Twilio sits behind the scenes of today’s slick onboarding and login experiences. The tech firm gives its customers the ability to embed communications into their offerings. Twilio’s few lines of code help with two factor authentication — where you receive an SMS to your phone after logging into an app or website — all the way to, more recently, a broad omnichannel engagement platform.

Bijon Mehta leads financial services at Twilio. I first met him years ago at our first Tearsheet conference. He was at J.P. Morgan then and now leads Twilio’s work in financial services including the firm’s go to market strategy and the channels it uses to reach customers in the industry.

Bijon joins me on the podcast to discuss how short form communication is being used in the financial services industry for authentication, and increasingly, in communications, in general. We talk about how the firm’s clients use Twilio technology to improve their customer experiences.

Here’s my talk with Twilio’s Bijon Mehta.

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The following excerpts were edited for clarity.

My name is Bijon Mehta and I’m the global head of financial services here at Twilio. In my capacity, I look after designing the go to market strategy and the execution of our business across three core channels of our business. The first is our direct sellers. And we have over 700 account executives globally. The second channel is our ISV channel. So, thinking through all of the appropriate software companies that we should be looking to embed ourselves in. And then thirdly, is our partnership channel, figuring out all of the business cases that we can work on and help solve across financial services, including banking, insurance, payments, wealth management, for the benefit of the top consulting firms globally.

Go to market strategy in financial services

Twilio was founded 14 years ago as an API first company. While APIs certainly existed 14 years ago, they weren’t as well understood as they are increasingly becoming now. So we started off with a core mission back 14 years ago, to, as we like to say, democratize communications. When we say that what we mean is we’ve taken the complexity and complication from the telco world globally and put a layer of APIs on top of the telco network (we call it our super network). 

And what that does is it allows us to offer customers the ability to embed communications into their offerings using very few lines of code. That’s opposed to what happens in the traditional world: if you’re going to set up a business in the UK, and you’re a US company, you’re going to have to go to British Telecom and figure out how to connect into their environment and then build all that code. We democratize those communications by providing APIs. 

And more recently, through an acquisition we made of a company called Segment, we’re now increasingly focused on the data element of what most firms are dealing with when it comes to understanding what their customers’ needs and preferences are, and being able to serve those up. So combined, we like to think of ourselves as an intelligent customer engagement platform.

The evolution of the product

When I think about our product set, I can almost bucket them into five categories. So the first is what I refer to as digital engagement. That’s really the different forms of communication that we offer APIs in — that can be SMS, voice, video, and email. 

The second core offering is around security and authentication. That’s where we offer two factor authentication, one time passwords and things like that. 

The third area is what I generally like to refer to as workflow automation and that’s really combining elements of our different offerings, and providing the ability for customers to, for example, automate the scheduling of an appointment. Maybe you get an appointment reminder, and for some reason, you can’t make that appointment now. You can, via your texting app, reschedule the appointment. Or it could be through something that we refer to as a product called Speed to Lead, where you can aggregate top of funnel activity and respond more quickly to third party requests for your product or your service. These are all different forms of what I refer to generally speaking as workflow automation. 

The fourth area is customer service. When I think about customer service, I refer to products like our IVR, Integrated Voice Response, offering, or our chat bots, or our full blown contact center offering. All of these are designed to better channel customer inquiries when they’re coming in. 

And then, the last and most recent fifth channel is around customer data, which we got into via the acquisition of Segment last November.

Penetrating customer accounts

I would say it’s very rare that people know the full breadth of what we do. I would argue that most people use Twilio products in their personal and professional lives and have no idea that they’re using Twilio. The example I like to give is ride sharing. If you use Uber or Lyft, you are using Twilio capabilities. And so typically, our go to market motion is land and expand. The top use cases that customers come to us for are around account security, as many people certainly in the last 15 months have been strengthening their mobile offering. And so they look to us for a turnkey solution. The other big one is SMS notifications. Those are probably the top two.

Embedded finance

I first got involved in APIs back in 2003, when I was working at Citibank and overseeing the execution of our foreign exchange trading with different firms. And obviously, the world has evolved a lot since then. I like to think of APIs as a way to shortcut the building of different capabilities. And it’s best seen in the fintech world, with many of these fintech companies that have gone on to become unicorns. Typically, their developers will look to orchestrate a variety of different capabilities by incorporating other people’s APIs into their build. 

