. They want to be able to have the tools where they can self-service.
As a result of COVID, too, subscription and delivery services are now a part of our experience and becoming even more important. And at the end, we want access and think of them as the principles of convenience.
So, when we are engaging in a payments experience, we want it to be convenient. And, Erin, I'm sure you think about this, too, when you're using various apps on your phone either to make a payment or to order goods and services. You know when you experience a good one versus a bad one, right? And I think cardholders experience that every single day. Even now, I'm staring at my phone and thinking of a few, as I'm sure you are, too.
ERIN DANGLER: Right. I really just like it when the numbers pop up and I can just push “buy now” instead of having to go grab my card and re-enter the number and [then] my fat texting fingers mess it up.
MELISSA KOPP: Yeah. And what's interesting is that when those things do pop up – you know, I'm a sucker for all of the cool little boutique shops that pop up on Facebook or Twitter, – I'm like, “Ooh, that looks like it would be great in my closet.” And you click right over to it, and you're at the checkout, and and your phone automatically pops up and says, “Would you like to use this card?” Yes, I would; That's so easy for me. I don't have to run back to my wallet and get it, grab my card. That [convenience] being there is a something that [was] facilitated by my financial institution.
My financial institution has laid the groundwork and the foundation for my card being able to pop up in various cases like that. That is at the foundation of what financial institutions need to be investing in.
ERIN DANGLER: Definitely, yes, I would agree with that. I've been having some frustrating experiences with my cards lately, and it's really making me think about changing banks. I want it to be easier. I want it to be more seamless. Consumers are getting more demanding as time goes on.
MELISSA KOPP: Well, I think we're getting smarter. We have our eyes on what's now available to us. [The COVID-19 pandemic] brought that to light again. And I think we chatted about before some of the gaps and deficiencies that have been highlighted as a result of [the pandemic]. And payments are at the top of the list. Now everyone, like I said, either wants to subscribe to something and have it delivered, or they want to pay digitally, because it's all hands-off. But they also need it to be ubiquitous and fast and secure. Ultimately, remove that friction so I can get onto my next task.
ERIN DANGLER: You talked about the security. We also want to be able to call our credit card company if there's been a fraudulent charge and get it taken care of immediately.
MELISSA KOPP: Yep, absolutely. That goes back to the self-service portion being convenient. Give me the tools in my hand so I don't have to call and say, “Hey, I didn't perform this transaction.” Build all of those types of friction points into your overall experience and make it super simple for your cardholders to interact with you. You don't want to be on the top of their list because you didn't meet their needs: You want to be at the top of their list because you made it super simple for them to interact with you.
ERIN DANGLER: But making those effortless experiences possible is no simple task. There are just so many ways for customers to interact with companies these days.
MELISSA KOPP: I want the experience to work the same for me across all the channels that you're offering to me. We need to think outside of just the physical card. We need to think about the fact that I can now order groceries or detergent from Alexa. I can order from my car, right? (I don't yet have a car where I can order from, but I think I would probably evolve into being an avid user of it.) Or – my goodness! – my refrigerator can tell me when I'm out of milk, and I can reorder. I can reorder my groceries from my refrigerator. For all of that to work, it has to be seamless and convenient.
ERIN DANGLER: What other trends are you seeing that are changing the landscape?
MELISSA KOPP: [Point-of-sale] financing has become huge. If I think about the way in which I shop – I told you before, I'm a sucker for all those boutiques that pop up on Facebook, and I jump over to check them out – if [I] go to the checkout now, rarely does it give [me] the total for [my] purchase. What [I] see now is, “This only costs you $29 a month.” Or even smaller purchases, right? “This only costs you $10 a month.” They're breaking these down into what are called monthly installments.
Also as a result of [the pandemic], right, people want to understand: “Do you know what? I've spent my monthly budget here, but I can afford this. I can afford $10 a month. I can afford to make this purchase.”
And it's not just in the non-card lending space. Installments can be done as a loan, or they can be done via the card as well, and that's where we're seeing the popularity rise.
So, let's say I've walked into Target and I have purchased a big screen. I walk out now I can get a notification from my financial institution. Now, my phone says, “Hey, Melissa, saw you spent bucks on this new TV. Would you like to turn that into an installment plan to make it easier on your budget?” Well, yeah, sure I would. That three-, six-, nine-month plan makes it easier for me. We're seeing card-based POS financing really grow in popularity.
ERIN DANGLER: What about the stores themselves, with this point-of-sale financing? Are they providing it, as well?
