Transcription:
Desiree Wolfe: (
Hello, everyone. As I look across the masses, I just want to congratulate you all for your commitment to customer experience and payments. And I assure you have all made the right choice.
Desiree Wolfe: (
So this session is our deep dive into shifting spending habits. This session for the last couple of years, we've seen the largest shifts in consumer spending behavior in decades, and it's more important than ever to innovate in order to capture, share of wallet. You'll hear about the dramatic shifting behaviors toward conscious consumerism. Thanks to tech innovation. This sustainable spending can also be tracked, gamified and automated, like never before. My name is Desiree Wolf and I'm senior director at Salesforce and the banking global industry insights practice. I have the pleasure of introducing our moderator for today, Daniel Wolf.
Desiree Wolfe: (
Daniel Wolf, is content director for American banker used previously the editor in chief at payment source, which has been combined within with an American banker. He was previously tech and risk management editor for American banker. He also has been American bankers editor for technology cards and payments and its technology reporter. He has a master's degree in print journalism from Boston university's college of communication and a bachelor's degree in English from SUNY Binghamton. And if you were not at the woman's in banking session earlier this morning, he has a fabulous connection to dead stuffed animals.
Daniel Wolfe: (
So that story, as if you haven't heard enough of my background is, when I first applied for this job, I didn't know anything about payments or banking, but I did have journalism experience. So I brought my favorite article, that I'd have written at the time, which was about a taxidermist in the Binghamton area who, I can talk about afterwards though. Why don't I let our panelist David Shipper and Katherine Pierce introduce themselves, David?
David Shipper: (
I'm David shipper with Aite-Novarica group, we're a research and advising firm based in Boston, Massachusetts. We focus on research related to financial services, so we have commercial banking, insurance, fraud and AML. I'm in the retail group and I focus on cards, specifically, debit - credit card rewards, those kind of topics.
Cathryn Peirce: (
Hello, I'm Cathryn Peirce, co-founder and CEO of Carbon Zero Financial. We build out the technical infrastructure by which people can more effectively vote with their dollar. So making it easier to act and transact, according to your concern for people and planet. We sell the technology to other financial institutions as a B2B climate FinTech.
Daniel Wolfe: (
We're gonna talk about the shifting spending habits. What's driving that and what's happening next? And I wanna start off with a very open ended and perhaps even unfair question, but I have warned them about this. What is the biggest change in consumer or business payments that you've seen or that you didn't expect or that you can't explain?
David Shipper: (
The biggest shift was we saw a huge shift for contactless. But a lot of that was with the cards. I really thought that contactless would really help mobile wallets and it has, but I've really been surprised that for a lot of banks spending at the point of sale with a mobile wallet is still single digit percentages. A lot of volume has really gone to the physical card and has stayed there. So I think that mobile wallet I feel has lagged a little bit compared to other contactless payments.
Cathryn Peirce: (
Mine would actually be in, something that hasn't changed. So bank rate polling shows consistent from 2017 through 2019, 30% of card holders with credit card points have never redeemed them. That is an asset they're just holding, that is losing value, that they're not exercising. And so they're sitting on money that they've theoretically earned and nonetheless do not exercise to their own benefit. That is a really interesting phenomenon and also kind of rife for opportunity and innovation in terms of credit card rewards and how we build out rewards and loyalty programs that continue to get people to spend and actually redeem that they've earned.
Daniel Wolfe: (
What can we learn from people spending particularly their loyalty habits. I remember at the start of the pandemic, there was a concern about travel cards and are they still valuable if nobody can or is willing to travel? And then, so we saw some adaptation there and I will admit I canceled my own travel card, because I didn't wanna pay the annual fee and they didn't want to waive it. So I opened it up again and used it for this trip. So my spending habits are at least getting somewhat back to normal, to the extent that my boss wants me to travel to these events. What else can you see from how people are either going back to their habits or, or what have you, in terms of how they treat loyalty products?
David Shipper: (
You wanna try, go for it?
