Among the things you'll learn:
- Navigating regulatory challenges: Explore the regulatory hurdles and opportunities that could shape the future of U.S. payment systems.
- Best practices from global leaders: Examine case studies of successful payment modernization efforts in other countries and the lessons that can be applied in the U.S.
- Strategic roadmap for implementation: What the action plan is for stakeholders to collaborate on effectively modernizing payment systems.
Transcription:
Joey Pizzolato (00:08):
Thanks Mary Ellen for the introduction and thanks to all of you for sticking around for our last panel. Is Cancer Dangerous? Don't worry about it. Yeah. As Mary Lynn mentioned, we are here to talk about payment modernization. This is a really nice capstone. I think in some ways we've been talking about payment modernization all day every day for the last two days. So we'll kick it off here. Before we get started, I'd love to give you all an opportunity to just introduce yourself to the audience. Tell us a little bit about your background, your company, and your role there. So maybe Brigit you want to kick us off first?
Brigit Carroll (00:46):
Hi everyone, I'm Brigit Carroll. I'm with Wise, you might know us as TransferWise. We're a global payments company, building the best way to move money around the world. We've got 10 or 12 million customers globally. We move about $10 billion cross border every month and our mission is instant, convenient, transparent, and affordable payments. And I represent Wise in Washington DC so bringing a little bit more of the policy background here.
Joey Pizzolato (01:12):
Great, thanks Eyal.
Eyal Lifshitz (01:14):
Hi everyone. I'm Eyal Lifshitz, Founder and CEO of Bluevine. Bluevine is a banking platform for small businesses. Company was founded in 2013. Since then we've served over 750,000 small businesses have provided access to capital over $16 billion and we currently manage over a billion dollars in customer deposits. We offer a broad range of banking products for small businesses, which includes lines of credit, checking accounts and of course payments. We serve customers across the entire US and focus on the smallest to small businesses, mostly Main Street, small businesses, less than $5 million in revenue all the way down to zero and new businesses.
Joey Pizzolato (01:55):
Great. Well thanks for joining us. Let's just dive right in. Why is payment modernization a critical topic for banks and larger payment companies right now and what are the biggest opportunities to doing that right now? And then also the biggest risk for not modernizing? So Eyal, maybe we'll kick you off. You can kick that one off.
Eyal Lifshitz (02:20):
Sure. So anyone that serves small businesses know that they use their checking account, their operating account a lot to move money to pay and get paid and payments that are, it's important for them that payments are lower costs, low friction, predictable. That is something that's really critical for them as they run their business. It is something that is important for them as they choose their provider. It is something that we see from our customers all the time. They want to make sure that they have the payment instrument that they need to make payments, they want to make sure it's the price that they need. And so we see it as an opportunity. We see it as a way to drive our competitive advantage. It is something that we use for our marketing. It is something that we consistently invest in. We want to make sure that we are always able to serve our customers where they need. And I think that's sort of where the risk exists as well, where there's a gap in our offering. We hear it from our customers loud and clear, and I think providers who are not up to the standards and the expectations of small businesses will see their customers churn. So certainly it is something that is both an opportunity and a risk.
Joey Pizzolato (03:32):
Bridget.
Brigit Carroll (03:33):
Sure. I think about payments modernization really is kind of updating, I mean payments, how do they actually run. A consumer or a small business doesn't understand how money flows. So it's really for me, updating sort of the rules and regulations that kind of dictate those payments, but also the systems that they run on. So talking about faster payment systems, we'll talk a little bit about that later as well. At Wise, if you don't know us, we've basically tried to modernize this as much as possible in the cross-border payment space. So essentially if you send money through us, we have built an alternative to the correspondent banking system in a way. So we have a US bank account, I'll send money from my US bank account into the Wise Bank account. If I'm sending money to a friend in Canada, for example, it'll pay out from our Wise Canada account and go into their bank account.
