Global Card Issuing and Processing Engine

It’s probably safe to assume a significant part of your business strategy is digital. It makes sense because your customers are increasingly online. And today consumers expect seamless digital experiences when purchasing goods or services.

As we look to the future, businesses which are able to offer personalised experiences will prosper over those which do not.

Think back (if you’re old enough) to life in the 1990s.

Your local grocer would know which vegetables you tended to buy; your pharmacist would be aware of the prescriptions you took; and you’d likely have a personal relationship with your local bank manager. If you didn’t bring your wallet to a local store, you might have been able to add it to the tab to be settled at a later date.

It wasn’t all rosy, though. Customer service was often slow. There was no such thing as the “always-on” or “as-a-service” economy. Instead, you would be at the mercy of your local shops’ closing times. Consumer choice was far more restricted. And oftentimes, if you didn’t have cash in your wallet to pay, too bad.

The internet revolutionised – or more accurately, digitised – all this.

Suddenly you could order amenities online. Not only could you purchase goods and services beyond your immediate locality, but the entire world was at your doorstep. You could seek out and communicate with likeminded people with the same niche interests as yourself. And, when you were ready to make a purchase, you could pay digitally.

Online retail was booming. And at the heart of its success were digital payments.

The rise of Fintech 1.0

There were three drivers which propelled the first wave of fintech, or Fintech 1.0.

The first was the rise of the internet. Constantly improving speeds and widespread access meant hundreds of millions of consumers were suddenly able to access digital services.

The second was the rise of the smartphone. This hardware transformed consumer behaviour beyond recognition. Apps and other software products providing significant upfront value made smartphones indispensable – just think of Google Maps, Spotify or Uber.

The third driver which paved the way for fintech providers’ success was the financial crisis in 2008. Not only did this bring the traditional banking system to the brink of collapse, but consumers were far less trusting of the big banks thereafter.

A new wave of start-ups quickly emerged, taking advantage of a new regulatory and consumer landscape.

This new breed of financial services providers was not tied down by legacy infrastructures and, with smaller teams and flexible IT infrastructures, they were more agile. And this allowed them to easily circumnavigate the new regulatory and compliance requirements that were introduced in the wake of the financial downturn.

Fintech providers sought to solve problems the banks could not. Or at least to do what the banks do, but better. Huge levels of investment poured into the fintech industry as start-ups took business away from the banks.

But the first wave of fintech, of Fintech 1.0, had its limitations. Service providers have only tended to disrupt at the edges of banking. Sure, they competed with the banks, but they didn’t change the core infrastructure of banking. The incumbents haven’t fallen. Far from it.

Many big banks have updated their offerings by introducing new digital services. Others have created incubator programmes, supporting ambitious fintech start-ups. And this collaboration will be keen as we move towards Fintech 2.0.

Financial capability is becoming a native component of the stack

Some of Fintech 1.0’s limitations can be put down to time and experience. While new financial services entrants have been nimbler than the big banks, they have struggled to win the confidence of consumers.

Years of data, insight and a deep understanding of the industry is wrapped into the traditional banking system and, in turn, has been woven into the fabric of banks’ financial products.

Today the tide is turning.

Regulation is there for a reason. And recent policy shifts specifically targeting fintech groups has not only favoured transparency and collaboration but has also offered an opportunity for new players who adhere to the rules to enhance consumer confidence and solidify their legitimacy.

Introduced by the European Banking Authority, the PDS2 legislation was intended to boost competition by forcing banks to share the data of customers who authorise it with third parties. And this led to the rise of open banking.

The result has been an explosion of innovation.

Open banking, which refers to the use of open APIs that enable third-party developers to build applications and services around the financial institutions, is a game-changer. It has led to the rise of an entire ecosystem of regulated apps which share transaction data to improve customer experiences and empower consumers with new financial products.

The emergence of new technologies is also tipping the competitive landscape in favour of the fintech community. Cloud computing has allowed them to scale their services while significantly cutting costs to the consumer. Distributed ledgers, frictionless payments and connected devices are likely to drive significant change to the banking industry, this time at its very core.

Fintech 2.0 will see deeper collaboration between financial institutions, the fintech ecosystem and other third-parties.

Together, they’ll bring a seamless set of services which are far more personalised to the end user, right across the entire value chain. The opportunities for improving customer experiences and opening new channels of revenues will be considerable for digitally oriented businesses.

Grow your business with open banking

Open banking is paving the way for banking-as-a-service and embedded finance. And the opportunity for online companies is enormous.

Instead of bolting on impersonal white-labelled financial services with brokers taking most of the margin, banking-as-a-service and embedded finance allow brands to take ownership of the process themselves, essentially transforming your company into a financial services provider.

As an example, the disruptive car manufacturer, Tesla offers its customers an insurance policy which comes with the car. And that’s a win-win. Tesla has created a new source of revenue, while the customer is more satisfied because he or she has benefitted from a seamless customer experience and, with the middleman eliminated, the insurance policy is likely to cost less than it would elsewhere.

You can embed financial services into your business across a range of offerings which might include:

  1. Payments
  2. Insurance policies
  3. Card payments
  4. Card and virtual card issuing
  5. Lending

Schedule a time for a relaxed conversation about how you can create new revenue streams and seamless experiences which delight your customers without the costs, regulatory burden or time and personnel requirements.