Invest or Fall Behind

By Dan Perlin
Published July 9, 2019 | 3 min read

The pace of digital innovation in the financial industry isn’t slowing down, it’s speeding up. Dan Perlin, Managing Director - Payments, Processors and IT Services Research, RBC Capital Markets highlighted the opportunities in mobile point of sale (mPOS), merchant consolidation and what the future holds for the banking sector at RBC’s FinTech Conference 2019 in New York.

The brave new FinTech world is representative of a paradigm shift in how financial services operate, pivoting on disruptive technologies to meet changing customer expectations. The innovative new entrants have changed the financial sector for good and both traditional institutions and smaller businesses are recognizing the opportunities for consolidation, further personalizing the customer experience and the need to invest or fall behind.

In light of these changes, our fourth annual FinTech Conference was attended by over 40 private and public companies and more than 300 people. Dan Perlin, Managing Director, Payments, Processors and IT Services at RBC Capital Markets, outlined the key takeaways from a day of insightful analysis and discussion.


Takeaway 1: Merchant acquiring industry consolidation

Industry consolidation in issuers and acquirers was a major topic in most of the panels and discussions of the day. There are a number of reasons for this consolidation, including the opportunity to gain scale, the ability to provide retailers with more innovative solutions and using data as a secret weapon for personalization.

“The number one mentioned rationale for these deals is to gain scale, scale benefit as really a defence against software,” explained Dan Perlin.

“The second is really data and this is weaponizing these companies to have the combination of both issuer and acquirer, or processer, data and acquirer, to create much more personalization in real time in terms of offers as well as efforts to understand the consumer at that end.”

He added that there was no change in RBC’s thoughts on the top three deals: FIS/Worldpay, Global Payments/Total Systems and Fiserv/First Data.

Conversely, keynote speaker Angela Brown, President and CEO of Moneris, did favor global payments because this was the most payments-pure play, untethered to the flow or growth core processing asset.


Takeaway 2: Software colliding with payments

Panelists described the collision of software and payments as a very competitive area, especially for small and medium businesses. Both new entrants like Lightspeed and tech firms such as Square are siphoning share away from established players and software is what’s providing value to clients, not payments.

“Merchants are needing to move much more quickly in terms of satisfying consumer’s expectations and the way to do that is really through software, it's not effectively through payments,” said Perlin.

“Verticalization clearly matters, domain expertise is where you're creating differentiation, that’s what we heard throughout the day.”


Takeaway 3: mPOS taking share from legacy vendors

A major deal discussed was Oracle’s acquisition of MICROS, with FinTech experts and attendees referring to this as a watershed moment in payments. But in POS, the other key moment was when EMV forced an upgrade cycle, creating the opportunity to reinvent the POS moment in the customer journey.

“The innovation that's happening here is very much in the consumer front end… so we need to be paying close attention to that,” said Perlin.


Takeaway 4: Pace of play in digital innovation is accelerating

The disruption of the past few years is continuing and the pace is picking up. Customer personalization is what’s driving this trend and the major obstacle for established players is legacy technology. panelists highlighted that banks used to see a problem and throw a solution at it, but now, spending is focused on creating and enhancing a multichannel customer experience.

While innovation may take longer than expected for banks in particular, financial firms need to invest or they will fall behind.


Takeaway 5: Boundaries of security, data privacy and authentication merging

Although consumers might not always like their banks, they do trust them with their data and the future of banking is in privacy, trust, security and identity, according to the panelists.

“The key here is the value of trust and security,” said Perlin. “I think that authentication broadly, and this is in a global context, is going to be a much bigger theme as we think about the space going forward.”

Other highlights


The afternoon also saw a great discussion around InsurTech. panelists from CyberCube, Datalot, RiskGenius and Vitech discussed how the shift from on-premise to the cloud has had a profound effect on the insurance industry, enabling better sales cycles, analytics and real-time risk pricing. But they also highlighted that insurance is a unique industry, technology needs to address its business processes, rather than technology disruption coming first.


And no FinTech conference would be complete without a discussion on Blockchain. Axoni, Grayscale Investments and Lukka talked about how the lack of clarity on regulation and taxes is a big obstacle to widespread adoption. Right now, payments are like email was in the early 90s - before the browser was created. It’s going to take time before we see this technology take off.

Dan Perlin

Dan Perlin
Managing Director – Payments, Processors and IT Services Research, RBC Capital Markets

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