MELISSA KOPP: Yeah, they've been doing it for a while. Walmart and Affirm have had a program for quite some time. We can make a large purchase in Walmart and right there in your Walmart app you can choose to turn that large purchase into a loan.
Now, that's not a card-based loan. That's more of a true installment loan, but retailers have been doing this for a while, and it's that part that’s growing in popularity. You can see the push and pull between the retailers and the issuers: Everybody wants a piece of that pie. I think that, the financial institutions who maintain relationships with their cardholders have a leg up here because they have the channel to begin communicating.
I think where we're going to see that behavior really begin to change is when they can offer this as an option before you go shopping. If my financial institution can reach out to me and say, “Hey, Melissa, we have options for you with some pending purchases. You may be thinking about turning these into an installment plan. Just use your credit card, and you can choose your terms ahead of time.”
So, when we get to the point where – and we're almost there – that we can start delivering that message before people go shopping, that's where we're going to see the behaviors really start to change.
ERIN DANGLER: So, how can businesses and financial institutions keep up with all these trends in the payments landscape? Melissa says it boils down to one idea: They have to go omnichannel. But what does this buzzword really mean?
MELISSA KOPP: Omnichannel means it's just a multichannel approach to marketing and selling and serving customers in a way that creates an integrated cohesive experience no matter how they interact with you.
They can be shopping online from a desktop or mobile device or by telephone or in your actual store. It just needs to be seamless and all integrated. It can't be disjointed, can't be broken. It can't look and feel different every time they interact with you. You can have amazing mobile marketing and engaging social media campaigns and a really nice and well-done website, but if those things aren't working together, it's not omnichannel. It has to cross multiple layers of your touchpoints with your clients.
ERIN DANGLER: So, can you give me an example of an omnichannel experience?
MELISSA KOPP: Yes. Disney gets the omnichannel experience right. They do lots of things, but they're the best at this – and down to the smallest details. It all starts with your initial experience on their beautiful mobile-responsive website. Even the trip planning website works well on mobile, and that's something we don't see very often.
Once you've booked a trip you can use the MyDisney experience tool to plan your entire trip, from the FastPasses you want to your dining. Even in the park, [you can use] their mobile app to locate the various rides, see your attractions and see how long you're going to have to wait in line. But then, they take it one step further. They have the “magic bands” that can act as your hotel room key, store your photos that you've taken with any of the characters, and can be used to order food. It even has your FastPass integration, to keep you moving along when you're standing in line. That's a truly omnichannel experience.
Another example would be Starbucks. If you take a look at the app, it's really one of the top omnichannel experiences out there. You get free rewards that you can use to make a purchase, but unlike traditional customer loyalty programs, they made it possible to check and reload your card via your phone, the website, in store or on the app. And then any change that you make, your cardholder profile gets updated across all the channels in real time. I'm not waiting for an upload or an overnight file to take place. You don't have to stand in line anymore to get your coffee. I can order ahead of time and just walk in and pick it up. So, they've done a really nice job from an app and an ordering experience.
I would say Chipotle is up there, as well.
ERIN DANGLER: I think I need to do this coffee thing, because I stood in line behind somebody buying scratch off tickets. It was my personal seventh level of hell.
MELISSA KOPP: Yeah. Just wait until you're behind the elderly lady at the groceries, writing a check and just –
ERIN DANGLER: – pulling out the license and writing down –
MELISSA KOPP: Right, yes.ERIN DANGLER: In talking about omnichannel, what other financial institutions are moving towards omnichannel. I mean, banks, brokerage firms, insurance companies?
MELISSA KOPP: Banks, credit unions, financing organizations, brokerage firms – everyone.
Banking as a whole has a way to go to get there. There are more integration points because there are so many players in the mix, but we're getting there. The banking experience has to get there, because as I mentioned before, there are ways for me to go and get that cup of coffee without my bank even being involved.
I can load money into that Starbucks app and I didn't need my bank to do anything. It's important that [banks] think about all of those integration points, where the deficiencies lie and how and when they invest in that user experience, because it's super important.
ERIN DANGLER: Who are they looking to for best practices? Where are financial institutions getting their wisdom from?
MELISSA KOPP: Their processors in a lot of cases – they're looking to their third-party partners. There are so many players in the fintech space now that are setting the stage, coming in and offering support and guidance and road maps for financial institutions to follow to get there. Processors such as FIS come into play because we own pieces of the ecosystem that plug into them. in some cases, we can be the card processor. In some cases, we are also what's called their core processor, which means we house kind of the brains of the operation, the account system.
