From every direction, you can see the tremendous transformation that’s happening in payments. But blink for one moment, and you’ve missed another technology change in the payments ecosystem. How can anyone keep pace in the midst of new startups circumventing traditional institutions, new technologies elevating consumer convenience to new levels and new promises – or threats – to revolutionize payments?
During the past decade, technology firms grew to dominate the FinTech landscape. For years, the talk about disruption resounded through our industry. Here’s the proof in dollars and cents: Market capitalization for technology firms now surpasses that of financial institutions in the U.S. There isn’t a single silver bullet that will halt their progress. It’s incumbent upon us to transform our thinking to meet the demands of change.
Consumers don’t care where you come from
Consumers – especially the younger ones – could care less if the product that makes their lives easier comes from a financial institution or a technology company. What they adapt to quickly are products that fit into their lifestyles and established habits. Of course, they want safe, user-friendly payment services and solutions but they also want to be able to individualize them to meet their specific and daily needs. They may adopt quickly but then abandon just as fast when the next best thing comes their way. The bar for meeting consumers’ expectations is continuously being raised and delivery of desirable payment services must rise in tandem.
Take smartphones and voice-activated smart-home devices, for example. They make life easier. They are the safest payment vehicles, thanks to tokenization. And best of all, they are easily individualized through apps and “skills.” Between Google Play and the Apple App Store, there were five million apps as of March 2017, according to Statistica. By June, Alexa had surpassed 15,000 skills. Closing the loop between home and on-the-go use are new apps that allow Alexa and Google Assistant to work on smartphones.
Can’t we all just get along?
Despite deploying new fraud-fighting technologies in 2017, massive numbers of account takeovers, the proliferation of bad information and relentless breaches continued to the tune of over six billion records exposed through 2,227 publicly disclosed data breaches in just the first half of 2017. It’s time for sharing security information – even when it helps the other team – because the alternative is to concede victory to fraudsters.
In 2018, artificial intelligence will move to the frontlines in the fight against fraud. Global information sharing can further fuel its power.
An important goal stemming from our recent inaugural P20 conference is bringing the top 20 processors together to monitor security breaches, help each other fight fraud and support a healthy payments ecosystem. Our plan: to all just get along.
Uncertainty Persists in Regulation
2017 was a year of uncertainty for financial services regulation, created by unknowns such as what post-crisis reforms would stay, what impact Brexit would have, what the new U.S. political administration would do and what governments around the world would do.
Steady yourself for a repeat performance of uncertainty. Expect that some aspects of Dodd-Frank will be adjusted, but don’t anticipate a wholesale rollback. We know, for sure, that Asia-Pacific will continue to implement regulations such as KYC/AML, make further progress on financial inclusion – especially in India – and address the impact of regulations from outside the region.
We surmise that regulators are aware of the “if it walks like a duck…” talk about FinTech’s acting too much like banks not to be held to the same regulatory standards. But, we don’t know if or when regulators will require Fintech’s to get in line like a duck.
In the EU, one directive and one regulation going into effect this year will have a major impact on banking in Europe and beyond:
- The revised Payment Services Directive (PSD2) – taking effect this month – requires European banks to allow third-party providers access to customers’ online accounts/payment services, with their permission. It aims to increase the security of online payments and account access by mandating that banks facilitate secure access through APIs.
- The objective of the EU General Data Protection Regulation (GDPR) is to sync up privacy laws in Europe to protect all EU citizens from privacy and data breaches. The GDPR will apply to both organizations in the EU and outside of the EU if they process or hold personal data of EU citizens.
Regardless of regulations, everyone should prepare for a world of open APIs and increasing demands for greater privacy protections.
It’s time to think like Bugatti engineers
Although I’m not among the lucky 300 owners of a Veyron Bugatti, I think about how engineers at Bugatti created the fastest and fastest-accelerating, technically most advanced, beautiful but sturdy and smooth-riding-at-any-speed automobile. The driveline alone has 1,200 components – all of which are documented in a database to enable tracing any flaw back to an individual part. Bugatti’s engineers think differently to achieve excellence.
Now is the time to think like Bugatti engineers – differently. At FIS, we’re revisiting everything we do – changing the way we look at the organization and how we spend our time. We’re changing models that have been in place for decades, how we build products, with what third parties we partner with and how we deliver products to market to reduce time and cost-to-market. We’re changing the structure of the organization to keep pace with rapid transformation.
In the New Year, it’s time to reflect upon:
- A focus on growth and actionable innovation
- Optimizing customer experience technologies
- Revisiting business strategies
- Spending on resources to support the core competencies of the business not on activities that are better handled by third parties with adequate scale
- Finding partners that are adept at handling rapid transformation
- Using capital to improve customer experiences
- Looking for improvements in current ways of doing business
- And, remaining passionate and aggressive about pursuing excellence every day