(04:20):
So as much as possible that money doesn't actually cross borders. And we've used our technology to sort of modernize the system as much as we can, but there's still things that we can't control. And so things like access to payment systems for non-banks is a big part of modernizing the payment system, but also thinking about how consumer needs and expectations are changing. I think what was the status quo several years ago is just not going to cut it anymore. And we're seeing we all live in a very instant culture and so people want instant when it comes to domestic payments, but they increasingly want it for cross-border payments as well. And that's sort of the need that we're trying to meet.
Joey Pizzolato (05:03):
Great, great. So then I guess, what are the most pressing pain points in the current payment landscape domestically and maybe a little bit cross border, and how do those pain points affect your customers directly?
Brigit Carroll (05:18):
I mean I can maybe kick off from the consumer perspective first and then we'll talk about the number one question we get from our customers is where's my money? So pain point just very simply, where is it? I want it now and I want to make sure it's exactly what I thought I was going to get on the other side. And so today I would say a lot of the domestic pain points hold true for international and everything that we fix on the domestic level will also enable better cross-border payments. From the small business side, we did some research that showed that 49% of small and medium businesses don't go global because of the complexity of international payments, which is pretty crazy. And I mean I would consider that almost a huge barrier that we have to address, which you're trying to fix
Eyal Lifshitz (06:04):
A hundred percent very much echo. The same things that Bridget said. Anytime that there's not what we call not a happy path, we get so much incoming from customers, the predictability of payments is a big one. Small businesses don't want to spend their time in their bank account, they want to spend it running their business. And so anytime that there's issues with a payment that we definitely hear about it. But in addition, there's also a matter of just as you said, speed of payment. People expect it to be real time. They're not payment experts. They don't fully understand the differences between wire and a CH and same day a CH and the different type of payment options and international payments to them, they click a button, they press send, they expect the money to show up with their payee or their customers. They don't want to be an expert. And so solving that for them, making it more predictable, making it real time and faster. And the other part is, the other part of the friction is how much they're actually paying. And that has become a thing where if they feel like the payment or the fees are unfair or they realize that they actually did not know how much it costs, that's where you have a break in trust and that trust is really important. So certainly areas for improvement across the system.
Joey Pizzolato (07:24):
Can you tell us a little bit about how you all at your organizations are approaching payment modernization? Either right now or very recently?
Eyal Lifshitz (07:39):
I can start mean we listen to our customers and what they're expecting. We don't have direct access to the banking system and we're not a payments vendor. So we partner with companies like Wise in order to deliver that experience to our customers. We're always optimizing for delivering the best experience that we can for our customers. Where I started when we started the conversation, how do we deliver faster payments, cheaper payments, creating them more predictable, both domestically and internationally. And whenever there is a development in payments, we are always kind of looking to see how we can be at the forefront of that. And so we are certainly looking at FedNow to be able to adopt that. We wanted to adopt Zelle. We have a lot of customers that want Zelle. Even on the business side, it's interestingly, it's one of the biggest requests for small businesses. We can't as a FinTech, but it is something that we've been looking at. And so anything that our customers want, we are trying to find the right way to approach it and finding the right vendor such that we're able to do that, whether through our banking partners or with third party vendors in order to deliver the experience that our customers are expecting.
Joey Pizzolato (08:52):
Brigit?
Brigit Carroll (08:53):
Yeah, I mean I'll echo a lot of what Eyal said. I think direct access to the payment system is a key part of modernizing payments. So for a little bit of context wise was the first non-bank to integrate directly to the Bank of England's faster payment system in 2018. So that was what, seven years ago now, which is a while ago. And since then we now have about six direct connections I think around the world. And what that enables us to do essentially is instead of relying on an intermediary directly connect to that payment system, of course according to stringent risk-based criteria that the central bank defines and says, okay, you're qualified to access the payment system. When we did that in the uk, we were able to drop price immediately by 20% for those customers and increase the average speed from about 15 minutes, which is already pretty fast to less than 20 seconds. So what we consider instant and so really tangible benefits there. I think this is a trend that will continue actually now I believe the US is the only G seven economy to not lay out plans or have already done this. And so what does that actually translate into? It just means that Americans don't get the same seamless, fast, cheap experience that other people are getting around the world and that impacts both consumers and small businesses.
