Open Banking Expo Magazine recently caught up with Susan French, head of products at BBVA Open Platform. Here’s what she had to say on the future of payments, customer experience and Banking as a Service.
Banking-as-a-Service will be the Belle of the Ball in 2020
Banking-as-a-Service has had an incredible year in 2019. BaaS allows any business, from enterprises to established startups, to deliver new solutions to age old financial problems such as consumer debt, simplified savings, financial wellness, or better access to credit. It’s proving to be a way for hard-hit retail banks to stay competitive by diversifying product and revenue streams and for forward-thinking banks to exponentially grow their customer bases through the network effects of third-party BaaS relationships. Companies beyond the fintech industry will start realizing the value of using APIs to offer payment services, bank accounts and debit cards as a native part of their product. Making the move for every business to become a fintech a reality.
Consumer experience hasn’t been enough to drive change, until now
Innovation in digital payments and mobile banking services is not new, but surprisingly the adoption rate has been much slower than other areas of mobile tech. Part of the issue has been in simplifying the transaction process, because consumers like simplicity and ease. The fewer decisions and redirects a consumer has to endure on their way to checkout — whether that’s a digital checkout through an app or website, or a physical checkout at point-of-sale with a card or phone — the less friction in making a purchase decision and the more likely the consumer will have a good experience they will be willing to repeat.
Simplified payment journeys streamlined under a single brand experience (such as those offered by Amazon and Apple) are great examples of how this can be successful, however we have to remember that easy, branded payments experiences come in many flavors. Some, like Apple’s new card, come in the form of a fully owned and branded card ecosystem and experience, and others will rely on leveraging APIs to aggregate transaction options in a single, branded interface. As we move forward and into 2020 we’ll recognize that there’s no right or wrong answer here. Companies will need both options to design the right solution for their unique customer base, business model and objectives. Whichever route they choose moving forward, the consumer experience will be at the heart of it.
Big tech may dominate the headlines, but smaller fintechs will gain strength
2019 has been a busy one for Big Tech in fintech, with Facebook, Amazon, Apple, Netflix and Google, otherwise known as the FAANG companies, jumping over each other to announce new banking or financial service initiatives. These announcements are met with a fair dose of cynicism, as FAANG companies struggle to convince consumers they can be trusted with personal data. These headlines will continue to play out in 2020, but if past experience is indicative of future behaviour, consumers often choose convenience first. Much of Big Tech’s success in the financial space will rely on their ability to convince customers they have their best interest at heart.
In the meantime however, smaller fintechs, who had to work on first building trust in order to grow, will see ongoing consumer adoption. Standout players will be those who take a hard line on transparency, regulation, security and customer service. Other non-financial services companies will ride this wave of growth as well, as they seek to incorporate banking solutions into their apps and websites, making it easier to keep the customer relationship within the brand.
Digital payments will streamline
2019 has been a big year in the digital payments space, with the introduction of new players and significant movements from big tech companies. Despite so many choices and seemingly never-ending hype, consumers will ultimately settle on one or two payment solutions that they use regularly, everywhere. In 2020, we’ll see more consumers choose payment solutions that they see as ubiquitous, simple, and easy. Those are not likely to be retailer-specific experiences.
Consumers will choose the likes of Apple Pay, Google Pay, Venmo or PayPal because they require little thought or planning at checkout, always work and are becoming more widely accepted. Those businesses that have successfully kept consumer payments inside their branded experience — think Starbucks, Target or Amazon — do so because they have figured out how to provide the consumer with enough extra benefits that it is worth the extra effort at checkout to choose a brand-specific option. What companies are realizing, however, is that this requires a non-trivial investment in both dollars and attention. For this reason, most businesses will likely choose to focus on their products and services and not on trying to own the customer payment journey.
The US government will struggle to keep pace with payments
In 2019 I predicted that the US government will work to catch up with the rest of the world on its real time payments infrastructure. This proved true, with the government announcing “FedNow” in August, a system that will allow real-time bank-to-bank payments, all day every day, with a launch date expected in 2023 or 2024.
The good news is that the technology is already available, used in countries around the world including Australia, Singapore and across Europe. However, the US government has struggled to keep pace with innovation and by the time the system is ready to go live, its very likely technology will have moved forward. In the meantime, card-based payment systems will continue to aggressively promote push payments as an option that is available here-and-now. Finally, consumers will increasingly warm to real-time person-to-person (P2P) networks such as Zelle, Apple Cash, Venmo, Square Cash, PayPal and others.