PAYTECH FOCUS: CATALYSTS FOR CHANGE Ratings war: Streaming services changed the movies; paytech promises to do the same for banking
Could PSPs be about to follow the likes of Netflix, offering customers an experience they don’t even know they need yet? We ask Workato’s Jonny Gaffney and Neil Drennan from Currencycloud By most metrics it’s clear that payments are going through something of a revolution. The combination of ever-improving Cloud technology and a consumer base increasingly demanding speed and ease of use, means that how we interact with our finances is likely to undergo almost limitless change. Being ‘nimble’, ‘agile’ and ‘fleet of foot’, seem to be the prerequisites for surviving, or indeed thriving, in a changing landscape. That’s why we sought the perspective of two people front and centre of this financial ‘revolution’. Jonny Gaffney from Workato, an integration and workflow automation platform, and Neil Drennan, chief technology officer at international payments solution provider Currencycloud, share their expert views on how the payments sector, and financial services generally, are likely to adapt and transform in the coming months and years. THE PAYTECH MAGAZINE: We’ve seen the rise and rise of challenger banks, which sell themselves on quicker and ffnews.com
more efficient payments. What opportunities and obstacles will these guys encounter in the future? JONNY GAFFNEY: First and foremost, consumer expectations have changed so drastically, over the course of the last 10-to-15 years. We, as consumers, really want information in our hands immediately, we want things to happen straightaway, we need speed, we need agility. That’s part of the reason why consumers are moving from some of the more traditional high street banks to these digital banks. But, at the same time, they face the challenge of how to scale up when they are growing so rapidly. For example, is their technology really capable of scaling with them? I personally think they are well-placed, typically, because of the mindset they’ve adopted in creating their organisations. Critical to scaling up is maintaining the personalised customer experience, like when you contact a customer service agent and they immediately have all of your customer information at their fingertips; they can talk to you in a tailored, non-robotic way. Customers now want and expect that.
NEIL DRENNAN: There are, indeed, opportunities but also obstacles. Challenger banks run at a fundamentally lower operating cost than the incumbents. So, they’ve got the advantage of being nimble, agile, working with new technologies and generally being fast, in terms of the products they provide to the market. Their big challenge is that it’s capital intensive to be able to acquire customers and entice people to move away from the incumbent banks that they’ve typically been with for a very long period of time. At the other end of the spectrum, the incumbents have an infrastructure that is extremely costly to run. If you look at, say, JP Morgan Chase, they spend more than $10billion a year on their technology operations – it’s the single biggest cost line. So, you’ve got a situation where incumbents are having to really address their cost base, while challengers must ensure they’ve got enough capital to entice customers away from the incumbent banks. It will be fascinating to see who wins out, in the middle ground between those two ends of the spectrum. Issue 11 | ThePaytechMagazine
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