Betting Big on Payments

Jim Johnson
FIS | Head of Financial Institution Payments
Posted on September 6, 2016

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New regulations, thin net interest margins and challenges in growing accounts have dramatically changed the topography of the financial industry landscape. Traditional revenue streams are drying up. As a result, bankers are looking to payments for growth – and their expectations are flying high.

Concurrently, consumers are seizing control of their interactions with institutions and brands. In the digital world, companies such as Starbucks, Apple, Amazon and Netflix have introduced new ways of interacting with consumers and made them widely available and extremely user-friendly. These companies have created exceptional customer experiences and dramatically raised the bar on consumer expectations for other industries, including payments. Once previously considered unconventional, their ideas about doing business have become mainstream. Today, consumers expect all payments to be as frictionless as placing an order on Amazon.

Continuous changes are occurring in the payments arena as a plethora of new payment solutions are heading toward us at 100 mph. The adoption curve – as well as the shakeout of “losers” – is compressed.

The big message to bankers is what’s worked in the past won’t work in the future – yesterday’s products can’t be counted on to generate tomorrow’s revenue streams. In the words of Henry Ford, “If you always do what you’ve always done, you’ll always get what you’ve always got.”

The reality of running a financial institution, however, is that very few bankers have extra resources to place a large bet on a payments solution that could waste their money and possibly place their firm at risk. Payment solution investments are big and not all of them pay off.

The million-dollar question becomes: How can bankers monetize and maximize payments opportunities to their organization’s advantage while minimizing risk? My response is to pick the right partner.

But what does the right partner look like? This is the time when you really need maturity in your corner. Most banking providers need to work with a proven partner that can bear the risks of waging bets on multiple payment solutions. Other things to look for:

  • Choose a partner that puts security first. Don’t fall in love with a technology that doesn’t have security baked in from the get go because today’s thieves will figure out a way to exploit weakness in any payments solution. How do you know if your potential partner places security first? Ask about what ongoing relationships they have with key players in the industry such as leading security labs and think tanks.
  • Pick a partner that puts the consumer at the center of product design and execution processes. Consider how much influence that partner has over other members of the supply chain to create consumer demand for the product and drive ubiquity in the marketplace. We’ve seen how useless a slick mobile wallet is if it’s not accepted at popular retailers.
  • Pick a partner with a proven track record and the wherewithal to place multiple bets on different technologies and still survive a few missteps. Remember, for every successful startup there are many that have gone by the wayside.
  • Consider a partner that controls multiple points in the supply chain. There are so many players in the supply chain – merchants, merchant processor, network, issuing processor and issuing card base, core processor – that the flow of payments can bog down. Controlling multiple points in the supply chain can reduce friction and speed ubiquity.

Finally, you must be mindful of how your customers generally consume their products as that will give insight into how they may want to consume yours as well. And don’t forget millennials in your research: As a growing force, their preferences will soon affect you. And how customer behavior changes and evolves must remain front of mind in your planning.

 

What do you view as the most important factor for choosing a payments partner?

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Jim Johnson
FIS | Head of Financial Institution Payments

Jim is a results-driven executive with 21 years of experience at FIS, successfully leading businesses and serving his client’s needs in the financial, retail, government and insurance sectors. He oversees Business Operations, Information Technology, Development, Project Management and Implementations for Financial Institution Payments. Jim is heavily focused on implementing strategic planning and execution, focusing on talent and teamwork, and relying on metrics to measure success.