October 31, 2015
Money20/20 is the largest global event focused on payments and financial services innovation for connected commerce at the intersection of mobile, retail, marketing services, data and technology. With 10,000+ attendees, including more than 1,000 CEOs, from 3,000 companies and 75 countries, Money20/20 is critical to realizing the vision of disruptive ways in which consumers and businesses manage, spend and borrow money.
The LTP founders Aditya Khurjekar and Amit Goel attended the 2015 Money20/20 conference held in Las Vegas between 26th and 29th of October to witness the latest innovations in payments technologies and industry trends.
Returning to the conference 3 years after founding it in 2012 along with the current conference chairmen, it was a special experience for Aditya, who could witness the blossoming of the seeds of innovative cross-industry dialogue that he had sown in the inaugural year, when he had laid the initial content foundation for the event.
The LTP team noticed very interesting trends happening in the various adjacent industries at the event. Companies need to keep these trends in mind as they build their strategies for 2016.
Trend 1. Shift from business model innovation to technology innovation
In recent years, the financial services market has seen a major disruption wave coming from the FinTech sector. Surprisingly, innovations were brought not by payments experts, but by technology experts and people passionate to utilize technology for a better experience.
Business model innovation can be illustrated with an example of Prepaid Cards vs. Debit Cards. The major difference between the prepaid card and debit card is the fact that you do not need a bank account to have a prepaid card. Those cards are convenient, easy to get and use with no hassles. However, prepaid cards could be used once. Therefore, the model of the prepaid card was modified to a card that can be reloaded. That is how GPRP cards were born. Now the prepaid card is a hybrid of a debit card and gift card that still does not require an account. Bright business minds utilized the positive sides of the debit cards model and prepaid cards model to create a new one – reloadable prepaid card that accumulates positive sides of both parents of the card. This is an example of business model innovation.
However, this past Money20/20 clearly vindicated the trends evident in the market for a while now – the dominance of innovations coming from techies rather than business professionals. Companies like Venmo, Square, Stripe, Braintree, and many others, without a doubt, have had a great impact on the industries they are operating in. Those disruptors came from a tech background. Nowadays there is no necessity to be a payments expert to become an innovator in the space; tech professionals passionate about innovation can disrupt the industries they previously had very little to do with.
Trend 2. Identity verification becomes a major issue
As money transactions become easier and easier with technological innovation, the security issue becomes a major concern. A vast variety of applications allow consumers to move funds with one or two clicks. However, this very ease makes those transactions more vulnerable and makes the identity verification question more complicated than it was before. There is always a balance and a choice between security layers and consumer-friendliness.
The LTP team recently conducted an exclusive interview with one of the Money20/20 attendees – John Dancu, CEO of IDology, a fraud prevention and identity verification provider. John shared with us valuable insights on the subject, saying:
When it comes to identity verification, we want to have many layers. However, we need to make the identity verification process as easy as possible for the legitimate consumer without added unnecessary friction. One layer is no longer sufficient to catch fraudsters. When we talk about identity verification, we look at many factors – device, identity activity and location attributes so that our customers can be dynamically decisioned to move to higher levels of verification based on risk profiles. This allows the good customers to easily access products and services while raising the level of friction when suspected fraud is present. We are using real-time resources; looking at other factors that are going around the transaction.
One of those new innovative layers of authentication is provided by another beacon of innovation in mobile payments, Payfone, a company that has Early Warning as one of its investors, a US banks’ joint venture that acquired another US banks’ joint venture, ClearXchange. A Money20/20 supporter since the early days, Payfone itself continues to scale new heights in mobile authentication - the company recently announced 340% growth in volume in a little more than 3 months and is expecting to cross 3 billion authentications in 2016. Rodger Desai, CEO of Payfone, explained to Aditya on the sidelines of one of the sessions, The industry is finally beginning to appreciate the complexity of what the mobile ecosystem has had to offer us. It’s not easy and it takes time to establish the relationships, but we are now making an impact that cannot be ignored. There are banking and payments use cases that are now fundamentally more secure because of the APIs that Payfone provides.