Cathryn Peirce: (
Airlines is a fascinating case study. Airlines have really devalued points. So when we think about inflation, the extent to which you lose money If you just keep it in a savings account, can your points prove to be a depreciating asset? If all of a sudden one day airlines are saying that those miles are actually worth 30% less now. So the inability to exercise them is one thing, but also the inability to even get as much out of them after the fact that the world's opening back up. Crypto's been a fascinating case study as well. As novel things come to the table, how do people want to capitalize on them or even explore them just through loyalty and rewards. At particularly the proliferation of fintech's and new programs. If you want rewards towards gaming, you can actually use these rewards in the context of your gaming experiences, rewards in terms of the metaverse.
Cathryn Peirce: (
We're gonna continue to see new innovations in technology and new surges in demand for certain products that we will just correlate, then the reward programs to these new innovations. Now whether or not they'll stay consistent and whether or not all of these card programs can in fact survive every day there's new ones. The pandemic was a moment of reckoning for rewards programs and kind of spending where all of a sudden this does not have the same value that it did two, three years ago.
David Shipper: (
I would agree with that, rewards has had to pivot, so you mentioned travel rewards. Travel cards had to pivot and offer other redemption options that were more relevant. For summit, it actually took a long time, but I think going forward, you'll see that those pivots continue to happen. So if it's a travel card, if there's something that impacts travel or if a startup has some creative way of rewarding or offering an incentive, you'll see legacy banks and credit unions start to copy that and make changes very quickly and become more agile than they have in the past.
Daniel Wolfe: (
One of the things we had discussed previously was about just that obviously with everything that's happened in the past couple of years, it hasn't all been about us, not wanting to touch a Jeremy Cash and moving to digital payments because it's cleaner and cooler, but also there's been a lot more awareness about certain issues like climate change, social diversity, inequity, and so forth, and how people are adjusting their spending habits to support certain businesses they might not have in the past, or to maybe use their rewards in a different way that, isn't perhaps as much as about burning fuel on a jet plane. So environmental sustainability, social causes, how do financial products like payment cards, mobile wallet, loyalty allow people to participate and what are they doing to drive the evolution of these products?
David Shipper: (
Obviously there are redemption options in rewards program where you can plant a tree or you can do something else or, and you can speak better than I can, but there's ways to track your spending, right? So if you make a purchase at a gas station, something can be assigned to that transaction to tell consumers and help them track that. We'll see more of those kind of features where your purchases are translating to something on an environmental or social level that's being communicated back to you. It is kind of interesting, that those kind of features payments and especially cards can lead the way and then as those grow, they can have a bigger impact because merchants will want to kind of meet those needs and not be excluded from a transaction because consumers are getting more conscious of where they're spending.
Cathryn Peirce: (
Let's drop some numbers after George Floyd, the search results for how do I shop with black owned businesses when up 300%, when we look at every time there's a new climate report, people kind of look at what are the sustainability companies? People are concerned. People want to align their dollars with the causes they care about. We know this and things are not quickly enough. I would deposit, building infrastructure around this. People want to align their actions and transactions with their values. It's just not that easy at the moment. I'm not gonna look up every single company with whom I transact and be like, okay, well, what are their ESG ratings? And is it women owned? Is it, but if you are willing to build infrastructure around it or work with fintech's who are doing, so this is such an incredible opportunity and the future of consumerism.
Cathryn Peirce: (
Conscious consumerism is the future of consumerism. We know that sustainable goods, for example, sell 5.6 times faster than conventionally marketed goods. We know that people are willing to spend between 10 to 35% more on that, which is marketed as an eco or sustainable product than they are conventional one. So there is in fact alignment between that, which is good for your bottom line and for revenue and that, which is perceived to be good for ESG pillars. How easy are you making it for your consumers to align their transactions with their values, if you are not helping them with that, driving their behaviors and their consumption towards that, then you're probably missing out and you're probably not actually retaining them and kind of enforcing brand loyalty as effectively as you could. We are of the opinion at Carbon Zero Financial, that if you need to provide the opportunity to one, understand what your consumers care about and then quantify their ability to participate in it. How often are they shopping with black owned businesses? How often are they shopping with women owned businesses? How often are they shopping with sustainable businesses? Then help them facilitate in actually spending where they want to, this is the future. Increasingly the kind of context in which we live, people want to align how they spend their money with the causes they believe in. And there's a ton of opportunity. If you, as kind of banking partners, Cards as wish, etc., create features and products around that.
