It’s not exactly Bogie and Bacall, or Kim and Kanye — at least not yet.
But FinTechs and financial institutions are increasingly crafting partnerships designed to help them both thrive in this global world of digital payment and commerce. The stakes are too high to turn away from at least the prospect of such relationships, not with the fierce pace of innovation punishing anyone who lags behind, and regulatory measures such as PSD2 aiming to make the world safer for FinTech-FI collaborations.
And technology — in this case, mobile point-of-sale technology — can serve as a kind of matchmaker. That was one of the main messages in a recent PYMNTS interview with David Budzevski, executive director, head of merchant acquiring products at Commonwealth Bank of Australia.
He told Karen Webster about why the payment card network is working with contactless payment company Mobeewave in Australia to bring more merchants — smaller ones — into the digital payments ecosystem, a move that can also pay dividends for cardholders. With the participation of the Commonwealth Bank of Australia — one of the largest issuers of contactless cards in that country — Mobeewave and the financial institution are involved in a mobile point-of-sale mobile point-of-sale (mPOS) effort meant to enable small businesses to easily accept contactless payments, or payments via digital wallets, instead of cash.
New Payment Flows
So what’s behind the thinking when it comes to forming such partnerships?
As Budzevski tells it, it’s about considering not only the payments form factor — or a new technology or payment method — but figuring out how to best enable all that for “new payments flows for consumers and businesses.”
More specifically, in Australia, contactless presents itself as a very promising area around which to build such partnerships and innovation. After all, he told Webster, “Australia has embraced contactless payments for a decade now, and two of three transactions are now contactless. And Commonwealth has been one of the innovation leaders.”
It used to be — at least according to common perception — that FinTechs and financial institutions were viewed almost as cats and dogs, as natural, even eternal antagonists. Asset-rich, tradition-bound FIs were supposed to look down on the scrappy, upstart, coming-to-eat-our-lunch firms that operated in the FinTech space. No more. The ideals of providing seamless, frictionless transactions, giving customers a full experience and offering merchants affordable, end-to-end point-of-sale systems that can do more than merely ring up purchases are changing that mindset.
“The transaction is the start of the experience,” Budzevski said. “How do we actually grow the experience for customers beyond just the acceptance of payments?”
But that’s not all that goes into forming robust partnerships between the different players in the digital payments world. Organizations must consider “different customers cohorts,” Budzevski said, and ask “where are the pain points?”
For small businesses in Australia, a common pain point is the cost of accepting digital payments, and the need to lease or rent costly point-of-sale equipment — not all of it designed to handle the end-to-end customer experience. There is also the recognitions that other firms — say, Square — are striving hard to provide those services and tools to merchants, smaller ones especially, and are doing pretty well as they grow and expand. Indeed, Budzevski said, “Square’s footprint in Australia is growing quite rapidly.”
How to deal with that via a successful partnership?
Eliminate the need for merchants to buy expensive POS hardware, and instead enable them to simply use mobile phones — and the tapping of their fingers — to facilitate those digital payments. That also can have benefits on the consumer side: While Australia has certainly taken to contactless payments, consumers there still seem relatively reluctant to engage in mobile contactless payments. A proper partnership, one crafted and done well, can result in significant benefits for all parties involved.
That’s not to say it’s easy, or even as nimble as all the parties might like. When working on projects that involve financial institutions, FinTechs often find themselves dealing with a whole new set of relatively heavy regulations and compliance issues, given how national and sub-national government oversee banks and credit unions.
Locating the pain points, and coming up with good technology, are only parts of the overall effort. A certain patience is also required for a successful partnership. Innovation is one thing when on the drawing board or in the lab. It’s another thing when it meets the mazes and walls of longstanding regulations — and that still holds true no matter how many steps have been taken around the world to create “sandboxes” for FinTechs to operate in.
Crafting those FI-FinTech partnerships also requires the big boys — the banks and the payment card networks — to look at FinTechs as their own creatures, and to find ways to judge them by the merits of FinTech. “You need to look at this very differently,” Budzevski told Webster. After all, so much of what FinTech firms do is experimental and even unique.