Eyal Lifshitz (10:10):
And maybe one thing to add is, again, we talked about the payment execution side On our side, what we're trying to do is modernize the experience as much as possible. So again, as I said before, our customers don't necessarily know the difference between a wire a same-day, ACH FedNow when it comes, whatever. And so as an example, and shockingly this is not the experience that they see in all banks is we have one entry point. There is no single entry point for wire or international wire or ACH. You press a button, you select your option, you click execute. That's it. Okay. And so that is really important to simplify the experience for customers. We're all geeking out on the different types of payments and how they actually run behind the scenes. The consumers or the small business owners, they don't necessarily know about that. They don't necessarily care about that. They just want their money to move. And so everywhere that we can simplify, and the other part is, and you guys do it too on your consumer experience, is creating wherever we can predictability around the time and the estimation when the payment will arrive and what's actually happening after they click send. And so those are a lot of things that we're doing, not necessarily on the infrastructure side, but more on the user experience side.
Joey Pizzolato (11:20):
So you can't really talk about modernization of any tech payments included without talking about regulation. So do you have any advice for companies that are looking to sort of modernize their payment system but also sort of balance security and compliance? I'm thinking K-Y-C-A-M-L, whatever it may be.
Brigit Carroll (11:42):
I mean I can start. Obviously you don't have a product if it's not going to be compliant, so just start there. I wouldn't even put it as a this or that. So obviously from the wise perspective, we're a licensed money transmitter and supervised by the CFPB, but you have to think about these things in tandem. And so I don't really, I would actually maybe challenge that question a little bit. Of course in the cross border space especially, there's more complexity, but I also think if you are laser focused, we have been for the past 14 years on solving something within that space. It is possible, and we were just talking about this before the panel, but sometimes it feels like you talk about domestic payments and everything seems solvable and with cross borders it's like, oh, it's too hard, it's too complex. We can't be transparent because of this or that for our customers, that's just not true. I would really challenge that and there's so many innovations today that are being made. I would love to see some of what we've seen on the domestic side now crossover to the cross border side as well. Like Fed Now for example, they could enable cross border payments on FedNow that's not yet the case. So there are changes that we can make there in addition to expanding access to the system.
Joey Pizzolato (12:47):
Right.
Eyal Lifshitz (12:49):
And again, I think that that balance, it's not contradictory and there's the trust that is important for your customer in the sense in how you're managing compliance and how you're managing security. That is important too. They want to make sure that you are as an organization, that are trustworthy organization and these are critical components is part of it. I think there are ways in which you can do all of these things and still kind of manage and balance customer experience. And when you're asking, it's all these edge cases that cause issues with payments. It's when a payment needs to go into a queue and it requires a manual review and all of a sudden the customer's like, what's happening there and why do I need to provide all these documentation? Those are actually the things that are, they're sort of like 80 20, but you really need to invest in those areas to make sure that you're maintaining that trust with your customer because it's those times where it may be an issue that you need to solve for from a compliance standpoint, but in many cases you can solve it with the right documentation, but if that experience is a bad one, you would've lost the trust with the customer forever.
(13:53):
So even when you're making sure that you're managing through compliance here at all these things, you can still do it in a way that is transparent and you're thinking about the customer experience.
Joey Pizzolato (14:01):
Right. So follow up question for you, Bridget, you sort of alluded to this, right? So how does modernizing your domestic payment infrastructure lay the groundwork for improving the cross border? If you have something really solid on the domestic side, how can you build upon that? Again, kind of keeping all of this in mind for your cross-border?
Brigit Carroll (14:26):
Well ultimately, if you think about it in a traditional sense, every cross-border payment will go through the domestic banking structure system. So it's going to benefit both.
