Transcription:
Nicole Casperson: (
We are possibly in the session that is truly between you and happy hour. I've moderated a lot of these, so I'm always a fan for the folks that stick it out to the end. Let's try to have a little fun, let's try to keep it a little high energy. I won't ask you to ask any questions coz I got lots of them, but if you ever want to, feel free to raise your hand at some point. To start I'm Nicole Casperson, I am the founder of WTFintech?. It is a biweekly newsletter where I cover the FinTech space. I also host a podcast called Humans of FinTech.
Nicole Casperson: (
With me are Anabel Perez, she is the CEO of NovoPayment and Josh Williams, he is the EVP and Chief Banking Officer, Head of Partnerships of Seattle Bank. So today we're gonna talk about the movement toward emerging payment technologies like real P2P transfers and Buy Now Par Later. These solutions often come at the expense of traditional payment methods like cards. In the session, we're going to explore how issuers can utilize strategic partnerships with FinTech providers to remain competitive and become leaders in an increasingly digital first payments landscape. So really exciting stuff. First let's set the stage FinTech companies and banks are often, pitted against each other. So it's like kind of fun for me that I'm sitting in the middle of two, of a FinTech and a bank, but that's really not the case. So out of all, first question for you've said it before payment FinTech companies need bank partners. Will you elaborate on this sentiment?
Anabel Perez: (
Yes, FinTech's and banks are the perfect couple. Banks has a really good authority license, they know how to comply with AML, KVC, how to report to authorities and always are capable to adapt. FinTech's are the disruptors. They're the cool guys with great ideas that needs to be put in a frame that can be executable. In our case we are a FinTech, but a FinTech enabler, so we partner with banks and other FinTech's to help them to build and deploy financial and payment use cases. We're always in the middle between the cool guys and the traditional guys. The beauty of where we are today is that we are in the intersection between traditional banking, embedded finance, and Defi, and we all need to be aware of what's happening in each of those dimensions. We all are in the comfort zone on the traditional banking. We talk about an API technology, which is been around for more than 20 years. but, thanks God that banks started to adopt it. Others understand that to build partnership we need to collaborate and the best way to interconnect and collaborate is through APIs.
Nicole Casperson: (
Josh, on your side of things, why a FinTech partnerships for community banks are so critical?
Josh Williams: (
I feel like this might be revealing too much information, but it feels a little like couples counseling, like say something nice about the banks, say something nice about the FinTech, so we're all on the same side.
Nicole Casperson: (
We're gonna get grimier later.
Josh Williams: (
In the last panel, if you were here for, it was really great in terms of first century being a great example of a small bank. Certainly in the size, US bank and Seattle bank is similarly a community bank. By convention 700 million in assets, what's been opened up and made possible by technology is it's made the possibility for customization to be so much more affordable from a technology standpoint that enables you to now go, be relevant, to use cases such that customer acquisition cost changes, cost to serve changes, and it really opens up, markets that you couldn't otherwise access when you were trying to have a one size fits all, sort of product scope. And so much of that was really requirement based on legacy tech that didn't allow you to innovate. So for these reasons, there's this huge opportunity now for, community banks that often are so much more tied into either specific, niche interest, but also just are more agile and have the flexibility and importantly, or under the Durban, limit to go out and offer value that maybe large banks either can't or just aren't relevant to. And that makes them unique partners to enable the types of innovation that Annabel rightly points out, that have started in FinTech.
Nicole Casperson: (
So now that we've gotten, over, I guess the honeymoon phase, of this talk, let's get into some of the different types of partnership models. So once you actually get into like the nitty gritty of partnering with each other, it's maybe not so, easy. So just like any relationship, right. maybe one of the biggest hurdles is that, partnerships tend to be something that happen on the back end. They're not necessarily brought in at the front end of development phase, or the strategy, right. Instead they're kind of something that you maybe do to like put out fires and to help, your business grow. But if you actually think of it on the front end, maybe that is actually beneficial. So Josh, will you talk a little bit to that and why it's so important?
Josh Williams: (
The way we tend to think about it is, one, really first, like, is it possible right when we're sitting down with, usually for us, by the way, we're dealing with FinTech's that are looking for access to that bank as a charter and capital provider, but, so one, is it possible technically, two, is it legal? Can we manage the, compliance and risk factors around that? And then three, can we all make money? Too often what we've seen is, FinTech's that have been strong on one of those, but not on all three and as a result end up with maybe an interesting product or feature, but something that either doesn't have the durability of a profitable business or worse runs into a regulatory, or consumer harm, standpoint. So what we find is really starting at the outset to make sure that all of those factors are built in by the design to the partnership, is essential for the better outcome.
