While the depth and breadth of the FinTech revolution are no surprise to those of us with a front row seat to the disruption of the traditional banking landscape, CBS’ “60 Minutes” took the revolution mainstream on Sunday (May 1).
The program took a look into the young entrepreneurs, or “FinTechies” as the reporter called them, behind API payments company Stripe.
Founded by brothers Patrick and John Collison, the concept for Stripe came about after the duo experienced what they described as a “difficult and unnecessarily time-consuming” process for a brand new business to go through banks in order to set up a website and receive payments.
“In a world where people can send a Facebook message or upload an Instagram photo and have it available to anyone, anywhere in the world like that,” Patrick Collison explained, “I think that the fact that that doesn’t work for money is something that seems increasingly, honestly, unacceptable to people.”
The two brothers quit college, at Harvard and MIT, to begin Stripe, a startup created with the goal to “make money as easy to send as email, for everyone, anywhere, on any device,” Lesley Stahl, the CBS reporter who conducted the interview, explained.
To see Stripe in action and exemplify the platform’s ability to allow new companies to avoid the paperwork and “bureaucracy” found at many traditional financial institutions in opening a merchant account, Patrick Collison walked Stahl through how to set up the payment system for her fictitious homemade dog food company via Stripe.
Five minutes and a few clicks later, her new company could receive payments online instantly.
“It doesn’t need to take any longer. This is how it should work,” Collison said.
“We want to free businesses from just selling via credit cards to people who hold bank accounts and instead enable people to purchase online, no matter what it is that they use — bank account or no,” John Collison added.
John Collison told Stahl that much of the innovation in products and services within the financial landscape that has come along in the past decade was not created by banks.
Patrick Collison said banks must ask themselves whether they can innovate and provide the necessary services their customers want — because, if not, the job “may be taken by someone new.”
But Stahl pointed out there is one core functionality of banks that FinTech startups are not challenging — deposits.
Many of these startups themselves send the money they handle to FDIC-insured financial institutions, because there still has to be a place to keep money.
“I think there will always be a need for somewhere to store your money, to have it sit. For all their flaws, [banks] have a lot of experience at being banks,” John Collison noted.
Stahl didn’t press the Stripe founders on the fraud and risk associated with onboarding new merchant accounts and how they manage that risk on behalf of the new businesses with unproven track records that they onboard. The Collison brothers also didn’t elaborate on the details of how their platform works and the role that banks play in enabling their services.