Phew! We made it through another holiday season (relatively) unscathed. Our wallets may be a bit lighter and our pants a bit tighter (depending on how many holiday treats you may or may not have gorged on), but now, we can really relax. There are just five more days until we can leave 2016 behind for good.
As 2016 becomes history, we should take special care not to forget it — lest we have to hear about being doomed to repeat it (there’s always that one person). We’d like to help you do that, PYMNTS-style, by sharing some of the insights that we served up on these pages over the last 12 months.
The Gig Economy Solidified
If there’s one thing that’s for certain, 2016 showed us that the gig economy is here to stay.
People worldwide flocked to be a part of it in 2016. In fact, 40 percent of gig workers surveyed in the PYMNTS Gig Economy Index reported receiving 40 percent or more of their income from gig economy jobs. Nearly 31 percent of the 1,000 gig employees said that they are able to support themselves through a single gig, courtesy of a marketplace that helps them string those gigs together.
“What the study reinforces is that this particular business model — gigs and giggers — is proliferating horizontally and vertically,” said Brent Warrington, CEO of Hyperwallet. “There’s so much demand for skilled labor … A lot of them are jumping jobs anyway, so this can take some of the pain out of filling out employment paperwork.”
And for the employers, the gig economy offers a break from the expenses and effort that go into onboarding and retaining full-time employees. “It gives them the ability to scale quickly and globally,” Warrington added. “Uber wouldn’t exist the way that it does today without the existence of the gig economy.”
Fraud’s Upward Flight
At the end of 2014, the average U.S. household held five mobile devices. By the start of 2016, that number had increased to about 13. Likewise, the rate of online fraud attacks on retailers has doubled, up 137 percent year over year in the first quarter of 2016.
Michael Reitblat, CEO of Forter, put it plainly: “We see more fraud attempts happening, and we see them for larger dollar amounts.”
There were 34 fraud attacks for every 1,000 transactions in the first quarter of 2016. According to the PYMNTS/Forter Global Fraud Attack Index, fraud attack rates are growing across sequential quarters, up 27 percent between the first quarter of 2016 and the fourth quarter of last year. The massive spike in fraud has its roots in several factors. One significant factor, Reitblat noted, was last year’s shift to EMV. Fraudsters likewise shifted their attention to the path of least resistance.
“You have to understand that these fraudsters are professionals,” Reitblat said. “This is how they make their living, and they are flexible. We started to see the migration with more people joining the fraudster community, if you want to call it that, from mid-year last year.”
Nearly $10.80 of every $100 in digital sales remains at risk. And at the rate things are going, this bad news may turn out to be one of those fond memories in 2016.
As Fraud Grew Across The World, So Did The Fight To Combat It
Mike Cook, CEO and founder of XOR Data Exchange, explained how his company used data aggregation to manage SMB credit risk, fight fraud and put consumers back in control of their identity.
“The problem we wanted to solve is to help people share data. We’ve built a lot of privacy enhancing technologies that allow us to let companies share information without actually flying the data around,” Cook explained.
“That data comes to us, and we match it with the data that came from a compromised company, and we score it. We do not like data breaches, so we want to really take away the ability for fraudsters to monetize that information,” he said. “Our goal is to see the line of data breaches, which continues to climb, begin to flatten in the coming years because hackers will have a tougher time making money from the data they steal.”
Thanks to Wells Fargo, financial institutions were put under a microscope in 2016.
Karen Webster said it best when she wrote: “Every complaint to the CFPB now, regardless of how unfounded or ridiculous-sounding, will be investigated. This will tie banks up while examiners search for any indication of wrongdoing. Consumers, who can’t help but read about the outright fraud committed by Wells’ employees — it’s all over the news — will wonder whether all banks and bank employees are like this — even at their own bank. They might not have really understood the ins and outs of LIBOR or the mortgage mess that cost banks billions, but they surely understand what happened at Wells. The trust in big banks that has been eroding anyway could very likely erode even further.”
“And millennials, that segment of the population that never wanted to have much to do with traditional banks, will have yet another reason to thumb their noses at them and go somewhere else. So, if banks thought that the CFPB was breathing down their necks before last week, they better buckle up. The last four years will look like a cakewalk compared to what’s coming next. And for that, they have Wells Fargo to thank.”
Brexit Fueled Fears, Uncertainty
Uncertainty and a sense of unease remained worldwide after this summer’s shocking Brexit result. Richard Steggall, CEO of Urban FT, shared his take on Brexit and how the U.K. may be positioned to make the best out of a very uncertain situation.
“Everything about this is the uncertainty — the share prices, the value of the pound and the direction that FinTech and finance companies, in general, are having to rethink in terms of how they move into Europe — all of them are.”
“My thoughts on it are that, for whoever ends up leading the U.K. through this migration — it’s now Theresa May — it’s almost unthinkable that she won’t maintain the free trade relationships that they have. U.K. is too important to the E.U. and other nations as a trading partner. It might come at a great economic cost, depending on the tariffs and other decisions that could be made, but I do believe those relationships will stay in place.”
“But, it’s going to take at least two to three years for them to unwind what they’ve currently got, and by the time they make the decision that there will not be the sort of free trade available to British companies, those British companies will have sufficient time to reorganize themselves so that they can get on with Europe.”
“I was shocked by it; I think everyone was. As it’s set in and you look at the reality of it, decisions need to be made on a pragmatic basis as opposed to an emotional or hysterical basis. Life will go on, and I don’t honestly think it’s going to affect the FinTech sector, but I do agree that it brings a large degree of uncertainty. But uncertainty tends to affect the bigger institutions rather than the small ones. For the smaller ones, there’s an opportunity, and for the bigger ones, there’s a vulnerability.”