Anabel Perez: (
I totally agree. When you decide to partner is because you first decide not to build or not to buy. Those three options are always there, but when you partner and you are convinced that the new detail economy is about, connecting the dots, then there's no other route that go through partnerships. Partnerships needs common goals, clear objectives and importantly, what are expected results for each party. It's all about data, building new assets over existing ones and being able to serve our common clients or to gain new territories or enter into new market segments. So if you're clear with that, the next question that you need to ask yourself and your teams is my partner share the same values, because, any partnership, there's always, asymmetries, one who is bigger than the other one is more expert in one thing than the other.
Anabel Perez: (
Culture is important because through partnership you can build more trust and trust it's all about in the digital economy. It is important to define, that you need to, as in any, match money, you need to really understand the family that you're entering, and how they will benefit from you. Through that model to learn together, not only because I'm giving you capital resources or access to whatever things is important for the partnership, but also how I'm learning through you and today it's all about, return on learning on new experiences instead of just return on revenues or assets. So it is important.
Josh Williams: (
Nicole, just add to that since we're now under the analogy. It's the tough date, but good marriage. I mean, the idea is you wanna bring all those things up front as quickly as you can, because as Anabel says, if you find somebody that just has a dramatically different tolerance on risk or regulatory compliance, it's better to know that right away and just help them find somebody else.
Anabel Perez: (
I always recommend, if you are in your bank, you are starting a new, partnership model, you wanna open the doors for disruptors, you need to establish a policy. So you can really benefit from that learning process. So you segment the type of partners you want to build, because I can help you to craft your product strategy, can help you to reduce cost, can help you to improve the vision of your organization. More importantly, can help to bring a different perspective, because we all experience blind spot when we launch programs.
Nicole Casperson: (
You mentioned the values aspect, because I do think that's something that just kind of gets a little bit lost in our space. We're very focused on ROI. We're very focused on, how do I make the most cost effective decision in a partnership, which kind of lends itself back to the match or anything, but to actually like lay out your values on the table. I think, people just don't always make that a priority. So when it comes to kind of deciding what partnership makes sense, like, how do you maybe incorporate all of the things that you just said into the different type of partnership options and kind of make that progress actually work and makes sense and it feel natural and not like hard.
Anabel Perez: (
In our own experience, we love to establish technical partnerships. So we can compliment assets, of course, commercial partnership, because that bring you knowledge of the pain points that need to resolve. If everything goes well those partnership can turn also into strategic partners, that can help you to build greater things in our own experience. Back in late 2016, we started a partnership with visa and we just, acting as a tech enabler I'm betting visa APIs. So, thanks to the successful technical partnership, we move into commercial and we are servicing today common clients, and then visa decided to invest in our company. That gave us approval concept of the type of partnership that we love to continue to build. At the end it was not, we were not looking for capital, but, it was a natural consequence, in the relationship. So, not all efforts will be alike and similar. of course there's a huge asymmetries, but, if, on your side, you are willing to give and to learn, it's a good approach for successful partnerships.
Nicole Casperson: (
What about your side?
Josh Williams: (
I would agree with everything Anabel just said. I think, starting with really what's most important to the partner, in this case, if it's a FinTech, what are the specific client experience they're trying to drive, where are they at in terms of their scale objectives, just how important strategically are those different criteria? Then trying to build around that as best you can. We're relatively new to the partnership space, whereas, Novo payments have been at this quite some time, but what we've seen from that has been informed by long history in commercial banking, long history managing significant third party service relationships where you make money and sense and you lose some money in dollars. So just recognizing that, usually if you start with that high degree of focus around what the key objectives are, a lot of it then seems to play out to like, what are the key decisions that have to be made and what makes sense. Again, at the end of the day, if it's not gonna be a good fit, then we're happy to help try to find a different solution. We've done that where said, "Hey, here's another bank that is a different model. You should go talk to them." So it's just, it seems to work through if you can just be upfront and, really clear about objectives.
Nicole Casperson: (
Also having all of the stakeholders involved, right, especially, on your end. Right. It can't just be, the CTO or it can't just be one division of the company that is fully invested. So how do you kind of ensure that all of those stakeholders are involved in this, FinTech times bank partnership, especially on your end where it's like, maybe gets a little bit dicier.