Daniel Wolfe: (
This is where I confess to being a very tote bag, motivated person when it comes to my charitable giving that as much as I may care about a cause, I usually wind up actually spending money on it. When I do see I can get a tote bag or something out of it, it's a motivating factor. So the mission is to help consumers align their spending with the causes they care about. Who is best positioned to do this? Can a traditional bank, tweak an existing long standing card product or loyalty program to accommodate this? Is this something that a more like a nimble startup is best equipped to do? Or is there a middle ground, a partnership opportunity? What do you do if you're a legacy bank?
David Shipper: (
Legacy banks are at an advantage personally because they own the customers. They have the clients and what you'll see is a lot of FinTech startup card programs like an aspiration. There's one called tree card, they issue cards made of wood. There's a lot of startups that are playing in this space, but the legacy credit unions and banks can copy that very easily. And if they start to see that these companies are growing very quickly, then partnership with a FinTech or just building it yourself, banks and credit unions, even though they're a little bit behind, they can catch up very quickly.
Cathryn Peirce: (
FinTech's are very often more aware of that, which is current and coming. So in terms of the ability to swiftly capitalize on trends and build technology around it, they do move quickly. They are a bit more scrappy with that. And as such, normally are kind of ahead that said, banks are kind of the institutions with whom most people are doing their banking, the kind of legacy banks. So I see a lot of opportunity. We are a FinTech that does B2B, where we initially were gonna launch our own card and then realized it's better to meet people where they are, let's meet them, where they're currently banking, let's meet them on the cards that already exist. So for me, it actually looks like the proliferation of more features and options on existing cards than it does entirely having to reinvent the wheel. There will continue to be a lot of collaboration between fintechs and banks, but everyone can be doing more and everyone can be essentially diversifying their tech, such that it actually appeals to kind of modern consumers and how they wanna transact.
Daniel Wolfe: (
So the wooden card, that's an interesting concept. I remember years ago at one of our events seeing a presentation about just like all the different ways that, that small rectangle of plastic could be changed or modified to make it more compelling to consumers, you can have the colored core, you can have it made of metal. You can have it, SCED, all these other ideas and, or print vertically instead of horizontally that's popular these days. But in the end it was almost always still plastic. So its just in our conversations, it was the first time I was thinking, will plastic cards be seen as something bad for the environment? The same way that receiving paper statements in the mail is seen as wasteful plastic shopping bags in New Jersey where I live, they just like did away with them a week ago. And it's a very jarring experience for me, although I'm sure, a lot of other parts of the country are used to that. But so is there a sentiment there, is there a thought that the very idea of a plastic card might be seen as a negative and in that case what do you do then?
David Shipper: (
A lot of people don't realize that PVC, what plastic cards are made out of you can't just drop that into a recycling bin and have it recycled. So PVC by itself causes issues when it comes to, you know, being eco-friendly and sustainable. Using wood to create a card or recycled plastic bank of America just announced that they'll change all of their cards to 80% recycled. US bank has done that before. BBVA in Spain has said that all of their locations, you know, they'll be issuing recycled cards. There's a lot of options out there now than there ever was before. And I do think, especially when you see a Bank of America and US bank start to talk about it, then others will follow suit and you'll start to bring more sustainable products into that card to make it feel more, like you're being more responsible.
Cathryn Peirce: (
A difference between bags and paper statements is the cadence, how frequently are you getting new ones? So paper, these plastic bags, we would have every time we went to the store, you generally don't lose your card too often, or need to replace it too often. So I don't actually think that the sustainability aspect will be the undoing of the physical card. I think instead it'll go the way of change and cash, where it just seems clunky. It seems ineffective. Like why would I carry that when I'm already carrying my watch or my phone on which I can currently pay. That will kind of go the way of just being perceived as inefficient, clunky, not kind of antiquated, and we won't be rid of it because of the sustainability aspect during that time, however, people will be trying to innovate around the very goods and materials with which they produce cards. I'm guessing we'll continue to see the metal cards, the recycled cards, etc.