In a lot of cases, we, as FIS, are also partnering with other fintechs to help support the financial institution. A lot of hands in the pie – you can start to see how that would become difficult to get everyone playing together. But the good news is that with APIs now becoming so prevalent and such a part of the conversation, it's making it easier for all of us to do business together to get to that truly omnichannel experience for the client.
ERIN DANGLER: APIs. Sure, you’ve probably heard the term before, but what the heck is an API, and why are they so key to creating an omnichannel experience? The letters stand for application programing interface, and yes, that sounds complicated. But, essentially, APIs allow different applications to work together. So, if you’re a bank working to build out your cardholder experience, APIs mean you don’t have to keep working to reinvent the wheel.
MELISSA KOPP: Let's say you wanted to be able to embed the ability in your phone, in your experience, for your card holder to say, “Hey, I didn't perform that transaction.”
I want to let you know about it. Code has already been written in the form of an API so that a financial institution can go in and grab that code, bring it within their applications. It's a very simplistic explanation; I have by no means done it justice, and there's more work that comes into play there. But at the end of the day, it's basically all of these events that are already captured and translated into an API. So we don't have to develop this from scratch, which is making it easier for us all to communicate in the same manner.
ERIN DANGLER: So you're taking things that have already been built and bringing them in to collaborate together, like Uber. Uber is already there: They grab Google Maps. They grab a third-party payment app. And so, Uber isn't creating and coding these things from the get-go, which would tax their workforce. [Instead,] they're just tapping into what's already there.
MELISSA KOPP: Yeah, which is where we were years ago. Now, it has completely evolved into kind of a market, an API marketplace, if you want to think of it that way. But the nice part is that it keeps growing and evolving, and as new types of transactions occur and as new types of events occur – or new types of things that cardholders want to perform occur – it's all captured and then translated into an API that our partners and our clients can go and grab and import. It's making speed to market much quicker, and making the experience that much better across all the channels for our clients. That's only going to grow and get bigger.
ERIN DANGLER: And so it would make sense that a payment provider would want to employ APIs?
MELISSA KOPP: Oh yes, absolutely, and it's interesting because if you were to rewind to just 10 years ago, I think most processors were under the mindset that, “I want you to play within my walls. I want you to use the products and services that I have. That translates to revenue.” Now, we’re at a period in time where many processors, and FIS is leading the way here, have opened up the walls. We've opened up the opportunities that we want to look out for to partner with these third parties, because everyone working together only makes that relationship stronger with the client.
Gone are the days where, “If I don't have it, you can't do it.” Well [now], if I don't have it, let's go find it and let's plug and play into the solution. So, we can help you deliver what you need to your cardholders.
We have to be there. We have to understand that there are going to be ways in which our clients want to do business that maybe we haven't thought of. So we really need to open up the walls, and this all goes back to APIs that allow us to do that.
ERIN DANGLER: So how can APIs affect the user experience? Let's say Melissa wakes up in the morning. She's got her card in her hand. What does it look like in this financial transaction world?
MELISSA KOPP: If it's Melissa, there's no card in my hand!
ERIN DANGLER: That's right!MELISSA KOPP: When I'm waking up in the morning, [using] my phone is one of the first things I've done after I've kissed my two little ones.
Let's say I'm shopping on my phone and the checkout experience – whether it's in the app or shopping at a dotcom on my phone – the checkout needs to populate my card. My card number needs to pop up. Let's say, I'm shopping and I get an alert from my financial institution that says, “Hey, Melissa,” – and again, all on my phone – “saw that large purchase for that dress. Do you want to turn that into an installment plan?” I’m kind of at my monthly budget, so yeah, let me do that. Let me turn that into 30 bucks a month for three months.
Then, I’m going about my day, and I get a notification from my financial institution that says, “Hey, I noticed you were shopping online today, but I also saw this other transaction online that seemed a little odd behavior for you, did you perform this?” “No, I didn't.” “Great. Would you like to charge that back?” “Yes, I would.”
Everything's at my fingertips and I'm able to see where the transaction took place, the dollar amount and the time, just to confirm, that wasn't me – or my daughter didn't have my phone perusing around buying things on my card.
Fast forward, I'm going on a trip. Someday we can all get back on plane soon and go hang out at the beach. I want to make sure that my financial institution knows I'm going to be spending outside of my normal market.