Josh Williams: (
Well inside the bank there are a lot of players that are involved. I mean, part of it is from the outset, we try to make sure that our team goes in with a fairly high degree of awareness of they should have a general sense of, what are the real tech sensitivities here? What are the regulatory sensitivities here? Then commercially how do we think, this is gonna go, so from the outset, we're asking those questions, but then pretty quickly we're getting the right business line folks involved around that. Then we try to be very judicious in terms of how we use everybody's time on our side and of course on the partners and any third parties, such as no Nova payment that might be helping them out. We're gonna start to get more subject matter experts in as we go down that process. Again, t's just a process of working your way towards it, trying to be thoughtful and being able to really identify it, hopefully as quickly as you can, what are the big deals and make sure that we solve those first.
Nicole Casperson: (
Really going into it with a lot of intention. One thing that stood out to me that you said earlier about the branding. I actually think, you had kind of in interweaved some of the many benefits of a FinTech partnership. This was early on and it still sticks out to me right now. So I'm curious, so hopefully the audience is curious too, that a FinTech partnership can actually help to fulfill that branding aspect. Like I said before, I feel like sometimes a FinTech partnership, to a bank maybe seems more like this backend situation, something that, maybe you do when you have a specific problem, but not necessarily something about your full on business strategy. So I'd be curious if you could talk a little bit on, how a FinTech partnership does accelerate, a traditional bank's, branding.
Anabel Perez: (
Banks typically are perceived like traditional houses, but today the size of the bank is not relevant anymore. If you compare, the app from bank A versus the app from bank B, in the property store of Apple or Samsung are same size. What differentiate one bank to dollar is the feature functionalities, the ability of the banks to really provide, to the end user, the right support for their lifestyle for their needs and that's why we love to always to mention that when you're billing product, you need to follow the data and follow the money, how flows across your client's, journey and how you can help them to be successful. I mean the banks now it's always available, open 24/7.
Anabel Perez: (
Not all banks, but most of them now are becoming 24/7. Sometimes when you pay your credit card, the balance is not updated on real time, so, the app is available, but the systems are not available. When you are a partner, you're not only gaining culture that you may need from those that are moving fast are expanding sense while you're gaining sense at the same time. But also it's a great way to really, connect and become more intellectually interpretable. It's not just between technical assets? It takes time. If you really want to evolve, you really want to adapt and you really want to scale, you need to open the doors for those type of relations that at the end, will pay you back in terms of your brand equity, because, your bank will be recognized as a bank for partnership, not only with your merchant customer, with your enterprise customer and consumers, but if we go back to the basic, moving from traditional banking to embedded finance, you're partnering more with your clients, you are giving them the right set of tools, APIs, so that they can consume financial services on their terms.
Anabel Perez: (
So instead of them, asking you to open a payroll account from the ERP system, they will be able to send you the information that you need to open a payroll account. Based on the information and the salaries of your employees, the bank will be able to prepare for you the right service package for your employees. So everything is starting up through connectivity, but connectivity is partnership and partnership is open mindset.
Nicole Casperson: (
There's a flywheel, just that you can just keep building on. And that's super important coz then if you go back to, let's say like the values and that doesn't sell it for you, but like if something like, oh, I can build another strategy. I can build another product offering. I can build another thing for my customers. If that flywheel of offerings is more intriguing to you, then maybe that's like a good self or a good point. To be able to share the fact that you're not just really thinking about, an outside strategy that your customers see, but also one internally where you get to learn as well. And that's like really valuable in my opinion, when you get to do both.
Nicole Casperson: (
Let's talk a little bit about, something specific cards, that is in the title of this session. So we're gonna hit on that real quick. So cards more than just plastic these days, right? They're an interface. I took that quote from Anabel. By the way, I can't take credit for that one. Let's talk about, how do we modernize this? How do we get to a place where, people see banks and FinTech companies in the same way that they see Apple pay and how do partnerships help enable that, Josh let's maybe hear from you, on your end and how do we modernize that old credit card there?
Josh Williams: (
Candidly, we're newer to the card space, I don't think they're going away from the standpoint. They still are a great form factor, in many cases, we've heard a lot of great examples today of how moving to virtual cards, single use cards are really interesting. We're probably, more interested in looking at opportunities to be able to, support, especially in B2B spaces, some of the things like examples from Zada, just talking about you couldn't have had in industries like Grub-Hub or Uber Eats without what Marqueta really revolutionized. There's tons of other applications, especially in the B2B space for those to play out. So that's definitely exciting. From there, I think, heard some cool things, I thought Alicia from discover around the idea of being able to, hopefully at some point really decouple some of the regulatory, protections around electronic payments that really aren't serving consumers well, down the road. If we can see some of that sort of shift to the US, those are gonna be huge improvements for the consumer and for the industry.
