New payment CEOs taking the spotlight for 2024

January 5, 2024 10:42 AM

For the people who recently took the top job at their payments company, there's a tough juggling act in store, including navigating an uncertain economic and regulatory environment, while figuring out how revolutionary advancements in technology fit their firms' goals.

These leaders will have major decisions to make on technology trends such as generative AI. While gen AI burst onto the technology scene in 2023, 2024 will be a "year of implementation," according to Shannon Johnston, CIO of Global Payments, in an earlier interview.

"They will have to determine how to respond to the first wave of generative AI," said Alenka Grealish, a lead researcher at Celent. "First, should we be leaders or followers? Second, if you are a leader, what areas and resources are needed?"

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Beyond technology, CEOs will need to spot opportunities in cryptocurrency and blockchain, and seek ways to compete for a share of payment flows for cross-border transactions, a potential loosening of app store payment policies and the continued need to diversify business models beyond traditional payment acceptance.

Here are some high-profile payment executives who became CEO in the past year, and the distinct challenges they face at their new firms.

PayPal

Alex Chriss, PayPal

Alex Chriss has been CEO of PayPal for only about three months, but that's enough time for him to make a quick assessment: The company needs to change its strategy, and get leaner.

By Chriss' own view, which he expressed during the firm's more recent earnings call, PayPal's "cost base is too high … and the company's focus has not been clear."

PayPal recently sold the logistics company Happy Returns to UPS; Chriss said that business had strayed too far from PayPal's focus as a payments company. There may be similar adjustments ahead, as PayPal attempts to build momentum in 2024 after a steep rise and fall in its stock price during the past two years.

It also has plenty of competition, including other payment technology firms such as Stripe and Block, other fintechs and more traditional payment and bank technology companies such as FIS and Fiserv.

PayPal is betting on AI's potential to cut costs, and could use generative AI across all parts of its business, including customer support, engineering, compliance, accounting and other tasks.

"We can use generative AI in a responsible way to bring consumers and merchants together," Chriss told analysts during PayPal's earnings call.

PayPal launched its own stablecoin in late 2024. PayPal's stablecoin got off to a relatively slow start, but picked up traction toward the end of the year.

PayPal's stablecoin is one of the first to come from outside of the cryptocurrency industry since the failure of the Facebook-affiliated Diem, making the new coin a high-profile digital asset project that, if successful, could lead other payment companies to jump into the market.

Ryan McInerney, Visa

As Visa's new CEO, Ryan McInerney has stepped right into the most controversial and high-profile issues impacting the payments industry.

Just three months into the job, analysts grilled McInerney about the impact of FedNow's real-time payment network on similar products such as Visa Direct. McInerney countered that nearly a dozen real-time payment networks already use Visa Direct, shrugging off the potential threat of a U.S. government-backed instant settlement system.

As banks start to build specific uses for FedNow, the network is expected to grow in the coming years, requiring card networks such as Mastercard and Visa to coexist with the real-time network. Thus far McInerney has projected confidence.

"The most instructive thing to do is look around the world. The U.K. has had Faster Payments [the U.K.'s real-time system] for 15 years and we haven't seen much, if any, impact on our U.K. debit volume," McInerney said during an earnings call. "And the U.K. is a growing market for Visa Direct."

One early response to FedNow that's come under McInerney's watch is RTP Prevent, a Visa product that generates a risk score based on deep-learning AI models, enabling banks to decide whether to approve a transaction at the point of payment.

McInerney became Visa's CEO in February and has been with the card network since 2013, most recently as president. Earlier in his career, he was CEO of consumer banking at JPMorgan Chase and a principal at McKinsey. McInerney replaced Al Kelly as CEO of Visa.

In October, McInerney again found himself under analyst questioning about the potential of the Federal Reserve's enforcement of Regulation II, which requires merchants to offer a routing option besides Visa or Mastercard for online debit transactions — the rule had previously only covered in-store payments.

"I think what's notable about our business model is we've proven that we can be resilient and have a strong business in regulated interchange markets, unregulated interchange markets and in markets that have higher regulated interchange and lower regulated interchange. … We feel good about our ability to compete," McInerney told analysts during the third-quarter earnings call.

Moving into the new year, part of Visa's focus will be on a $100 million initiative to invest in generative AI startups. Visa's international reach could make these investments impactful, Javelin Strategy & Research analyst Christopher Miller said in an earlier interview. "Merely having these capabilities isn't the same thing as actually being able to leverage them," Miller said.

Michael Rhodes, Discover Financial Services

After launching in the 1980s as a U.S. credit card issuer and card-acceptance network, Discover Financial Services built a reputation for steadiness under a handful of leaders, with low C-suite turnover. But last year, a series of unusual regulatory problems and internal errors rocked Discover, and longtime chief executive officer Roger Hochschild suddenly stepped down.

Under interim CEO and board member John Owen, the Riverwoods, Illinois-based financial giant recently selected TD Bank executive Michael G. Rhodes to be the firm's next CEO and president. Rhodes will take over during the first quarter of this year, the company said. With more than a decade of experience at TD managing retail and digital banking operations — and previously running the bank's North American credit card and merchant services division — Rhodes appears to have the right credentials to lead Discover.

Rhodes' top priority will be rooting out the sloppiness that led to Discover's various missteps, including its admission last year that the firm had overcharged certain merchants for 16 years. He must also fix other systemic problems that triggered repeat consent orders from regulators around routine compliance, consumer protection and student loan servicing, while restoring internal controls to avoid future missteps.