We used to be at a point where it would be great to notify my financial institution, which you can absolutely do within the mobile experience. But now, they know my behaviors so well, they see Melissa bought this plane ticket. Melissa has prepaid for this hotel. She shouldn't have to tell us she's going on vacation; we know that. We know that when she goes down there and we see a purchase that at the seafood shop right on the beach, that it’s her. We knew she was going there. We saw she bought that ticket.
And if I get back and I've lost my card, I should just to be able to get on my phone and flag the card as lost and have a number automatically sent back to me, a digital card number that I can reprovision back into my Netflix, my Uber, my DoorDash, all of my, my regulars, my Amazon, and so on.
Anything and everything that can be done digitally that can interact seamlessly with me and doesn't require me to jump back and forth between multiple different apps is going to deliver an amazing experience for me. That was kind of a six-month “day in the life” right there, but you can see how it kind of all comes together into how I want to interact and how I want my financial institution to interact with me.
ERIN DANGLER: Do payment providers really need to become omnichannel? How important is that they move towards this omnichannel solution?
MELISSA KOPP: If we're talking about payment providers, I'll use FIS as an example. I think that that becomes increasingly important because of many things, but most of all because of data.
Here at FIS, we have pretty much all the spokes on the wheel: We have partners we work with and clients who are e-commerce providers. We do a lot with Google. We do a lot with Amazon. A lot of businesses and merchants that are online-only, that’s our e-commerce space.
We partner with the physical brick-and-mortar stores, as well, merchants across the globe. Then we have our financial institutions. Then we have integrated payment providers that cross many realms, but all of the different ways and people you could pay are within the ecosystem here.
And the reason that becomes important (this isn't a commercial for FIS) is because we can pull data from all of those points. We can help supply that back to the financial institution so they can make informed decisions, so they can understand where gaps may lie within their cardholder experience and determine where they are going to ultimately take that.
So I think it's really important for payments providers to have visibility into the entire spectrum so that they can help deliver that back to their partners and to their financial institutions. Because if we're not playing in a various space, that means they're going to go somewhere else.
ERIN DANGLER: Have you seen payment providers racing to become omnichannel because of [the pandemic]?
MELISSA KOPP: Well, I think, from my payments provider perspective, a lot of consolidation occurred in the market [pre-pandemic].
Without naming too many names, there were several acquisitions and mergers that took place. FIS had had a large one with the acquisition of Worldpay that took place prior to the pandemic, which was good because it combined ecosystems: from the FIS perspective, large issuing presence in the market globally, and with Worldpay, large acquiring large merchant presence globally.
Bringing those two together ahead of [the pandemic] set the stage for our clients to be able to understand the payments ecosystem, to plug and play and to start identifying synergies between the issuing and the acquiring space.
I think we talked about this prior: Gone are the days where it's financial institution versus merchant., because at the end of the day, we all have the same goal, and that's to enable a seamless commerce experience, whether that's online or in a physical store or in an app. You need to enable that experience for your cardholder, and we have to come together to do it. So, partnering with someone who understands that entire ecosystem and has access points within that entire ecosystem, you're going to be ahead of the game.
ERIN DANGLER: Well Melissa, this has been a fascinating conversation, and you've inspired me to rethink some of these things, because I personally have been getting very frustrated with my cardholder experience. I need to up my game and find some financial institutions that are going to work better with me so that I can have a better customer experience. Do you have any parting words of wisdom for us before we say goodbye today?
MELISSA KOPP: If our financial institutions need some inspiration, they can find plenty of companies that have already implemented fantastic omnichannel user experiences. We mentioned a few. There are pieces and parts we can take from Disney, and we're always learning from Amazon. Just think about it as a card holder: When you interact, what are the important things to you?
What are the easy little seamless things, like popping up my card number when I'm shopping; or, when I have to type in my three-digit code, popping up the really large screen with the numbers on it versus having me type on my regular keyboard. Think about those little pieces and parts that make that checkout experience more convenient. And invest in self-service, my goodness! That's where we are. We all, as consumers, want to do everything from our phone. So take a really hard look at the tools that you have within your self-service functionality and start to remove friction. Develop a simple flow.
That's a lot. Not everyone is going to be able to do all of what we talked about. So just find one or two areas, you know, where your organization can make changes. Or I think you risk being disrupted.
ERIN DANGLER: Melissa Kopp is director of business development at FIS
That’s it for Financial Futures. See you again next time when we take a deeper dive into P2P payment apps and how they are changing the game.