The connected economy, with a tangled web of devices, apps, payments choices and a never-ending series of interactions between consumers, merchants and financial services firms is anything but simple.
In the latest On the Agenda discussion, Capital One Head of Debit Curtis Garrett and FIS Senior Vice President and Division Executive for Business Development of Payment Solutions Melissa Jankowski said that strong digital footprints and clear value-add use cases can do much to streamline the complexity and forge new, connected ecosystems.
The discussion came against a backdrop in which PYMNTS research has shown that 92% of consumers have placed an order online in the past year, and 30% of consumers are highly connected across several daily activities, wielding multiple devices to navigate their financial and personal lives.
Read more: How Consumers Live in the Connected Economy
The connected economy is anything but static, churning across an ever-changing roster of stakeholders — spanning merchants, providers and consumers — and no shortage of payment options beyond credit and debit. These days, buy now, pay later (BNPL), cryptocurrencies and real-time payments are increasingly in the mix.
Jankowski noted that all manner of form factors and payments choices have evolved in the past several years, and consumers have more decisions than ever to make about when and how they pay — which indicates that even though technology makes it easier than ever to transact commerce overall, the connected economy is getting more complicated.
This is because of a host of considerations, she said. Who controls the transaction? Will payments move through traditional global networks, leveraging in-place rails? Is plastic involved, or will we shift entirely to virtual conduits?
Looking out a Few Years
Said Garrett: “Things are changing — and of course things will evolve, so we need to position ourselves for 2027.”
In other words, the changes are in place for the near term.
More immediately, he said, merchants and providers need to grapple with some of the challenges that are right in front of them. The explosion of BNPL has shifted risk a bit, and merchants themselves are becoming de facto underwriters.
But at the moment, said Jankowski and Garrett, BNPL does not necessarily represent a wholesale threat to traditional credit and debit trends. But there also looms the potential for regulators to step in and fundamentally alter the way the industry operates.
In the absence of interchange fees (a staple for companies including Capital One) for companies like Amazon and Google, “if you’re not being charged a fee, you’re the ‘product,’ and they find a way to monetize you as the customer,” Garrett said. More specifically, the tech giants can monetize the significant amounts of data that move between merchants and financial institutions (FIs).
Super Apps to the Rescue
Jankowski stated consumer data and platforms can work together to give rise to the super app — essentially a place where a range of far-flung apps serving different functions could be “pulled” into one place, simplifying consumer access and navigation.
The super apps, she said, provide consumers value by streamlining interactions, where an individual need not “disrupt themselves” by hunting for specific merchants’ apps or payment mechanisms.
That simplification is especially critical in an age when we might be described as “time poor,” and efficiency is highly attractive as we move funds from one place to another. Providers and merchants within those super apps must find ways to differentiate themselves to solidify their brands and make them stand out, said Garrett.
One key aspect of differentiation and value-add, said the two panelists, can come from the credentials that also protect consumers (and authenticate them) along their digital journeys.
“Multifactor authentication is necessary,” said Jankowski. “I do believe that individuals are going to start thinking about how they’re going to protect themselves but still want to have the convenience of not being disrupted as they are transacting, especially in a known environment.”
Crypto Gains Currency
No discussion about the emerging digital ecosystem would be complete without an exploration of cryptocurrencies. Jankowski remarked that cryptos still have a few wrinkles to iron out, including whether they are meant to be bought and sold, whether they have a place in mainstream commerce, and just how consumers want to interact with them. Additionally, the regulatory frameworks surrounding cryptos have yet to be determined.
“We’re still in a discovery phase,” she said.
More readily apparent, said Garrett and Jankowski, is the value-add inherent in real-time payments — when we get there. But it remains to be seen just what a real-time payments will look like, said Jankowski.
“The industry at one point was talking real time, but all it really was behind the scenes was multiple batches happening at a greater succession versus waiting 24 hours in order to do batch payments,” she said.
Jankowski and Garrett said that as connected economies take shape, we’ll view money and money movement through different prisms, as platforms become interoperable and super apps gain ground. Underpinning it all will be the drive to help consumers, merchants and service providers find each other quickly and interact with fluidity.
As Garrett remarked of consumers: “We don’t have a lot of time — and simplicity is important.”