“Turbulent” is the word Scott Johnson selects to describe the events of 2020. And as vice president and head of product at Western Union Business Solutions (WUBS), Johnson would know. His eye on business payments and FX risk management gives him a unique vantage point from which to view developments in creating new pathways for an API economy and the future of payments.
Saying that global business was “reminded with stark force of the need to be as prepared as possible for whatever lies ahead” after the collective COVID-19 experience, Johnson sees uncertainty and volatility — but it’s slowly giving way to clarity around what’s needed now.
“We don’t really know what the global markets are going to look like as we exit the pandemic, so it’s really important for businesses to do … a lot of future proofing and … make sure that [they] have redundancy and flexibility to pivot with the market as things change over the coming year, and even further,” he said.
Everything from politics to roiled financial markets “adds another layer of unpredictability to the situation,” Johnson told PYMNTS, while also pointing to the ground that’s been gained.
“Companies really had to accelerate their digital transformation journeys as everybody went home to work,” he explained. “Supply chains started to fall apart around the world. As we exit the pandemic, companies will need to work on their supply chains … they’ll need to diversify, they’ll need to continue the digitization of their work, and they’ll need to carefully manage their working capital, given that we’re probably looking at a period of uneven demand ahead.”
Flexibility is paramount in meeting those new and undefined demands, Johnson said.
APIs, Open Banking Create ‘Huge Opportunities’
Pointing to Oxford Economics’ Global Services Trade Revolution Report, commissioned by WU, Johnson said, “We projected the value of international trade and services, as opposed to the trade in goods, will increase from around $6 trillion in 2019 to $8 trillion by 2025.”
That’s a lot of market potential. However, continuing changes in how we work, shop and pay require fundamental upgrades and enhancements to existing payments infrastructure.
“We hypothesize that this digital transformation will enable the financial services industry to increase in value by almost a third by 2025,” Johnson said. That equates to what he called “huge opportunities” for digital payment players “focused on providing businesses with the flexibility they need to pivot with the market in the coming years and to focus on providing best-in-class customer experiences.”
That flexibility will increasingly come in the form of APIs (application programming interfaces) and open banking.
Johnson said, “As the world becomes more digital, it also becomes more international, so it becomes … critical for businesses … to enable customers to pay for things regardless of where the customer happens to be, or to get paid … regardless of where the supplier may be.”
With pilots in Europe, India and elsewhere, amid open banking and investment in APIs by banks and financial institutions (FIs), the dawning data economy “drives a lot of really interesting and innovative ideas and potential growth for the financial services and adjacent industries,” Johnson told PYMNTS. “As more and more companies embrace this digital transformation, APIs become a … critical way to glue together different services to ultimately provide a great … experience to customers, wherever they may be around the world.”
To illustrate, he used the example of WU Mass Payments, a processing platform for high-volume domestic and FX transactions. Its API batching, reconciliation, processing and other services let “our partners integrate a payment solution … into their customer experience that allows their customers to pay for things in 142 currencies in pretty much every country on Earth.”
Unified platform functionality from a trusted name in global payments also means “new levels of automation,” Johnson said. “It helps companies streamline their traditional accounting processes … while ensuring compliance and strong FX risk management strategies without having to hire teams and do a ton of work.” He added that several Mass Pay partners are having “great success” using these APIs to ensure that their employees are reimbursed for travel, and that vendor invoices are “paid efficiently without having to leave their application.”
Achieving And Delivering ‘The Nirvana State’ Of Digital Experience
Super-hot tech coming online is poised to take API payments to the next level. As companies begin working with real-time payments (RTP), artificial intelligence (AI) and 5G speeds, a new world of financial experiences quickly starts coming into view.
“It’s a really interesting time in the payments industry,” Johnson said. “We’ve seen a ton of investment in digital payments infrastructure, the emergence of … real-time payment systems that are actually real-time. That’s enabling a lot of innovation and … will continue to enable innovation. The payments are clearing faster, they’re settling faster, they’re happening around the clock 24/7 and in some countries — and that’s driving a lot of business process change.”
Beyond process change, Johnson said APIs are a critical enabler as payments “become more and more embedded in the business processes they serve, rather than acting as a standalone business process. That makes it easier to initiate payments, easier for end customers, and takes us steps closer to that invisible payment experience that we see with some consumer products.” Johnson calls that “the Nirvana state — the end goal many of us are pushing for.”
Noting that many new RTP schemes provide access to better data than older systems, he said the use of data itself is undergoing major change that is creating new efficiencies.
“These new real-time payment schemes are kind of what we’ve always wanted real-time gross settlement to be. I think 2021 will be a big year for bringing products that live on top of these real-time payment schemes to market. Ultimately, this is about good customer service,” Johnson said, adding that “an easy experience is a good experience for customers. By using APIs and new, real-time payments infrastructures, companies can build much easier payment experiences for their customers,” while also raising levels of engagement and something harder to measure: happiness.
Harmonic Convergence Of AI, 5G For The Ultimate CX
While APIs are well understood, Johnson said, “I think we’re still at the beginning of our journey with artificial intelligence and machine learning.” Basic use cases like reconciliation and bot-based investment are only the start. “As we get access to richer sets of data, we can continue to layer AI … on top of our infrastructure to provide customers with better insight and help them make better decisions about how to run their business.”
Conceding that “AI would have been really difficult to manage when we were all still in data centers and had to buy gear,” Johnson said cloud-based systems are giving AI and ML the medium in which to perform new financial feats of legerdemain.
“With cloud and with autoscaling, [it’s] a lot easier for smaller companies to start to explore AI without having to make really big upfront investments,” he said. “As we enable smaller companies to explore these things, we’ll see an explosion of innovation coming out of that.”
Also watch for fireworks around 5G. Johnson is one of legions in the industry who feel that 5G throughput “has the potential to really democratize access to markets. There are certain activities, like interacting with AI models in the cloud, that require pretty fast connectivity. With 5G, all of a sudden, everywhere on Earth, [all markets] could have access to that sort of connectivity.”
Johnson also noted that “obviously, there’s the payments play here. We don’t know where the future hotspots will be for commerce. It’s really important to make sure there’s access to those markets, that people can get money in and out, so that as companies, we can participate in these innovations, too.”
It’s all very technical and complex, of course, but Johnson says humans are calling the shots.
“I think one constant we will see [in the coming years] is that customers will always demand more, as they should,” he predicted. “They should demand better experiences and better service. That means we we have to be customer-centric, [just as] we have to be relentlessly focused on solving problems for our customers, thinking about the fundamentals, understanding the issues our customers are trying to address, and then building solutions that help them solve those problems.”
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