Over the weekend, CBS brought FinTech to prime time during a segment of its “60 Minutes” broadcast on Sunday (May 1). The program offered an exciting and broad overview of how startups in the space are using technology to innovate the delivery of payments and financial services.
Lesley Stahl, who hosted the segment, used Stripe as an example of how FinTech is transforming payments and, in particular, how they simplify the process new merchants face when attempting to accept payments online. Stripe is often described as the online version of offline Square — solving the same problem for new merchants but for a different transacting channel.
Stripe was born out of the frustration the Collison brothers faced trying to accept payments for their coding work back in school: tons of paperwork and lots of time lost waiting for the bank to approve them. Frustrated, they described their vision for Stripe as one that would allow any startup to accept payments online “as easy and fast as posting pictures to Instagram.”
Patrick Collison then walked Stahl through the Stripe process for accepting payments online for her fictitious homemade dog food eCommerce business. In just a few minutes, with a click or two of code, Stahl was ready to accept payments.
But there were a lot of important details about what really happens when payments are accepted online that must have gotten lost on the cutting room floor.
ONLINE PAYMENTS SHOULD BE SIMPLE AND SAFE
As Ralph Dangelmaier, CEO of BlueSnap, told MPD CEO Karen Webster in a chat they had yesterday (May 2), while it’s possible to create a webpage to accept credit cards and that can, in fact, be quick and simple, there are a few important steps that "60 Minutes" glossed over.
Dangelmaier pointed out the demo presented in the broadcast didn’t give a true and accurate picture of what’s going on behind the curtain when getting a new business that wants to accept payments up and running — beginning with verifying that a merchant is a reputable business.
A key first step, Dangelmaier said, includes gathering information about the products these new businesses are selling, which is probably simple in the case of Stahl’s fictitious homemade dog food but could be much more complicated with other products.
The next step is to verify that the merchant is not transferring money illegally from a U.S.-sanctioned country and, more basically, that the merchant is, in fact, a real merchant and not a shell fronting bad actors looking to do harm.
The last step is to verify that the customer’s data will be protected. Even with a trusted merchant, such as Stahl’s dog food business, validation must be in place that consumer data is protected at all times.
It doesn’t have to take weeks to check all those boxes, but it still has to be done.
According to Dangelmaier, the last thing shoppers want to believe is that just anybody, especially criminals and terrorists, can just get online and start accepting credit card payments, which is the misimpression that was left after viewing Sunday’s segment.
ONLINE PAYMENTS MADE (TOO) SIMPLE?
The aspect of securing online payments and protecting consumers from fraud is a significant piece of the puzzle, and both Webster and Dangelmaier agreed that “60 Minutes” didn't make that at all clear.
A buyer will always want to know that their money is going to a legitimate seller, and the same goes for sellers wanting confirmation that the buyers they sell to are not actually fraudsters toting stolen card credentials.
“If you didn't need that protection, then you wouldn't need banks, and you wouldn't need the card schemes," Dangelmaier explained. “Anyone would just be able to use anything to pass money back and forth; obviously, it doesn't work like that.”
When fraud does strike, it’s the merchant's and the buyer’s banks who are held responsible — something that Dangelmaier called “buyer AND merchant beware” — and that was not mentioned during the show.
REMEMBER, WE AREN’T ALONE — MAKING THE CASE FOR BANKS
Though the “60 Minutes” take on FinTech may have led viewers to believe financial institutions risk being entirely replaced by the thousands of startups looking to revolutionize the ways in which consumers pay merchants without a bank, that really isn’t the case.
Bringing money into the picture makes the situation much more complicated. As Webster noted, the broadcast “glossed over the complexities of what it's all about to accept money online for the protection of both the buyer and the seller.” And that, when it comes to enabling payments, there really is a bank in the background, for both the shopper and the merchant.
“Banks are really doing a lot more than just lending; they're actually processing the payments on behalf of this really cool middleware that ourselves [BlueSnap] and others like Stripe have built to make it easier to get connected to the banks. The goal is to make it easier for merchants to put their products online — not eliminate banks," Dangelmaier said.
Accepting payments also becomes increasingly complicated for a business selling multiple products in various countries across multiple currencies — not to mention if they are using multiple payment types with different payment methods.
The surge of FinTech stands as concrete evidence that the business of banking is changing. For Stripe, much like others processing payments in the space, payments still have to go through a bank. Dangelmaier made it clear that banks still have a place in the payments world.
“There are a lot of questions that needed to be answered coming out of the show. Although it effectively showed how easy it is for a startup to build a website checkout page to accept payments,” Dangelmaier said, “there are many other details that need to be explained to show the full picture for a merchant.”
Stripe made something that is really, really hard — accepting payments online for new merchants — look really, really simple. But we shouldn’t forget that it’s only possible because of the existing payments and financial services ecosystem that makes innovation on top of it to be kept safe and secure.
“The power of software and innovation is changing payments and commerce before our very eyes,” added Dangelmaier. “It was fun watching FinTech find its place in prime time.”