J.P. Morgan Payments’ Georgakopoulos: Internet of Things and Embedded Finance Forge New Commerce Ecosystems

No one wakes up, grabs their phone and declares, I’m going to go omnichannel shopping today.

But here we are, three years after the pandemic took root, navigating online and in-person interactions every day.

As Takis Georgakopoulos, global head of J.P. Morgan Payments, told Karen Webster, even our in-person experiences are changing, based on how we’ve become habituated during the pandemic.

“We’re social animals,” he said. “We like to go into stores. We like to order food. We like to go to restaurants.” But nowadays, even if we go into a store, we want the brick-and-mortar experience to be as easy as it would be online. We want to be recognized, we want to skip the lines — whether buying in-store to have items shipped to the doorstep or ordering online to pick up in-store.

Major brands are shifting innovation spending from a pure online and digital experience to place much more emphasis on the integration between the digital and in-store experience. Many brands underinvested in the in-store space for years, and the experience has simply fallen behind, he noted. These brands are also finding that a digital-only approach is short-sighted, especially in the fast-moving consumer and retail sector.

This is why a seamless omnichannel set up is critical. It helps ensure a consumer can be recognized and receives customized attention whether they go to the store or switch between online, mobile and in-store. In at least some cases, leading brands replace their chief digital officer role with a chief omnichannel officer to ensure focus on the customer journey, regardless if it’s online or in-store.

Forging that seamless cross-channel navigation, Georgakopoulos explained, comes with activating commerce within every connected endpoint — the mobile devices, voice assistants, handheld POS terminals and even “smart” cars that are becoming more commonplace. Social media platforms play a critical role, too, as new commerce ecosystems evolve; consumers now use TikTok and Instagram to search and shop just as much as to connect with friends.

The Next Big Thing Is the Internet of Things — With Payments

The Internet of Things is evolving to have embedded payments in the mix, and smart devices all around us are now being required to include the ability to make payments, and make them instantly.

The secure, interconnected commerce experience, noted Georgakopoulos, needs to be underpinned by data that travels with consumers across each and every touchpoint. We’re not all that far away from the day when, as he illustrated, a vacationer in Las Vegas will travel through the casino, play the slots, go to the swimming pool, head to the restaurant, have the meal, and up to the room … navigating it all without juggling keys or wallets.

“Why do you need a wallet?” asked Georgakopoulos. “Your face is with you, your palm is with you, your wearable is with you. You are used to using all of those things. Why can’t you use them in person as well?” Biometrics can play a big role in eliminating the checkout line, voice commands have the promise of becoming among the most natural conduits of transacting.

Right now?

The continuum — of the customer journey from the store to their phone, back to the store buying, returning — well, the seamlessness, is not there.

But the roadmap is there.

As payments systems get faster — instant, and on 24/7 — and we get ever more accustomed to using smart devices in the home to keep daily life running smoothly and to pay utilities, for example, the more adept we’ll become at using biometrics and other advanced technologies.

“The technologies are maturing,” he said.

Payments tie it all together no matter where commerce is taking place. Marketplaces and platforms, for example, have to make it easy for customers to interact, to have a simple checkout experience — ideally without leaving the page they are browsing. Payment choice is essential to attracting sellers (or, say, drivers, if it’s a platform catering to gig economy workers).

Embedded finance, he mentioned, can offer merchants loans against their sales, and can help give them information about who buys from them, thus helping them adapt their own product offerings. As they reach new audiences and markets, preferred and local payments need to be top of mind.

“If you are an ecosystem or a platform player, you need to be able to do all of this,” he told Webster. “You need to do it securely, and you need to be able to handle [commerce] peaks — because the last thing you want is for your platform to go down.”

No Need to Rewire the Business

The model’s working, at least for some of the larger eCommerce players, Georgakopoulos said. But many other companies have not been able to get to this level of intuitive commerce. They don’t have the capability or infrastructure, or simply the expertise, to get there. The good news is that these firms need not “rewire” themselves.

“That’s why companies such as ours,” he said of J.P. Morgan Payments, “have stepped in, to help these companies to develop these capabilities more simply.” J.P. Morgan Payments has helped, with partners such as the FinTech Sightline, to foster the interaction layer between the consumer’s accounts and credit cards and the provider’s (take a hotel, for example) own systems so that closed-loop ecosystems begin to take shape.

The conventional wisdom may be that the FinTech landscape has been decimated beyond repair. And, indeed, investors are pulling in a bit, valuations have plummeted, and some FinTechs are scrambling for cash in the wake of the Silicon Valley Bank collapse. The companies that relied on relatively cheap capital and low interest rates — but with no focus on profitability — will have a tough time of it.

But, as he stated, J.P. Morgan Payments, moving nearly $10 trillion daily, has found a number of FinTech partners that have built out strong capabilities to help client firms (and, by extension, J.P. Morgan’s client firms) manage know your customer (KYC), anti-money laundering (AML) and other back-end functions. The partnerships enable software as a service and fraud defense as a service.

“If you do this well, and you do it at scale — and globally – this is what gives us the license to do everything else,” Georgakopoulos explained.

That “everything else” includes payments, of course. Payments acceptance is the most basic building block. But then once the money starts coming in, firms have to be able to manage payout, and to make the customer experience as frictionless as possible. No matter the payment method, whether debit, credit or buy now, pay later (BNPL), or whether face, palm or thumbprints are part of the equation, it’s imperative to make sure all the methods work, and that they’re safe and tokenized.

“Payments become an invisible kind of back-end to that whole infrastructure,” he said, “and for the consumers, they can think about what payment methods they want to use in the casino, how much money they want to spend, how long they want to spend there. And you can preset those options.”

Changing B2B — for the Better

The same trends and technologies, he said, have the potential to reshape business-to-business (B2B) transactions, where 40% of hundreds of trillions of dollars are still done by paper check. But just as the pandemic pushed consumers and companies to rethink how and where they find one another, how price discovery is done, and of course, how they transact, the industrial economy is moving online too.

We’re seeing the emergence of embedded finance in commercial settings, helping bring trade credit, net terms and other fund flows into supply chains that improve the very nature of business itself.

“We’re in a world of higher interest rates, and higher inflation and a market environment that focuses much more on profitability,” Georgakopoulos said.

“Larger companies desire to become more efficient and small companies that serve those larger companies want to be able to work with as many of those platforms as possible so that they themselves can also grow … everyone from the CFO to the CEO to the head of product, head of technology, are all there at the table,” when it comes to discussions about digitization.

APIs are gaining ground, he mentioned, but there’s a long way to go before B2B finally enters the modern age.

Looking ahead, he told Webster, there will be more room for partnerships between J.P. Morgan Payments and FinTechs. “They’re very good clients, and they also raise the bar in terms of what we need to do.” And the key word for the months and years ahead boils down to one thing: resiliency.

As commerce — retail and commercial commerce alike — moves between the digital and physical realms, “you need to offer value,” Georgakopoulos noted. “And, increasingly, the value is coming through embedded finance.”