Payments Space Grows In Complexity, Global Connectivity
“The world works in such a connected way now,” said Paul Galant, CEO of Verifone. “When Brazil goes down, the rest of South America isn’t really insulated. When terrorists strike Brussels or Turkey falls to an attempted coup, suddenly everyone with concerns over the possibility of an internal conflict thinks that can happen there.”
“We’re in the best industry in the world,” Galant said. “Payments is truly interesting, and I think payments is also evolving very rapidly but not in the sense of just paying for something. Payments is now able to inform the entire consumer experience, and I think ultimately we are going to see the world do more, not less with electronic payments. But it won’t be linear — and can’t be.”
“The scale of payments is amazing — it’s become the core infrastructure of life. Think of anything that you do that doesn’t involve payments in some measure,” said Galant. “Digital pure-plays who have no legacy can invent; legacy players have to reinvent.”
“We’re here to stay, we’re here to grow and we’re going to be more and more relevant everywhere and to everyone we serve. We see how the various payments threads are coming together across the globe into a new, interconnected and actually ubiquitous architecture that changes financial services and commerce for the better for all the players involved, and Verifone is well-positioned to be that commerce change agent.”
VantageScore Hit The Decade Mark
VantageScore President and CEO Barrett Burns said breaking out of credit scoring’s “legacy thinking, architecture and systems” was no easy feat.
But by starting with a blank slate, Burns said the company was able to recognize and test new regulated data coming into the marketplace, such as rent, utilities and telecom, that would eventually lead the company to a new scoring model that brought millions of people into the realm of being scorable borrowers.
“We found out that [rent and utility data] could indeed create more predictiveness [of creditworthy behavior]. For instance, we also challenged the history of penalizing consumers for not using credit for six months or more,” Burns explained.
VantageScore’s most recent model, VantageScore 3.0, also ignores paid collections, including medical collections. By challenging the longstanding theories surrounding what “creditworthiness” really meant, VantageScore could “broaden the window” of scorable consumers who were once considered by traditional credit scoring methods as unscorable.
“It’s thrilling to be able to offer an alternative to people to get away from predatory lenders. Even if someone doesn’t get a good score with us, it then gives the opportunity to learn how they can improve their score,” Burns explained.
First Data Hit One Year As A Public Company (Again)
First Data was first incorporated in 1971, so it is actually 45 years young. And it wasn’t even technically First Data’s first year as a publicly traded company either. From 1992 to 2007, it traded on the NYSE before being taken private by KKR.
“For us, the IPO was a rebirth, not a first birth,” said First Data CEO Frank Bisignano. “We were a very, very large company that had a lot of public filings already because all of our debt was publicly traded, so a lot of details about us were very public. Our infrastructure to be a public company was pretty darn good. Most other companies coming to the public markets have some funding, for sure, but not our assets, so we were in a very different place as a company. It was just different for us.”
“We were the world’s largest [payments processing company] when we rang the NYSE bell, and we still are. But this business today requires companies like ours to be a solutions provider. We love to partner with our clients; we love to build solutions with them that help them drive mobile and digital. And once we do, we iterate with them on those solutions so that we can continue to deliver the kind of value that helps them grow their business.”
“Now, as a public company, the thing I think about every day is how people — all kinds of people — have put their faith in us. That means that it’s important for us every day to run our firm in a manner that will make our investors pleased to have made that choice.”
PayPal Worked Toward Change
CEO Dan Schulman described his vision for a new PayPal.
“My goal is to get us laser-focused on who we are going to serve and who we are going to hyper-serve — and how,” Schulman said. “As a platform provider, we need to accept that POS is going to be a hodgepodge of technologies for a long time to come. We don’t want to bet on a single POS provider. We can’t change consumer behavior with form factors, but what we can do is change behavior by making it easy for a consumer to use their mobile devices to shop and pay using the payment method of their choice at any merchant across the world.”
“Managing and moving money should be a right for every citizen. It shouldn’t just be a privilege for the affluent. We have the opportunity to do something, and I think it’s our obligation to try and go do so … I don’t think so much of it as financial inclusion, as I do about it as financial health. A lot of people define financial inclusion as connectivity into the financial system. What I really think about is how we can use mobile phones and software to take the 2 billion people that are at the edges of the financial system and bring them into the financial system in a way that blows apart the financial paradigm that makes it expensive to be poor.”
Competition, Change Kept Us Going
“Competition is better for everyone,” said Visa CEO Charlie Scharf. “Competition drives a better outcome for the end user. It will push everyone to think differently about the value that electronic payments needs to deliver to all stakeholders, including Visa.”
Moving from a pure cash/check-based society to electronic payments is one thing, Scharf remarked. But embedding payments in a variety of commerce experiences is something very different.
Scharf’s view is that the opportunity for commerce to reach its full potential can only happen if transactions become seamless, creating the same kind of “better buying” experiences across all of the channels consumers shop that the Amazons and Alibabas of the world have created for consumers online.
“The reality is that most commerce transactions are not seamless transactions. The opportunity to make commerce more seamless — whether a consumer is buying something in a physical store or buying something on a website or a tablet or mobile device, or anything else that operates as part of the connected commerce world we are creating — is something that we get very excited about.”
Surely a lot of great insight to take into 2017, as 2016 quickly becomes part of our rearview mirrors.
Speaking of 2017, here’s hoping that yours is the best yet!