(14:35):
But I think we have to think about the international use case when we start with the domestic as well. So we can't overlook that. I think like I mentioned the FedNow point, but also access to broader types of players that will also lead to more innovation built on top of it. Because what we've seen in other jurisdictions is when you open up access to the system, so for example in the UK, the number of players participating, financial institutions participating in the system goes up. So we know that FedNow is not ubiquitous today, both on the send and receive side, we know it's not necessarily commercialized to everyone like a wise for example, to be used. The second that you let in sort of the innovators, you see the number from the bank side also shoot up. And so ultimately it's good for everyone because then more consumers are getting access to the faster payments, they're getting them at a cheaper price and then you're offering new payments products off of the back of that.
Joey Pizzolato (15:31):
Anything to add?
Eyal Lifshitz (15:32):
Yeah, I think the innovation kind of pushes on both sides to create consistency. I think generally customers are expecting a certain level of service. There are cases interestingly where our customers run in international payments through wise it's faster than a domestic payments and they're like, I send money across the world that was faster than sending it to my customer across the street. So that's odd.
Joey Pizzolato (15:57):
Okay, so one thing that I've sort of taken away from the last two days is very few payment companies just go it alone. So I really think you can't talk about anything in payments without, again talking about partnerships. So when you all are thinking about modernizing your payments capabilities, how do you choose the right partners and how do you think about choosing the right partners?
Eyal Lifshitz (16:22):
I can start there. I mean we have several partners that we work with for payments and certainly we look at their capabilities, the technology, what they're able to do, but there are other things that we look at that may not be so intuitive. For example, we look at how well they play with our existing stack, how well they integrate because again, we're trying to create an experience for our customers that is not a disjointed experience. So how well they're not just on a standalone basis, but how well do they fit within our overall platform? That is something we do certainly look and see how they manage through on one hand how they balance between compliance and customer experience, if you will. Certainly we want to make sure that there are ones that take compliance very seriously because the last thing that we want is for that partner to have issues and all of a sudden that service is shut down or is disrupted. That would be the worst thing ever. So those are definitely things that we look at, but we also see are they balancing that with the experience that they're delivering to customers? If everything's going to get paused for manual review because they're overly stringent or they don't have the capabilities to do this in a more streamlined way that's going to impact our customers. So we looked at the things that are very trivial, but we also look at some of these things that we learned over time that are actually quite important for us.
Brigit Carroll (17:41):
I would say from our side mean when we think about our partnership with Blue Line, obviously what are you trying to solve for.
(17:49):
Really being clearly aligned on that, but also shared values. So in terms of for both of us, price transparency. So we believe that not only consumers but also small businesses deserve to understand what they pay when they send a payment and not sort of be hit with hidden exchange rate markups until later they realize and the vendor didn't get what they were supposed to get. And so that's super important and that also just sets a tone I think in terms of the partnership. So we're super happy. But yeah, we've also, I don't know if others have heard about this, but at Wise we just launched a partnership with Morgan Stanley as well. We work with banks and other fintechs around the world, so Newbank in Brazil and a number of others, EQ in Canada as well. And so we really see this as, of course we would love it if everyone were a wise customer, but this kind of cross border payments problem, let's say that we're trying to fix is an ecosystem issue. And so we can only sort of solve for everyone if we also help leverage our technology for banks, for fintechs and for other financial institutions including credit unions here in the us. And so that's how we're going to get there I think. And we're really excited about the growth that we've seen through Wise platform.
Joey Pizzolato (19:07):
Great. Great. I want to switch gears just a little bit and go back to policy. What regulatory hurdles need to be addressed to facilitate further payment modernization?
Brigit Carroll (19:20):
I can start. Well the Federal Reserve can open up access to its payment rails to non-depository institutions. Like I said previously with stringent risk-based criteria has been done in many other jurisdictions tried and tested. So I would say that, but I would also say continue to improve on the likes of FedNow and faster payment it's launched, that doesn't mean it's over. So there's going to be a lot of work I think going forward to optimize and launch new features off of that. And then also think about the cross-border payments side.
Eyal Lifshitz (19:56):
What she said?