Discover recently announced plans to unload its $10 billion student loan portfolio, and Rhodes will be the one steering the transaction to its expected conclusion in mid-2024. That deal will enable Discover to focus on building up a digital bank anchored by a cash-back debit card program, which augments its core credit-card portfolio and Discover card-acceptance network that includes Diners Club and Pulse debit.

Analysts see Rhodes as a good strategic fit for Discover because his skills overlap with the firm's products. His biggest immediate challenge will be restoring trust with investors, employees, customers and regulators while he gets the company back on a steady track.

Cameron Fowler, Early Warning Services

The bank-owned consortium Early Warning Services is on a roll after the 2017 launch of the Zelle peer-to-peer payments app, which in recent years achieved broad popularity with financial institutions, consumers and a growing number of small businesses relying on it to send funds instantly via banks' mobile apps. Under new CEO Cameron Fowler, who was appointed in October 2023, EWS is embarking on some ambitious new challenges.

Responding to years of complaints from consumers and lawmakers that EWS failed to protect users from widespread P2P scams, the firm vowed in 2022 to establish a policy to reimburse some victims of Zelle scams and so-called user-authorized fraud. Zelle began reimbursing certain scam victims last year, but details about the policy and its potential to curb abuse are still evolving.

Fowler this year will also oversee the rollout of Paze, a digital wallet for online transactions initially supported by the seven banks that own EWS: Bank of America, Capital One, JPMorgan Chase, PNC, Truist, U.S. Bank and Wells Fargo. While the consumer value proposition for Zelle was clear, thanks to demand for existing third-party P2P services like Venmo, it's less certain whether consumers will be motivated to enroll in Paze. The new service makes checkouts more streamlined and secure, but it also requires consumers to confirm each e-commerce transaction with a code sent to their phone.

Scottsdale, Arizona-based EWS must also get millions of merchants aligned with Paze to make it worthwhile for consumers. To win over prospective Paze users and reassure regulators that Zelle protects consumers, Fowler will draw on nearly 15 years of experience at BMO Financial Group, where he rose to chief strategy and operations officer at the firm's Toronto office. Previously he spent five years at London-based Barclays in various wealth, investing and private-banking roles. The former consultant also served as chair of Moneris, a payments-processing joint venture between Canadian banks.

So far, Fowler is off to a strong start, with a high-profile Zelle fraud awareness campaign featuring Hollywood star Christina Ricci going live on his watch late last year. It may call for more marketing magic to turn Paze into a household word.

Jack Dorsey, Square (and parent company Block)

When Jack Dorsey returned to the CEO chair at Square last September — while continuing as chief of parent company Block — it signaled a sea change for the payments startup. Square does many things well, but its sprawling operations lost focus in recent years, culminating in a two-day nationwide outage last fall. Shortly afterward, longtime Square chief Alyssa Henry left and Dorsey retook the wheel, vowing to restore discipline to Square and related units.

Among other things, Dorsey said he's no longer conducting employee annual reviews at Block, which will make it easier to trim the workforce by about 8% over the next year to reach a cap of 12,000 employees. Square, in particular, has been plagued by "silos and a lot of redundancy," Dorsey told analysts in November.

The biggest challenge Dorsey faces this year will be creating more cohesive and profitable connections between Square and Block's other operations. That means bringing Square and its small-business merchant services — including payment acceptance, capital loans and business-management software — closer to Block's popular Cash App peer-to-peer payments app as well as Afterpay, the buy now/pay later platform Block acquired for $29 billion in 2021. In a November letter to shareholders, Dorsey said he sees potential for these units to collectively benefit businesses using Square's platform.

Dorsey also reiterated his commitment to bitcoin, which he says is the most logical vehicle for creating a native internet currency. To that end, Dorsey is also championing a new hardware-based Bitkey wallet that Block is selling for $150 in 95 countries to facilitate self-custody of bitcoin, with tools for users to safeguard and recover their assets.

Last year, Dorsey said Block aims to achieve profitability in 2023, and investors showed enthusiasm for that goal by driving the stock up late last year. The pressure is now on Dorsey to make Block's different parts work as a more lucrative whole.

Paulette Rowe, Stax

Stax's new CEO brings plenty of international experience to the Orlando-based fintech ahead of a potential international expansion that would bring Stax and its alternative pricing model to new countries.

Stax has maintained its economic strength as numerous other fintechs have seen their valuations fall over the past two years. The firm has added staff as many other firms in financial services cut employees. That positions Stax to extend its reach to more businesses in new regions.

The fintech charges a monthly fee, which is different from most other payment companies that charge a fee for each transaction.

"It is a different mentality," Rowe said. "Usually as payment people, we're thinking about interchange and scheme fees."

Stax appointed Rowe as CEO in August. Rowe had been head of integrated e-commerce at London-based fintech Paysafe, following a series of executive roles at different firms, including seven years each at Royal Bank of Scotland and GE Capital.

At Stax, she took over for interim CEO John Kristel. As a permanent CEO, Rowe succeeds Suneera Madhani, who co-founded Stax with her brother Sal Rehmetullah after a former employer rejected Madhani's proposal for a subscription-based payment processing model.

To fuel its expansion, Stax recently acquired Atlantic-Pacific Processing Systems (APPS), a merchant acquiring company that will enable Stax to expand its focus from enabling payments and digitizing the point of sale to adding more payment processing functions and merchant products.

This will enable Stax to compete with payment fintechs such as Stripe and Block, and other payment processors. "A lot of the payments traffic is going through the big names in the payment processing industry," said Rowe in an earlier interview. "We're hoping our model and pricing strategy will provide a competitive edge."