The Future of Digital Payments: Queen City FinTech Demo Day

On June 1, 2016, the Queen City FinTech Demo Day took place at the Fillmore in Charlotte, NC and gave area industry experts the forum to discuss the latest trends and developments in FinTech, and gave local startups the chance to pitch their companies to groups of potential investors. The morning session consisted of a number of panels, presentations, and fireside chats where the audience was told about the latest and most intriguing innovations in the world of FinTech.

The first of these events that will be covered is a keynote address by Jason Henrichs, a professional involved in venture capital and private equity and noted for his involvement in Maker of Things. In an intriguing talking point, Henrichs drew a comparison between the growth of the FinTech industry and the way Blaise Pascal, famed mathematician and philosopher, viewed the role of religion in the age of enlightenment. The way he illustrated this was with an X-axis and Y-axis as seen below showing all possibilities for the future of FinTech in relation to the ways in which people will choose to treat the advancement of FinTech.

What this graph shows is the two general options for the future of FinTech (move towards a new world order or eventually revert back to the status quo) and the two ways in which financial institutions can treat a potential shift due to FinTech (take action or do nothing). This creates a matrix of possibilities as seen above, and according to the Henrichs the quadrant that you need to be in is in the top right, and if you’re anywhere else, then you are already behind. Henrichs also described the innovation curve and how we have advanced to a point in the banking industry where consumer expectations are moving faster than the innovation that is occurring. Due to this, a FinTech revolution could be on the rise in which consumer demands are rushed to be met by the many innovators in the marketplace.

The next address was a panel on digital future payments. This panel included many industry experts in the field of mobile payments who offered their opinions on, as the title of the panel states, the future of digital payments. This panel involved fielding questions from a moderator as well as the audience in answering pressing questions on the advancing nature of mobile payments within the scope of the FinTech world. One of the major talking points during the panel was the Uber-ization of payments, a term used to describe the way in which you pay for an Uber transaction: You hail an Uber car on your phone, get in the car, and get out without ever exchanging anything with your driver due to the fact that the payment is handled entirely within the app. In regards to this term, many in the audience wanted to know how close we are to the Uber-ization of the entire payment industry, meaning a point in time when we never have to hand someone a credit card or cash and everything relating to payment can be handled through a mobile platform. Many on the panel felt that the world of FinTech is taking the first legitimate steps into this spectrum of full Uber-ization rather than the last and that we’ll only continue to see more payment methods become automated as both small and large companies have begun to fully embrace the necessary shifts in innovation to make them happen. This viewpoint aligned with the general consensus of the panel that the future of digital payments will continue to provide not only ease and convenience to consumers but security in their payments as well.

The next discussion was a fireside chat with Matt Harris, a managing director at Bain Capital Ventures. One of the developments in FinTech that Harris touched on was the sometimes difficulty in banks partnering with FinTech startups. He claims that this difficulty lies in the fact that banks are unfamiliar with the concept of partnering with another company in order to develop something, with this being in opposition to their usual strategy of developing innovation in-house or purchasing things that have been created by other companies. While he noted that partnerships are sometimes accessible in a banking landscape, they are usually difficult due to the many different sectors of a bank along with overbearing bank regulators. Fielding questions from both the moderator of the fireside chat and the audience, Harris used his professional experience to provide information mainly on the relations between FinTech startups, banks, and the innovations that occur between them.

James Crickmore Thompson led the next fireside chat with Oracle. Throughout his 20 years in the industry, Thompson has consulted on financial products with banks, as well as developed software that strengthened their customer’s experience. His talk was focused on finding ways to utilize FinTech for congregating an individual’s entire digital financial life to create a more personalized experience. However, when a financial institution is trying to service millions of clients, it cannot manually appease the personalized demand. He refers to digital banking as fast yet, unstructured. The unstructured nature of the current FinTech market refers to multiple identifiers across FinTech platforms. On one server you are John_Doe, and on another, you are DoeBoy78. This data fragmentation makes it difficult for financial institutions to identify who their client is and market their products to that specific demographic.

More than 60% of practices participate in digital interactions, and companies are struggling to keep pace with their customers. Banks are actively becoming more competitive when creating a digital user-friendly experience for their customers. From the top down, a financial institution is considered strong when it can provide the highest quality experience for its customers. This ease of interaction that FinTech can provide leads to massive conversions and revenue, simply because customers feel more confident in where they have their money and more loyal to a dedicated institution.

A new study shows that 72% of millennials prefer to bank with a non-financial services brand, such as PayPal, Apple Pay, and Android pay. This is threatening the banking industry which is attempting to create a more personal experience; this is where we see the unstructured nature of FinTech. Millennials make up 30% of the world’s population with a net worth of over two trillion dollars (Wealthfront) and by 2017, that number is expected to grow to seven trillion. These numbers demonstrate that the banking industry is losing control over a very important demographic. In order to maintain their customers, the bank has to be able to do three things well:

  1. It must know its customer inside and out of the financial industry, and utilize that information in order to take full advantage of customer engagement.
  2. It must create an easy transaction platform for customers across every platform.
  3. The bank must wow the customer by always being two steps ahead. They must create the right products at the right time and be able to provide customers with relevant and simple banking services that are ready to use. These steps encompass a business platform that proactively engages the customer.

Craig Fuller, Chief Information Security Officer for Bank of America, led the panel on cybersecurity alongside multiple leaders in the FinTech industry. Fuller is responsible for leading the team and protecting customers from threats and monitoring compliance for the bank. The panel primarily discussed cybersecurity and the upcoming protection from hacking. The security threat landscape of the banking industry has escalated in many ways over the past 20 years. First is the awareness of security as an issue, people want to assume trust in their financial transactions. The second major change is the ease in which a financial institution can contact a customer and handle security issues. Essentially, the entirety of transaction analytics has drastically changed, and financial institutions are forced to change with it. On the customer side, one has to become more aware of financial threats from data fishers. Jason Mowa* shed some light on how customers should make themselves less susceptible to threats. He focused on what he calls the security tool augmentation problem. The idea is that every specific point security solution that a bank employs will overcomplicate the system and leave backdoors for hackers. He asserted that the process is becoming too complex to break individual issues down one by one. He also stressed the importance of making customers aware of threats so that they can take their own measures to avoid cyberattacks. Throughout the panel, each contributor stressed the importance of having a FinTech product that is user-friendly and highly secure and urges the consumer to expect that from their provider.

This conference provided valuable insight into the emerging FinTech market—we heard from industry leaders who understand the issues regarding the delicate relationship between finance and technology. FinTech has made tremendous strides in accumulating and organizing data to help companies communicate effectively with their customers.