As banks are joining hands to create a powerful network in response to the rise of FinTech, fraud prevention companies and identity verification providers are also joining hands to make seamless experiences as secure as possible.
We have a collaborative fraud network where we help organizations fight fraud on a collaborative basis. We have an ability to see repeated activity across the network. We see fraudsters going from company A to company B and company C, and we see commonalities in fraud activities. That is one of the advantages of IDology. As the company continues to grow, the power of the network has gotten stronger and stronger, added John.
Amit also had the pleasure of meeting Sarah Clark, VP of Product at Mitek Systems, at the Money20/20 2015 conference and witnessed a demonstration of the company’s instant ID document verification solution, Photo Verify, in addition to facial recognition capabilities. These two factors of authentication help businesses optimize mobile channels for customer acquisition and payments while migrating risk. Sarah shared her thoughts on the identity verification issue:
The market problem we are solving is the fact that most users are now onboarding for financial account services digitally. Mobile has been booming in the past few years; the volume of inbound applications coming from mobile has tripled or even quadrupled. Moreover, there is a market problem with reliable secure identity verification of the person on the other side of the device. Therefore, we have a unique product where we can instantly scan the driver’s license of the user who is holding the mobile device, and our product Photo Verify can instantly detect if the driver's license is authentic. We bridge that physical-to-digital channel.
Trend 3. FinTech startups shake up the industry; banks prepare for comeback
In one of our recent articles, How Banks Are Joining Hands With FinTech Firms to Serve Customers, we highlighted the trend in the banking sector to collaborate with FinTech startups in order to provide better value to end customers. The FinTech addiction has spread among the biggest banks in a variety of forms. Industry giants like BBVA, Rabobank, Wells Fargo, Barclays, Lloyds Banking Group, Bank of Ireland, Commerzbank, UniCredit, Credit Agricole, and many others have chosen to set up startup programs to incubate FinTech companies. The market power of banks and assets enable them to invest significantly in incubating innovation.
However, monetary capability is not the only advantage banks have. Access to a large customer pool is the crucial advantage over FinTech startups. The LTP team picked a very interesting quotes from the FinDEVr 2015, where the Temenos team mentioned, Something banks have and FinTech doesn’t, but want, are customers!.
The disruptive wave from FinTech has forced industry giants to shift to a response mode and foster innovation themselves. The variety of forms in which banks were previously responding to the rise of FinTech was focused on partnering/investing/acquiring/incubating and helping each other out. However, Money20/20 2015 appeared to illustrate a new way banks are responding to their temporarily threatened dominance – giants of the banking industry are collaborating with each other to regain their power and become a source of innovation themselves.
There are several examples to that, and one of them is Early Warning, a trusted leader in fraud prevention and risk management acquiring clearXchange, the largest bank-owned digital payments network in the United States. As part of the transaction, U.S. Bank and PNC are expected to join Bank of America, BB&T, Capital One, JPMorgan Chase, and Wells Fargo as owners of Early Warning, pending completion of all applicable regulatory reviews.
In a joint prepared statement, the CEOs of Bank of America, BB&T, Capital One, JPMorgan Chase, U.S. Bank, and Wells Fargo said, Our customers want the ability to make payments to anyone, in real-time, making funds instantly available in the recipient’s bank account. To achieve this, we are combining our collective, bank-owned digital payments network (clearXchange) with our fraud, risk and authentication assets (Early Warning), to further ensure that our customers can send money, confidently, securely, and in real-time via their financial institutions. No wonder companies like Payfone (an Early Warning investee company) and Authentify (a wholly owned subsidiary), both now part of the Early Warning family along with ClearXchange, are looking forward to a collaborative disruption model in this space, where new technologies become innovations-at-scale by partnering with large FI incumbents.
Another example of the banking industry’s attempt to compete with smaller innovative players is Chase launching Chase Pay. At Money20/20 , America’s largest bank by assets, JPMorgan Chase & Co. announced the launch of its own digital wallet called Chase Pay. It is scheduled for launch during mid-2016. MCX — which includes retailers such as Walmart, Target, Best Buy and Shell—will be Chase Pay’s premier partner. Chase Pay will be entering the race with Apple Pay, Android Pay and Samsung Pay. Chase Pay is stated to provide a better payments experience to millions of customers, processing 34 million transactions each day on average with Chase banking.
