Long gone are the days when you can just be an effective leader in your field, or area of expertise, with just a deep vertical knowledge of your specific function. External factors, like technology and globalization, are blurring the lines of the traditional ‘swim lanes’ that clearly delineated business responsibilities. This means for today’s leaders to be effective they need to not only develop deep vertical knowledge of their specific function, but also need to know enough about all of the other industries and knowledge areas that are externally influencing or disrupting their primary function.
"As technology continues to influence how embedded or invisible payments become, payments leaders will need to become more like technologists"
When you read the above out loud it might sound like simply good business, but if we take a look at how payments has changed in just the past decade, you can really get a sense of how intense this change is for today’s payments leaders. As I took my own trip down memory lane and cataloged some of the key inflection points I’ve witnessed in payments, I noticed five key emerging themes:
1. The Basics – Managing your traditional business.
2. Disruption – The influence of new technologies on your traditional business.
3. Evolution – How you, your business partners, and your industry responds.
4. Consumer Empowerment – Consumers are now in charge with more choices.
5. Increased Oversight – As business evolves so does regulation, governance, and oversight.
Those key inflection points include the Global Financial Collapse (GFC) and the subsequent regulatory and oversight response, the age of Fintech, and ultimately where we are headed with faster, and eventually invisible payments. You’ll notice that with each inflection point, each theme’s relevance or weight also tends to increase. This illustrates why you need to know more about everything else than just your primary function to be effective
Just a decade ago your organization’s payments leader didn’t really need to understand Application Program Interfaces (APIs), or follow and understand advancements in smartphone hardware and mobile operating systems, but now this knowledge is becoming table stakes. Just a decade ago you could really focus on The Basics. If you were in the card issuance business you primarily focused on Penetration, Activation, and Usage (PAU). Or, compliance and transaction risk management if your area of focus was check processing, wires, and Automated Clearing House (ACH).
Sure, some Disruption was occurring from non-financial service providers, but it was primarily focused on solving industry issues, like lowering transaction costs for retailers through the ‘Interchange Zero’ business model (The belief that it shouldn’t cost retailers to accept a form of payment at Point of Sale).
So when did it all begin to change?
Brace For Impact – Here Comes The GFC
The GFC created Increased Oversight, which included The CARD Act in 2009, the Dodd-Frank Act in 2010, and the subsequent creation of the Consumer Financial Protection Bureau, and introduction of Reg II (The Durbin Amendment) regulating debit card interchange in 2011.
Disruption evolved from solving industry stakeholder payment challenges to offering financial service products and experiences directly to consumers, and so was born Fintech. Smartphones were becoming faster, and each product cycle of the next new and improved model was packed with more advanced hardware and capabilities. Advancements in smartphone camera quality created the ability to ‘Photo Capture’ data to improve many customer experiences, including check deposits from your mobile phone. All good hardware needs good software, so new ecosystems called app stores flourished.
This Is The Dawning Of The Age Of Fintech
All of these developments created the perfect ecosystem for Fintech to thrive. Fintech could now directly reach average consumers through app store ecosystems with individual financial service products and experiences. The people behind Fintech were not only technologists but also average consumers. They understood the technological capabilities of the mobile revolution, and through their own personal consumer experiences, the pain points with traditional financial services. Consumer’s expectations regarding mobile experiences began to be influenced by those who truly excelled in this channel; think Uber from an overall mobile only/user experience, Starbucks from a mobile payments perspective, and Venmo from a person-to-person payment experience.
The payment industry’s Evolution has included the Federal Reserve’s faster payments initiatives, NACHA’s second attempt at launching Same Day ACH, and of course the largest card payment brands opening up the edge of their payments processing networks through APIs via their Digital Enablement Platform initiatives. There’s also a distinct “coopertition” trend emerging, with traditional payment stakeholders once viewed as competitors finding opportunities to also be strategic partners. Financial institutions are also finding ways to partner with the most promising Fintech provides, too.
More importantly this era has created the Empowered Consumer. Consumers don’t need to solely rely on their primary financial institution for payment, financial management, or even transaction and savings accounts anymore. From the app store tethered to their mobile device they have access to thousands of solutions offered by non-traditional financial service providers. The payments leaders’ ability to understand this space is critical to finding ways to participate and remain ‘top-of-device’.
So what’s next for payments and the payments leaders?
Payments will get faster and transaction messaging more intelligent. Payments will also become embedded into our daily activities. Transferring money as part of a messenger or text conversation will be normal. Payments will become more invisible and you’ll find yourself making explicit acts of payment like dipping cards or tapping phones less. The Internet of Things (IoT) will allow payments to occur as you naturally move throughout your day. That might be your car that pays for tolls, parking, gas, or the drive-thru meal you placed via voice control just a few minutes ago. Or, perhaps your connected house that automatically orders groceries and household goods before you run out.
As technology continues to influence how embedded or invisible payments become, payments leaders will need to become more like technologists. They’ll still need the deep vertical knowledge of their particular payment function, but will also need to develop deep vertical knowledge in many technical subject areas, too.