Dan Perlin, Managing Director – Payments, Processors and IT Services, gives his top five takeaways from our third annual FinTech Conference in New York City.
- Still a lot of meat left on that payment bone.
Although most of the market is focused on the newest technology in payments (integrated payments, mobile, independent software vendor (ISV) partnerships, etc.) we heard from several large private merchant acquirers that the legacy payment channel still has significant room for growth. This growth includes legacy independent sales organizations (ISOs) shifting to the ISV channel, the bank referral channel remaining robust, and more meaningful small and mid-sized M&A opening up as large processors are focused on bigger and bigger deals.
- Regulation is still very present, but more focused on Europe in the near term.
Revised Payment Service Directive (PSD2), Open Banking, and the General Data Protection Regulation (GDPR) were all important themes throughout the day. One of our keynote speakers noted that achieving compliance is a competitive strength (as FinTechs and broader technology firms do not want to deal with the full extent), while Open Banking harmonized rules and leveled the playing field. Regulation also remains one of the biggest gating factors to widespread adoption for crypto assets and blockchain, although there are some early signs from the SEC that suggest this could be improving.
- Payments innovation has caught up with technological innovation to make B2B a reality.
After many years of underachieving it’s potential, we believe the combination of cloud-based implementations, faster payments, and increased collaboration with channel partners are beginning to drive growth in business-to-business (B2B) payments. Private companies in this space noted that B2B payments are less about the payment itself and more about the exchange of information.
- Blockchain is real but the time horizons vary.
When attempting to distinguish whether blockchain/Distributed Ledger Technology (DLT) is real or a fantasy, commentary from a panel, including two internal RBC experts, noted that it is not an application but rather a network. In other words, investors should judge blockchain as less about the solution itself, though important, and more about whether it connects distributed parties, including those within a company, that need to share information in a more cost efficient manner. Finally, the panel noted that the technology is still very early in its evolution; therefore, success of projects varies by the time horizon with practical use cases requiring many years to reach fruition.
- The value of payments has shifted from back-end processing to the front-end software.
We heard about the shifting focus of companies toward software, a payments panel highlighted a shift in merchant acquiring focus to the ISV channel, and discussion pointing out the importance of focusing on creating value at the front end of the payment to remove friction, drive engagement, and provide insight to both the consumer and merchant.
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