We are heading towards a not too distant future where every retailer can act like a FinTech.
As i2c President Jim McCarthy told Karen Webster of PYMNTS, every business should consider doing this – adopting Banking-as-a-Service (BaaS) platforms to offer financial products to their customers. endpoints, in context, across digital channels and on demand.
We’ve been here before, in a way. All sorts of traditional merchants have been doing this for years, even decades. Walmart, to give just one example, had installed the Woodforest National Bank in its stores; Kroger had retail terminals and ATMs in its own physical locations.
But as McCarthy noted, “Nothing was ever fully integrated or easy.”
These somewhat segmented experiences, housed in physical environments, can draw inspiration from the evolution of retail itself over the past decade and a half. Commerce has moved from its roots of green screens and wired terminals at checkout to a more seamless experience – which includes self-service kiosks and in-store devices that allow consumers to check into aisles once they found what they were looking for.
“Because of modern merchant acquisition, because of platforms and gateways, we’ve seen a huge amount of innovation in the merchant space to deliver a range of new services,” McCarthy said. Key, then, has been the ability to bypass legacy infrastructure in favor of partnerships that leverage the strengths of each stakeholder.
The ticking of the clocks, the silver burns
Within financial services‘ own digital and physical channels, lines are blurring between where and when we access checking, savings and investment activities. Digital-only platforms – think Monzo, Chime and others – have leveraged the mobile device as an access point for these services.
But as McCarthy described, as these digital newcomers began to develop their various offerings, they had to find traditional banking partners who would be willing to act as underwriters and ensure compliance – offering form and structure to provide checking accounts and cards. . Then they had to find payment processors to back it all up.
In the early days of financial innovation, he said, FinTechs should go out and find sponsors, banks and bank identification number (BIN) processors – and create new back-office functions and consumer services after that.
“All the while, time is running out and your money is burning,” he said.
Fortunately, we are moving on to the era of these “assemblies” of services and infrastructures.
Instead of having to go out to market and scour the proverbial forest to find the right partners, there are entities (i2c and its platform among them) that can bring all stakeholders together – at a single point of access.
For banks, there is the benefit of leveraging the platforms to market compliance and issuance as a service and setting up an incubator within to test their own digital initiatives, he said. declared. For FinTechs, this is the benefit of avoiding the hassle of partner hunting.
The positive ripple effect on the whole ecosystem is that new products can be tested (and changed) quickly before they go to market with application programming interfaces (APIs) and sandboxes – so much so that businesses can be up and running and issuing virtual cards in no time. days rather than months.
Putting a better envelope around banking “allows third parties to deliver financial services — as part of the commerce offering in new and unique ways to consumers,” McCarthy said.
Data shows that BaaS can dramatically reduce the cost of acquiring a customer. Usually these costs range from $100 to $200, but a BaaS solution can reduce them by $5 to $35. So there is value in outsourcing the infrastructure to a platform, while focusing on the user experience.
“You can test the fundamentals of these new ideas without wasting a lot of time getting to the starting line,” McCarthy said.
Dollar General is a prime example of BaaS flexibility, where earlier this week the company announced it would launch new financial services and payment alternatives for its customers, announcing the launch of Spendwell, its own banking platform. The company will pilot a Buy Now, Pay Later (BNPL) program with Sezzle and a new FIS Worldpay card reward points system.
Read more: Dollar General launches banking option and tests BNPL
Looking ahead, regardless of the merchant or business looking to diversify into financial services, digital card and wallet issuance remains an important part of the BaaS value proposition, McCarthy said.
The “next logical step” in instant digital issuance of the virtual card is to push that card to a digital wallet so that it can be used (for example) anywhere Mastercard is accepted.
Currently, the BaaS service space is fragmented, where people will have multiple banking and brokerage relationships. Consolidation will happen naturally, he predicted, leading to the emergence of super apps.
There’s a prologue to tying it all together, McCarthy said, as tens of millions of consumers have their key business activities housed within Amazon, leading to an audience naturally receptive to co-branded cards. He predicted that there will be an interoperability embrace.
PYMNTS’ own research found that 67% of consumers in the United States, or 173 million people, want an app that manages their digital activities, while 11% want an app that manages their entire digital life.
See more : Are you one of the 173 million Americans who want a great app?
As banks, FinTechs, platforms and merchants profitably leverage direct feedback and then launch new products, McCarthy told Webster: “Everyone is a FinTech – in fact, there there is a FinTech buried in every business. They may not know it yet.