Where is fintech heading and how can partnerships drive deeper innovation? This recent webinar, featuring experts from Discover® Global Network and 451 Research, outlined the key business priorities facing fintechs today and provided unique perspectives on the digital payments space.
In its second annual Fintech State of the Union study, Discover® Global Network identifies emerging trends shaping the fintech ecosystem, including connected commerce, open banking, embedded finance and real-time payments.
In a recent webinar, Jordan McKee, director of payments research and advisory at 451 Research, a part of S&P Global Market Intelligence, explored the study’s key findings by putting a spotlight on digital payment usage and adoption worldwide. One of the most comprehensive of its kind, the survey included responses from more than 4000 consumers and 850 fintech vendors, located in North America, Europe and Asia.
“The goal of this study was to better understand how consumers are leveraging different types of digital payments products and fintech services, their preferences in terms of providers who they want to use these capabilities from, and their interest in different types of emerging use cases, such as connected commerce and open banking,” said McKee.
“The objective was to also gain a view into the challenges that are facing fintech vendors, such as: Where do they need support within their organisations? How are they thinking about partnering with incumbents in the payments ecosystem. And what is their interest in pursuing different types of emerging use?”
Three clear takeaways from the study emerged, according to McKee.
- Consumers are gravitating towards digital payments to streamline their digital journeys. As more of their interactions are going digital, they’re looking for trusted experiences and experiences that remove friction and create different types of value.
- Fintechs want partners to help them deliver and consume different types of embedded financial experiences. Fintech is becoming embedded in every company, and fintech vendors need partners to drive that opportunity forward.
- At the heart of success for all parties is collaboration, security and user experience.
Consumers want choice
Consumers are gravitating to a wide variety of payment methods with more than half of consumers globally using digital wallets over the past 90 days.
Twenty-nine per cent use buy now pay later, while 40 per cent use a P2P payment service. Two-thirds of consumers (66 per cent) are interested in paying automatically for purchases by walking out of the store without interacting with a point-of-sale, and 58 per cent are interested in having connected devices automatically make purchases on their behalf.
Fintechs want to partner
A consistent message throughout the webinar was the fintechs’ “appetite to partner”, deemed more important than ever given the current macroeconomic environment.
“Ninety-eight per cent of fintechs identified areas where they believe their business could benefit from the support of a partner,” revealed McKee. “There really isn’t an ‘us versus them mentality’ that we so often see painted around this space. There’s a recognition for the value of partners.”
The research also showed that fintechs value the way partnerships provide access to customers, access to capital, and access to marketing support.
“The focus these days is about customer experience and the customer journey, and how a financial product supports this”, said Tribh Grewal, director, business development at Discover Financial Services. “Not everybody can do everything themselves, and this is where partnerships become very important.
“Learning has to be both ways, we learn from fintechs and the trends shown here. That’s where networks can help fintechs not only with access to the wider network, operating rules, regulatory compliance but also investment for growth, incentivisation and launch support.”
There’s also a clear emphasis on technology-centric partnerships, including core infrastructure development, or provision of core technologies that do not make sense to build in-house.
Benefits of collaboration
The major adoption drivers for digital payment services is “very much aligned to a Maslow’s hierarchy of needs”, McKee said, referring to the need for security, ease of use, speed, convenience and acceptance.
“What we’ve seen in the survey here is that it really puts in place this foundation for our industry to go deeper into adding even more value, and as consumers gain comfort with using basic digital payment capabilities like a wallet or a peer-to-peer payment app, they become more primed to adopt a range of different emerging use cases,” said McKee.
Overall findings: fintechs and networks moving forward
Central to the discussion was the fact that fintechs are looking for partners that have a commitment to partnership. At the same time, the participants agreed, payment networks, such as Discover, are wanting to work with fintechs that truly crave a ‘win-win relationship’, where there are commercial opportunities that benefit both organisations.
“We are a global card network”, observed Joanna Hanner, director of corporate strategy at Discover Financial Services, “but we are evolving as a digital bank and offering more digital banking solutions to customers and that unique business model makes us a really exciting company for fintechs to partner with.”
“Indeed, given the evolution of the market, no one party these days has all the answers,” observed Greg Rains, director of emerging products and solutions at Discover Financial Services.
“From a network side, we obviously play a central role,” said Rains. “We’re a connector, a facilitator and we also have a lot of data flowing through the network. Yet from a fintech perspective, there’s that specialisation. Fintechs are focused on solving a particular consumer pain point and can have a really deep understanding of that pain point.”
He continued: “If you take those things together – that deep understanding of the consumer issue with the macro view and the data products and services that a network, such as Discover Global Network has – then users stand to benefit.”