Joey Pizzolato (19:59):
What she said, what do you think it's going to take to get the Federal Reserve to open it up?
Brigit Carroll (20:05):
Well, we'll see. Maybe Congress can push them a little bit working on it, but I think also, and this has been a global trend, so it's part of the G20 enhancing cross-border payments roadmap, but it's also just a fact of we will be behind competitively compared to other nations if we don't do this. And so I think there's a recognition and especially in the new administration thinking about innovation and this could be a really great win actually. I think that would benefit, like I said, consumers, small businesses and America to stay competitive on the global stage.
Joey Pizzolato (20:45):
So you hear that everyone write your congressman, we've got about nine minutes left. Did anybody out there have a question for our panelists? Going once.
Audience Member 1 (21:02):
And so somebody asked a question,
Joey Pizzolato (21:03):
Going twice all got to make Mary Ellen work for it.
Audience Member 2 (21:10):
Exactly. Hi. So I've traveled to Brazil four times now and when you watch the way Pix has taken over there and from a real-time payments point of view and it's certainly not the only market where that's been the case.
(21:21):
What I think has struck me is how much of, yes, it was pushed by regulation so therefore it happened. But I also think there's a huge element of this that's cultural and people being okay with their government telling them what to do. I often think about if that's one of the major reasons it hasn't happened in the US yet. I think as a culture we're a little bit more afraid of that. Just speaking generally, do you think that that's part of why legislation hasn't really pushed better real-time payments in the US or just faster all the modernization that we're talking about that there's a fear of pushback because maybe the population doesn't understand the value that it could bring. How much of that do you think plays into the lack of regulation so far to help promote it?
Brigit Carroll (22:04):
I mean I have thoughts on that. I think, yeah, we don't like to use the word mandated, but to your point, it has worked really well. It's also a different context where maybe more unbanked or underbanked people and so that also gave rise to sort of some of that success. I would don't know, I think consumers don't, like we were talking about, they don't know how payments run. I don't really think it's that. I think it's maybe entrenched interests to be spicy that no, frankly, and also there's just no central bank wants to be the first mover. But again, like I said, this has been tried and tested and so I think we will get there. I think when consumers demand it, think about everything else in your life that's instant. I lived in Belgium for nine years and I moved back here and when I was paying my apartment I was like, oh, I'll just send you an instant bank transfer. And I mean I had been abroad for nine years and they said no, you need a check or a money order. And I am not kidding. I didn't know what a money order was and so I went to the grocery store and I went and got a Western Union money order. So it was kind of shocking really. So it's just what becomes the norm? You can never go back. It's like sending an email. That's what our CEO e says all the time. Sending money internationally should be as easy and fast as sending an email. And so I don't think it's consumers, but we should be more aware and ask for it.
Eyal Lifshitz (23:31):
I think small businesses and consumers want real time.
Joey Pizzolato (23:33):
Yeah,
Eyal Lifshitz (23:34):
I mean you can see it. I mean people are so used to on demand, like a click a button, something happens. I think we see it with our customers. Anything that happens, any form of transaction, anything that takes longer than now, they are starting to get anxious. So I certainly don't think it's coming from the side of consumers or small businesses.
Joey Pizzolato (23:54):
Anybody else with a question? Alright, well I've got a couple more. Alright, so for banks and fintechs that are just beginning their sort of payment modernization journey, what advice do you have for them? Are there any common pitfalls that are easily avoidable to once you're sort of educated on them?
Eyal Lifshitz (24:22):
You want to start?
Brigit Carroll (24:24):
I can.
Eyal Lifshitz (24:26):
Mean I think choosing wrong providers, at least for fintechs like us, that we don't rely on either our banking partners or our partners to execute payments is choosing wrong vendors. And we have chosen vendors that were not the right ones or partners, they were not the right ones and they had maybe a certain set of capabilities, but either they didn't understand our segment and their needs because within payments and managing risk for payments, the profile of the customer impacts the type of payments and what you need to be good at and how you monitor these payments and so on. So there there's certainly a match or fit and a fit with whom you're working with. There's also a matter of the pace of which you want to move and how quickly you want to innovate and how quickly you want to build. And so I think that is really important. So to me, somebody starting out, making the right choice on the partners is a critical one and if you get that wrong, they can send you back certainly several months if not more.
