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Catching Hold Of Rapidly Digitizing Consumer Bases

It's been a busy week in payments and commerce, as June kicks off and consumers around the world are ready to reemerge into the physical world. But their path back to normal still looks decidedly uncertain, as the pandemic’s future remains unknown and civil unrest throughout America acts as a headwind just as normalcy begins to make an appearance.

Of course, what “normal” means remains something of a jump ball at this point, as consumers and SMBs readjust to new habits and bigger businesses formulate new ways to reach customers. It’s a landscape that’s suddenly more complicated than it was three months ago, i2c’s Amir Wain told Karen Webster during the latest edition of This Week in Payments.

“Companies are finding solutions and traction in pockets, and payments players with global ambitions are participating in building the next generation of products or offerings that can connect all of these digitizing pieces for consumers and SMBs,” Wain said.

That theme reverberated across three big news items Wain and Webster discussed: Gojek’s big success in attracting Big Tech investments, Alibaba’s launch of credit for SMB buyers on its platform and the mounting competition between traditional banks and rising FinTechs in capturing consumer interest in a post-pandemic world.

Wain and Webster agreed that everyone wants to rule the emerging digital world, but actually being able to deliver requires a lot more than a simple, slick interface.

Everyone’s Gaga for Gojek (and ‘Super Apps’)

This week, Indonesian payments firm Gojek got a big boost in a funding round that saw participation from both PayPal and Facebook. Both U.S. tech giants are looking to boost their profiles in Southeast Asia’s financial services sector, particularly with small businesses.

And while terms of the deal have not been announced, Wain noted that the push demonstrates how in a world where commerce is rapidly becoming global, payments remain local – and they must be locally relevant to be of any meaningful use.

“I expect more changes where we will see some of these regional systems rolling up into a global infrastructure at some point,” he predicted. “This is all good news for the payments industry.”

More importantly, Wain and Webster noted, the push to add relevant local touchpoints speaks to an ongoing effort among Big Tech to build “super apps” that contain multiple interfaces that consumers regularly interact with. That beats pushing consumers across a digital journey that’s fragmented by “the need to use 18 different apps,” Wain said.

“To build that core app, though, there are two issues that need to be solved to create a scalable business,” he said. “One is acquisition and engagement, and the second part is actual product and service delivery.”

Wain said the engagement side comes in busting up those 18 discrete interactions and eliminating the need for consumers to interact individually with each provider. But the second part – product service and delivery – is complicated.

That’s an area where Wain isn’t sure the world will see a single winner emerge in the near future – but he believes the tech ecosystem will eventually evolve toward multifunctional offerings.

“I don't think it will necessarily be a single provider of a super app that provides the solution consumers and businesses are looking for,” Wain said. “But I think we will see some interesting variations and innovations in that area, focused on meeting the needs of consumers. So, I am overall positive.”

Building a Better SMB Services Ecosystem

Speaking of building the single high-utility point for the end consumer, Wain and Webster said there’s something of a B2B super-app story within this week’s announcement of a new Alibaba financing program. Alibaba announced plans to extend credit to SMB buyers on its platform, allowing those who qualify to order goods and pay for them up to 60 days after they’re shipped.

Wain noted that Alibaba’s offering is similar to a letter of credit that large and upper-tier medium firms use to set reasonable terms to manage their flow of inventory and funds. The fact that Alibaba has taken a common financial product and extended it to small and medium-sized firms seems entirely sensible given the pressure SMB buyers have been under in recent weeks, he said.

But perhaps more interesting is how the new offering fits in with Alibaba’s recent SMB add-ons, like its freight service. Wain sees that as part of a bigger play to build an entire ecosystem of service capabilities for SMBs.

“What [Alibaba is] wanting to become is a super app for the SMB,” he said. “I would expect them to add more and more of those capabilities to make the ecosystem more attractive.”

That, in turn, will require Alibaba to scale up its local partnerships to offer those capabilities “in ways that merchants can link smoothly and cleanly up with,” Wain said. After all, services must be both locally compliant and flexible enough to meet SMBs’ needs.

Moreover, beyond Alibaba’s efforts, it will be equally interesting to see what the company’s initiative might inspire for competitors, Wain noted.

Sometimes when one company seizes an opportunity, a whole slew of rivals follows and pushes things further. Wain noted that some financial institutions (FIs) might “start thinking about how they can capture some of this opportunity.”

After all, the roster of FinTech challengers that has lined up against Alibaba has gotten large, and in some cases quite advanced.

The Engine vs. the Paint: Banks Against FinTechs in the Race for Consumers 

As consumers and SMBs have gotten more digital-focused over the past three months, the competition between traditional financial services firms and challenger FinTech-backed banks with seamless digital service and slick UIs suddenly looks more formidable.

But according to Wain, the risk is that traditional banks will look at those UIs and think all they have to do is upgrade to something similar. He compared it to realizing your car needs improvements and deciding to upgrade the paint instead of putting in a new engine.

“If your car is old and you start focusing on the paint job rather than worrying about your transmission and your engine, the car may look good to your neighbors for a little bit, but it’s going to break down,” he said. “The paint is important, but that can't be my priority. There's so much focus in the financial market right now that there's a whole ecosystem of people coming up who are just focused on the UI layer and their plan to integrate that into the old legacy systems.”

However, Wain said upgrading for the digital consumer is more about “how to replace and update those ancient systems to create something that delivers actual value in the form of delivering real service enhancements that the consumer actually needs.”

Those kinds of fundamental upgrades are harder, but necessary, because the best and smartest FinTechs are already making them, Wain pointed out. They’re upgrading their “engines” so that what they offer is more than just a fancy UI paint job.

The bottom line: The future of FinTech won’t be won by what looks the best, Wain said. The systems that go the distance will actually deliver more than their competitors – and more consistently and smoothly.

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