Since Chase is partnering with Merchant Customer Exchange (MCX), Chase Pay will be progressively rolled out to merchants who represent 100,000 retail locations in the US and are already accepting payments via MCX’s express checkout app, CurrentC.
Even though it is hard to say if Chase Pay will succeed or it's doomed to fail, the launch of a bank-owned digital wallet is Chase’s attempt to shrink down FinTech control over consumer experiences and move away from being a dumb pipe. By providing more and more experiences in-house, Chase is trying to regain the power and control over the financials of the consumers.
Trend 4. Omni-channel experience innovation
Recently we covered the news of Facebook incorporating a Buy button for Facebook shopping. The ultimate purpose of the button is to create an integrated shopping experience that is seamless and almost effortless. Facebook has an advantage of being a massive network with the number of active users surpassing 1 billion. It is a huge pool of potential customers for retailers, to whom Facebook is now giving retailers targeted and contextual access.
The way companies used to think about and approach retail marketing is changing. In order to succeed, companies need to reach their potential customers wherever they are and on any device - with the mobile revolution, it is particularly important to be effective through the mobile channel.
Therefore, the retail industry is undergoing a dramatic shift: In-store foot traffic is down, online research is up and smartphones are becoming increasingly important to the consumer's in-store shopping journey. This change in consumer behavior shifting towards mobile is creating new realities for retailers to operate in.
At Money20/20, the LTP team caught up with SmartGift, a leading provider of SKU-level gift card technology for e-commerce, loyalty & rewards providers. Monika Kochhar, Chief Executive Officer & Co-founder of SmartGift shared with Aditya her insights on the new challenges in omni-channel commerce:
"The consumer's purchase path now is a series of knowledge seeking actions at various touch points. It's crucial to understand their cross device behavior and enable them to engage in shopping or gifting without losing the personal and authentic touch."
By integrating checkout flows and following customers to channels that are more convenient for them, companies like SmartGift are improving shoppers’ experiences. Retailers can benefit from integrated channels as it makes shopping frictionless and increases the checkout rate, without compromising on the detailed understanding of consumers’ purchase habits that are so critical for getting them back into their stores.
Trend 5. Borderless innovation
Money20/20 demonstrated that barriers to innovation across the world are coming down. Business and technology professionals from a variety of countries taking time and resources to attend the conference and share what they have to offer to the payments industry. 75+ countries’ representatives were expected to attend Money20/20. There are various reasons international professionals feel the necessity to attend a truly global conference like Money20/20.
One of the reasons is related to the trend of innovation coming from tech professionals. Increased technological competition fosters borderless business. Since technological advancements allow companies to operate globally even while being physically located in one country, it increases competition for local companies that did not achieve that stage of technological improvement.
Another reason is the fact that technological innovation is quickly adoptable. APIs offered by FinTechs can allow businesses to jump to another level of efficiency and experience relatively easily. Innovation spreads quickly due to its technological nature.
Global recognition is also an important reason. The Money20/20 conference is a place where companies have an opportunity to share their technological achievements and innovative products with more than 1,000 CEOs, from 3,000 companies and 75 countries. The conference provides an opportunity to attract the attention of executives that are looking to mine fresh ideas and discover new business opportunities. There is no better place to go global than Money20/20 for the innovators in payments technologies.
Last but not the least is the fact, that innovative tech-focused companies now have a capability to compete with local companies globally. Being on the other side of the globe is no barrier anymore. In order to compete successfully with them, local companies have to learn and adopt the experience.
LTP CEO, Aditya Khurjekar, also one of the founders of Money20/20, summed it up in a team debrief after returning from a whirlwind couple of days in Las Vegas, It was great to see my baby all grown up! What we started 3 years ago is now an unstoppable force of innovation and dialogue at the intersection of multiple industries, globally and across the spectrum of company sizes. LTP will carry the torch forward and continue to define and inspire The New Global FinTech industry with authentic independent content every day, all year round.