Brigit Carroll (25:32):
I would just say that from our perspective, the way that we think about things is always going back to the customer. Even at our scale now, we have a customer wishlist. So for example, if we don't send to a certain country, you can put in a request. Our CEO is regularly on the phone with customers trying to understand their pain points and just kind of bringing it back to what do we really need to focus on. I would say that's a great takeaway from Wise.
Joey Pizzolato (25:56):
Great. So we've talked a little bit about SMBs or you both have referenced them and we are seeing a lot of banks and larger payment like Visa, MasterCard, they're all putting a lot of focus on small businesses right now. So my question is how can payment modernization help those small businesses compete more effectively on a global scale? Like Brigit, you had referenced that there are some companies that could be global but just don't want to hassle with cross border.
Brigit Carroll (26:29):
I mean really obvious one, but unlocking working capital so when you have instant payments you have instant liquidity. But then also when we were talking about the transparency on when it's going to land and how much is going to get there exactly to the scent in the Philippines, that's not always has been a given in the past. And so that's really what we're trying to solve for. I think, I dunno, you'd know it better than me.
Eyal Lifshitz (26:58):
I mean there's a hesitation for small businesses to do anything that appears to them. Complicated. And international payments I think has somewhat of a reputation that it's expensive, complicated, it takes more to manage. And so not being able to transact internationally reduces their ability to source talent, to source inventory, to sell internationally. It just limits them to only domestically. And I think that prevents them from doing more.
Brigit Carroll (27:29):
We did some research that I think it was like 43 billion paid in international payments fees by SMBs in a year in the US. I mean you could almost consider that a tax.
Eyal Lifshitz (27:42):
And they don't even, and I'm sure they don't know that they've been paying that.
Brigit Carroll (27:44):
Yeah, exactly.
Eyal Lifshitz (27:45):
They have no clue.
Joey Pizzolato (27:46):
Ouch. Alright, last question for the both of you. What are your predictions for the future of payments and how are you preparing at your organizations for those changes? And then, so two part question. So it's kind of not the last but kind of the last and then what emerging trends or new tech are you most excited about?
Brigit Carroll (28:13):
I would say speed. We've talked a lot about speed. That's not really the future, it's just where the rest of the world is and we're not. So the future is here. We would love for it to come and be a reality in the US.
Joey Pizzolato (28:27):
Yeah, that'd be great.
Eyal Lifshitz (28:29):
Yeah, no, we're looking forward to that reality, but first, prediction checks are not going away. We talked about stable coins the panel before, but checks are not going away.
(28:41):
I can tell you for sure. I think there's just going to be some potentially consolidation payments. It doesn't make sense that there is ACH, same to ACH, wires, FedNow RTP. Again there, I would assume at some point there's going to be some consolidation. It just doesn't make sense to maintain all of those and they're not really adding that much incremental value. And hopefully we'll see more real time and just more predictable payments and cheaper payments for small businesses. And I'd be remiss if I didn't mention ai, we are excited about AI and everything that's happening there. I think when we look into the future, I think there's going to be more AI technologies to help customers manage their money. And as part of that is payment orchestration, which I think we'll bring with it a whole set of new challenges of okay telling your bank account agent, gen AI agent to pay your vendors and kind of do that by itself. Then I think how do you manage through that? And I think that's going to, it's exciting, but a little bit scary. So we're looking out for that, not doing anything, but I think it's going to come at some point.
Joey Pizzolato (29:50):
Right. Well I agree with both of y'all in all fronts and yes, the checks, money orders, they're not going away. There's always going to be a landlord that demands a money order. Thanks everyone for sticking around. Thanks so much to my panelists for the great conversation. Let's give 'em a round of applause.