Daniel Wolfe: (
There are already accounts like the apple card where the physical card is something you have to request, which is the way my checkbook is these days as well. On my way here, I did not realize until I figured I need cash for this trip. Coz I'm traveling, I need cash. I didn't realize my debit card had expired. I didn't realize that until I put it in the ATM and of course, my bank was supposed to have sent me one. We had gotten to the point where I had so infrequent need of it, that I didn't even notice that I didn't have a valid card.
Cathryn Peirce: (
I'll even say the role that businesses play this, if anyone's flown Delta recently, Delta has a new policy by which you cannot purchase anything in flight with cash or card, you have to have embedded your card into their app prior to getting on board. So they're already kind of propelling this movement towards embedded finance. We are no longer going to be doing these transactions in that capacity. It'll be interesting to see also the rate at which it's accelerated just by people no longer accepting it. There's organizations kind of sweet green in New York doesn't take cash anymore. We just want you to be tapping with your phone. No, we just want you in our app, etc.
Daniel Wolfe: (
That's actually like the pandemic really kind of flipped the switch on the script as well. Because I remember going into the pandemic, there were concerns that these businesses that don't accept cash were excluding people who might be unbanked or who just might, for whatever reason, not want to use, some traceable bank product to buy their lunch. So then all of a sudden cash became like practically radioactive people didn't want to touch it. And we kind of wared to the idea and have things like the Amazon go and another kind of contactless retail where just the very idea of any kind of payment instrument is sort of being stripped away from the model. So actually, let's pivot to that because while we were talking about a number of, ideas that were very specific to the past couple of years, in terms of just the shift to digital, social awareness, environmental issues and so forth, what do we see on the horizon? Is there anything you see either of you as driving further change, driven by the customer specifically in payments digital or otherwise?
David Shipper: (
When it's up to the customer, they're the ones that have to make a decision and if we talk about mobile wallets and people do like to use their mobile wallet. The problem is that the merchants aren't updated yet. So the contact list, so now you go to a merchant and you could pull out your phone, but then you're like, you don't accept contactless. You have to put your phone up. You have to get your card out until the merchants are 100% contactless. I think that we're going to continue seeing this kind of confusion between using your card or not using your card. We're talking about card payments, anything that's gonna replace card payments or any other type of payment. It has to be as simple as using a card.
David Shipper: (
It has to be streamlined and convenient. There are other ways to pay that maybe they're faster, they solve one of those problems, but a card is still like the simplest way to pay you. You're trained to use it, you know, that, it's going to work and you swipe it, that doesn't work. You insert your chip or you wave it. There's a lot of technology in that card. That's really going to keep it around, I think for a long time. And if you want to beat the card, you have to be more simple and you have to have really good acceptance or you'll only get a piece of the pie.
Cathryn Peirce: (
It always comes back for me voting with your dollar. I think we are seeing huge trends around wanting to bring back some dignity to the transaction, wanting to feel like these are my values. Money at its base is a mechanism by which we would express value. This is worth this much to me. And increasingly social political landscapes inform that our payment landscapes, people really feel such an urge to be expressing and voting with their dollar. So if you are facilitating with that, you can really capitalize it and can drive a lot of money to your business and to the businesses with whom consumers want to shop. But I'm interested to see, how effectively can you capitalize on these moments of when people want to employ their money based on values?
Cathryn Peirce: (
I don't think presently banks do a very effective job of that, but if you can do so you open up an entirely new relationship, and form of engagement with your consumers. Beyond which we all love data. We're working with a generation now, I can wake up and I have a sleep score, I can tell you how many footsteps I took yesterday, I can tell you how many calories were consumed. We love to learn about ourselves through data and analysis. In what capacity are you giving your consumers new insights about their own behaviors, about their own transactions, because you're giving them innovative technology. We need to be bringing that same kind of specificity customization of data of insight to their transaction experience. Just breaking down your spend by category type is not it, we need to go a bit farther. Then based on these insights, it unlocks such keen insights and awareness on this is how they like to spend money. This is with whom they want to, and you can start to drive that relationship as well. It's a lot about diversifying how you engage with consumers around their values and the social causes they wanna endorse.
