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This Week In Payments: Vulcan Capital’s Rick Roberts Talks Overcoming Inertia, Stabilizing SMBs and Contextualizing Finance

It’s been another busy week in the world of payments and commerce as the U.S. recovery shifts into rockier territory amid an uptick in infections that has some regions shifting back toward shutdowns.

Rick Roberts, analyst and portfolio manager at Vulcan Capital, joined Karen Webster to discuss Disney’s big digital win, the latest stimulus debate and the week’s other major developments.

“I think across the board as a society, we are leaning into technology in a very big way here,” Roberts said. “What we're seeing from where we sit at Vulcan is a ‘demand pull’ forward across technologies, whether it's data science, medical science, payments, FinTech, contextual finance, digital banking — all of those services that are technology- and digital delivery-related are surging.”

But will they continue to surge? Here’s what he and Webster foresee.

Disney’s Five Years Of Streaming Progress In Nine Months

Despite a difficult second quarter, Disney’s bright spot of good news in its quarterly earnings report was a big one: its digital streaming service Disney+, soon to be a home for the release of its $200 million live-action remake of Mulan.

With 60 million subscribers signed on, Disney+ has managed to clear its five-year goals for the service within nine months of its launch. That, Webster noted, is an inarguable example of a “big digital shift.”

But the question it now raises, Webster and Roberts agreed, is about whether that will be a permanent digital shift. Roberts said from the kinds of broad demographic changes now evident in the market, his money is on things changing for quite some time, if not forever.

“When we think about just changing behavior and what [it takes] to create habits, whether that's a diet or not smoking or not drinking or anything, 30 days is really what one needs — and here we are 120 days into [the pandemic],” he said. “So, I think it's safe to assume that some of this will be habitual and repetitive and recurring.”

That isn’t to say no one is ever going to shop in a store again or go to a movie theater if offered the option. But people who’ve become accustomed to digitized living are going to consider a multichannel experience standard operating procedure when it comes to commerce.

Roberts said that’s “all very constructive for the digital evolution.” He said the shift to eCommerce made by necessity in the pandemic’s early days is now likely to become a permanent shift in the sense that consumers will expect to be able to leverage online channels.

But how retailers offer such channels will evolve as merchants move from makeshift solutions put up quickly during the pandemic to permanently integrated and expanded offerings, Roberts said. However, he added that what exactly the end product will look like and what timetable it will involve will largely depend on the timetable for a vaccine — the great known unknown in the marketplace.

The Stimulus Question

Is more stimulus funding on the ways for U.S. citizens and small- to medium-sized businesses (SMBs)? That’s the trillion-dollar question as Congress and the White House continue to debate just how much to spend on another round of federal government stimulus and who should get the money.

Roberts and Webster said that question is complicated by the fact that many U.S. consumers, faced with economic uncertainty, used previous stimulus money to pay down debts and pad their savings instead of spending it. That’s a financially responsible decision, but not one that gives the U.S. economy — and hard-hit SMBs — a boost.

Roberts said that doesn’t mean the federal government shouldn’t send individuals stimulus checks. But he said it does mean that lawmakers need to make SMBs a critical part of any future pump-priming plan.

“The businesses need the funds,” he said. “Otherwise the people won't have a job to go back to and stimulus becomes something we are doing in perpetuity. I'm in favor of supporting the individual, but I do believe that businesses need support, and people need to be able to get back to work.”

Roberts added that businesses, particularly small ones, need to do a number of things to adapt to the current environment. Leading the list: boosting their eCommerce and touchless payments capabilities in one form or another.

He said support to make those upgrades is critical, which is why “uncertainty of when and if stimulus will be extended and how much” remains so difficult for SMBs.

Digital Banking’s Growth Spurt (And Diverse Future)

Google made headlines about a year ago when it announced it was working with Stanford Federal Credit Union to offer a mobile checking account. And this week, the company made more headlines by announcing it had extended that effort to a half-dozen additional banks.

Roberts said that’s big news, both for what it means now and what it portends for the future.

“I believe this is just the tip of the iceberg in this area of contextual finance,” he said. “We're just at the beginning still — or the early innings.”

He said what’s remarkable to watch is the degree to which technology has made it possible for “anybody to be a bank now” in the sense of issuing digital credit cards, originating loans or enabling digital payment methods for consumers.

Roberts said that’s what will allow the whole concept of contextual finance to flourish. It will soon become possible to offer financial products to clients precisely at the moment of top relevance.

There’s tremendous investment underway into surfacing those financial capabilities to consumers. But Roberts added that he doesn’t believe digital banking will replace relationship banking.

“At the end of the day, there will still be a need for both relationship [banking] and digital banks,” he said. “One is completely objective, driven by numbers and algorithms. The other is driven by a human connection that informs and influences rhythm. There is a place in between — and I think that’s where we'll settle. One won't replace the other.”

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