When driving innovation and taking new approaches to payments, FinTech startups can increase choice for banks, retailers and consumers. Last month, startups such as Modo helped airline customers find more ways to spend their points, while DadeSystems sought to assist banks in giving their corporate consumers more treasury marketing offerings. Here is the latest news from startup-land in September.
In the travel payments space, Modo helped an airline take a new approach to its loyalty program. The company created a widget that allows customers of the Etihad Airways loyalty program to log into their accounts as part of the FinTech Abu Dhabi Innovation Challenge.
To use the widget and redeem their points, customers log into their loyalty accounts, then use a combination of points and another form of payment. The widget allows the airline to capture how many loyalty points the consumer wants to use, and allows the consumer to enter their credit or debit card information. Through the checkout page, the widget provides a single card for that transaction, and the Etihad reservation site processes the purchase as it would for any other card.
This type of multi-tender option can cause headaches, however, as merchants are processing two different transactions and settlements. That can pose a particular challenge if consumers want, say, a refund or a change in itinerary, as a customer may no longer be able to go on a planned trip or may need to change the routing. The process for a refund, reversal or void is very clear for a credit or debit card, according to Modo CEO Bruce Parker: “It happens every day,” he said. Loyalty points, however, live in a different system.
In other words, they don’t process a reversal or redemption the same way as cards. However, Modo interprets that process, makes it interoperable and says “What does the loyalty system do?” In this case, the loyalty system cancels the redemption and returns the points if the settlement hasn’t occurred. If it has occurred, though, the process re-credits back the points. According to Parker, that illustrates the differences between loyalty points and cards in a scenario that happens every day.
When it comes to banks, DadeSystems is rethinking treasury market offerings. Historically, banks have started wholesale and retail lockbox businesses. “For a long time, that’s been a successful model,” Tom Berdan, chief marketing officer at DadeSystems, told PYMNTS in an interview. However, as payment types and payment channels have grown to become more electronic, the amount of lockbox payments is declining rapidly.
In one case, a payer may send a payment through a supplier network, such as AvidXchange. In turn, a company may receive a deposit into their bank account a couple of days later and have to pull the remittance information from the supplier site. In another case, which Berdan said is more frequent, payments will come from an accounts payable system within the payer. Most commonly, those payments are sent by automated clearing house (ACH). The remittance details, however, are typically sent separately through an email.
As an example, Company A might receive an invoice for $10,000. That company might originate an ACH transfer to pay that $10,000 transaction and send the payee an email to say the payment is on the way. In addition, the company might send the payment details in an email, PDF document or an Excel spreadsheet (if there is a large volume of payments). The customer receiving the payment, though, is left to do a lot of work: Since most systems can’t read and parse an email or an electronic file, such as a PDF or Excel spreadsheet, they have to manually post the payment.
As corporates face these kinds of challenges, FinTech firms like DadeSystems seek to provide solutions to meet their needs. Banks, in particular, can benefit from partnering with FinTech firms that can help them get access to quicker development, rather than going it alone. In addition, banks can tap into the expertise of such firms that keep an eye on the latest developments.
“We’re out in the marketplace every day dealing with corporates and seeing the new trends out there to support the changing payment landscape,” Berdan said, indicating that FinTech firms are on the front line of innovation.