Anabel Perez: (
Card are also recognized today as credentials and why everyone is talking about credential because cards have move and achieved to digital. What I'm referring to digital is that not only you can have access to your check in account, or you can have access to a line of credit or your traditional credit card, but you can also initiate digital payments through card rails or from there, you can evolve to an alternative rails. It is important to understand that today it is not just a piece of plastic. That piece of plastic representation in the detailed space is now a credential. You just tap your mobile phone or your card and initiate a payment.
Anabel Perez: (
Any of those type of transaction has different configurations, but everything together is what build the experience of using your bank on customer terms is not vice versa. So everyone needs to evolve fast because, for many that's a future, but a future is the present for many. Today everyone's moving, not only from chopping on the traditional grocery, also ordering online on recurring fashion. So subscription models are becoming more natural. For example, to, reduce decline or elevate your approval rates, and reduce frauds and rates you need to tokenize and credential. For that, you need to really issue virtual cards. So everything has a dependency on the another, so it's a pool and chilaca that you need in order to really excel in the space. The only way that you can do that is when you partner with a tech enabler that can fulfill all of those feature functionalities, even though you will be replicating what our fathers, uncles, and grandfathers did on the banking space, in a fragmented tech stack. That's what we need to walk away from Franken stain stack move to more streamline, tech tax. That would be faster, better and cheaper.
Nicole Casperson: (
What you're really getting at is that enhanced value proposition that a card, actually can have. If we are able to get to a place where it feels less like that traditional thing or it's interesting because one of the reasons why people have a hard time maybe with digital currency is because folks are still, hung up on being able to hold there's something about cash. Like, there's something about holding something tangible that still really works for people. So I'd be curious. Josh, you mentioned on your side you're maybe like newer to the card space. So maybe like from your vantage point, how does the modern card, move into a place that does enhance your value proposition sitting in your seat? Coz I also think about Buy Now Pay Later, they say with Buy Now Pay Later, which has its own things, that, younger, folks won't use cards anymore. I don't necessarily see that as the case.
Josh Williams: (
There's a lot there, I mean how you make it relevant is how you see that it evolves is that you make it relevant. if people see it solving their need, then they're gonna be less interested in like holding that cash or they'll be less interested about having a plastic card in fully virtual. I think, how you can make credit more readily available, that's clearly a part of BNPL. It's often overlooked that the reason that worked was free money. If you're getting 0% interest and the merchants are observing the credit risk that obviously inflated adoption of that solution, that's not to say it's gonna go away. I totally agree with what was said today. It totally revolutionized how people are thinking about buying and it really reflects the facts that eCommerce is being much more open to different ways to go out and, drive business.
Josh Williams: (
So that's where I'm most excited, is really seeing again how you can use and many times it is gonna be a card solution to basically solve different settlement, capabilities, make that faster, make that more customized in ways that maybe previously wouldn't have either required a card or for users that wouldn't have historically been able to get access to credit. There's just a huge amount of opportunity around that.
Anabel Perez: (
We all are experiencing to these new models where, new and emerging merchant aggregators are offering innovative solutions, in front of the face of the bankers and bankers serve those merchants. And it's a time for bankers to wake up because you have all of those relationships within your bank, you just need to wrap those relationships in a different way. So it is important that, the role of emerging technologies is to retrofit existing processes. Technologies are available. Technologies are out there and we just need a creative mindset and the willingness to really, create something new.
Nicole Casperson: (
One thing I love about what you just said is the aspect of the technology. There is enough technology. It is mature enough. At this point, we've worked hard enough to build out the infrastructure that, we can get to a place where literally everyone involved wins, where everyone gets a slice of the pie where everyone can be profitable. So don't see technology as something scary or something that isn't gonna be a good ROI or all that good stuff. So, we have just one more question before I, let you turn your, the coffee in your system into a cocktail, because I know that's all you've had today. Let's tie in the bigger picture conversation of what we've all just talked about. So clearly establishing the right structure is key here, having the value in place, having all of the right stakeholders involved. I'm summarizing it pretty well. So let's get into three action items. Our audience should write down right now and take home with them to establish the right partnerships on a bill from the FinTech side lightning round.
Anabel Perez: (
In this event, there's a lot of great minds. So you can walk away from this company without a new friend and a new mentor that can help you to enlighten your next innovation on your bank. So it's important to connect, during coffee or during drinks that is important to learn from others and to share experiences and I think that's key for innovation.
Nicole Casperson: (
Agreed.
Josh Williams: (
I will just close this, we've heard over and over about ecosystem partners, collaboration networks, that's the key to identify who some great partners are and go from there.
Nicole Casperson: (
Amazing Annabel. Josh, thank you so much for joining. Thank you all so much for listening.