Daniel Wolfe: (
This would be a good time to see if we have any questions from the audience. Hand went up right away, so, wait for a mic or go find one yourself. Here we go.
Speaker 5: (
Katherine, you talked about organizations aligning their products and features to the values of their customers. When I hear that, it sounds expensive to me, right? Everybody knows electric cars is the right thing for the planet, but it's expensive. What's your message for large financial institutions that can follow in the footsteps of BFA and others, to do what's right. What's right for the environment and for the customer, but not digging a hole for themselves in terms of making it very expensive for them.
Cathryn Peirce: (
Absolutely, this was a great time to even address the misconceptions around impact. This does not have to be philanthropy. This does not have to be charity. We can in fact, create profitable structures around this. You can align KPIs on kind of bottom line revenue with impact. So for example, take sustainability. If you are facilitating in your consumer's ability to find alternatives that are more sustainable, those goods are very often sold at a higher price point. You are helping your consumer lower their carbon impact and you're increasing the value of that consumer to your bank. It's antithetical to do good with financial services, financial services can serve people, planet and profit. At the same time, we just have to actually identify these opportunities and build around it.
Cathryn Peirce: (
The data would suggest, people are willing to spend more, if it aligns with their values, you can in fact, be commodifying the facilitation, because people are grateful to have been connected with this. What we do with carbon zero financial, we're an API, but we essentially tell you the carbon impact of your transactions study you as a consumer and then say, hey, had you switched to these brands, your carbon impact would be this much less. Broker discount to start that relationship after which you can kind of sustain that on your own. We're giving you an initial, upfront incentive to make that switch, but ultimately you're doing so because it aligns with your values and you actually like the quality of these products. Well, that consumer ultimately is gonna be spending more coz they're shopping sustainably.
Cathryn Peirce: (
The breadth of products that can be sustainable, maybe I started with apparel good and connecting you to kind of sneakers that are more ethically and kind of sustainably sourced. But as I go along this journey with you, maybe now I'm connecting you to your clean energy, your energy efficiency appliances, these various things that are in fact routine expenses or in fact, large ticket expenses that you are now driving them to. I would actually encourage people to not associate impact inherently with loss of profit or with charity or any of that. It can be profitable when designed intentionally and effectively.
David Shipper: (
I'll add to that if you think about paper statements, getting rid of paper statement is better for the environment. You can promote it as something that you're doing to be sustainable and it saves you money. There are other things like that you can be doing to cut back and promote that. We talked about recycle plastic, the recycled plastic or those kind of options might be nominally more, but just like a colored core, you would expect that to stand out in the wallet. The ICMA is the card manufacturer's association. They've made a logo for sustainable plastic, so that they call it eco friendlier. But you can promote that and get the benefit out of that. Even though you might be spending a little bit more, you can promote these things and gain benefit from them.
Cathryn Peirce: (
In the context of climate, there's nothing profitable about a planet that can't sustain human life. If we are actually thinking more long term, instead of short term maximization, it's for the long term benefit of everyone, including your profits, you want a consumer base who's healthy, who's equipped to continue at consuming your product. That means facilitating both the environmental and social wellness of that consumer.
Daniel Wolfe: (
When we are talking about the environment, I thought you were gonna start talking about your hikes.
Cathryn Peirce: (
I'm organizing a hike tomorrow morning so that we can get out of the conference room before it's too hot.
Daniel Wolfe: (
I know we're out of time, but since we had only one question, is there anybody who has like a super fast question? I don't see any hands, but then again, there's a blinding light, like right at us. So I'm sorry if I missed anybody.
Desiree Wolfe: (
I was under the light. I didn't see any hands either.
Daniel Wolfe: (
Thank you.
Desiree Wolfe: (
I just like to thank the panel. I think there was great insights. Katherine, your comment about the devaluation of rewards as assets and then how that could or create an opportunity to create an incentive to line, spend to value and provide insights. I thought that was fabulous. David, your comment about how fintech's while they have the advantage that legacy traditional banks own the relationship and easy to catch up is great. I'd like to thank you all for coming to the session. I'd like to close it out, thank you. Well done panel.