I almost think of APIs like Lego blocks. Organizations can say, well, instead of building a two factor authentication solution, because there’s nothing truly unique there, why don’t we just take Twilio’s two factor authentication, right? Instead of building an IVR solution to better automate the inbound calls that we’re going to get from a customer service point of view, why don’t we take Twilio’s IVR solution? It helps to increase the time to market for a lot of these products and services. And I think that’s one of the greatest impacts that APIs are making.

Use cases

I would say that COVID has really accelerated the development of using APIs within incumbent organizations. You name the bank or the insurance company, and they’re leveraging APIs throughout their business. I like to refer to it as the replatforming of the industry, where in one fell swoop, they’re going from on prem to evolving beyond SaaS into APIs. 

We work with a broad range of really amazing organizations in the financial services industry. For example, with Morgan Stanley, we’re powering the ability for all of Morgan Stanley’s Wealth Management advisors to securely and compliantly text message with their customers. We provide an infrastructure that allows the advisor to not just communicate with the end client, but also the end clients’ required third party advisors, like a lawyer or an accountant.

We’re working with ING, which is a major international bank, providing elements of their contact center offering. They’re using our video APIs to help onboard new customers. 

On the digitally native side, we’re working with organizations like Wise, formerly known as TransferWise. We’re powering all 3 million plus customers with secure two factor authentication. We’re working with Nubank, the world’s largest challenger bank, and providing them a full blown contact center offering. 

What I find interesting is that in just the last two years, it’s the incumbent players that are asking us more and more what we’re doing with the fintechs and challenger banks of the world than their traditional competitors.

Communication’s role in modern finance

Certainly in a B2C environment, and that could extend beyond retail banking into wealth management, payments, insurance, what COVID has done is it’s highlighted the criticality of meeting the customer over the channel of their choosing. We’re going through a massive demographic shift globally and here in the US, where the Millennial generation is increasingly becoming the dominant active generation online. Organizations are realizing that, in order to support those customers, they’re going to have to create tools that are easy to use, intuitive, and predictive, and leverage all of the machine learning and AI that’s increasingly now happening. And do it in a way that you don’t have to have an 18 month launch cycle for a new product or service. You have to look at big tech, and you have to look at fintechs as a north star, in terms of how you look to build some of these capabilities.

Looking ahead with products

As a business, we went public a little over four years ago, where we’re running at a $2.8 billion revenue run rate. Our E Team is maniacally focused on our customers. We see the tragedy of COVID in a positive sense of really aligning industries, financial services included, along this digital journey. We did a survey at the end of last year. We found that 95% of the key decision makers that we reached out to had indicated that, on average, the increase in the use of digital tools has gone up by at least six years, in terms of the the shift over the last 15 months. So, they’ve accelerated plans by an average of six years. 

And so, for us as a company, we’re steadfastly focused on our core original mission, which is democratizing communications, coupled with the additional value that Segment brings to our product portfolio. Because in order to democratize communications, you need to be able to have a really strong understanding and footprint around your customer. And that’s what Segment delivers for our customer base. We’re in the early stages of integrating the Segment technology into our toolkit. And we think that over the next two to three years, that piece of technology is going to yield tremendous value to our customers. 

And then I would have to say, the other big piece for us is scaling our contact center offering. Contact centers were not really viewed as a mission critical piece of technology. But, because of COVID, and because many people were sent into a work from home environment, the need to have a cloud based contact center that can be flexible to integrate different technologies became really critical. That’s a piece of our business that we’re going to be looking to scale dramatically here in the next couple of years.

Sales cycle and expertise

One of the things and the key reasons I joined Twilio was because at the end of 2019, the company’s leadership team decided that they’re going to verticalize our go to market. They decided they were going to focus initially on three key industry verticals: financial services, healthcare, and public sector. And it shouldn’t surprise anyone that these are also the three most regulated industries. What we’ve been doing, from the beginning of 2020, is creating a dedicated industry sales team. We’re starting in the US, or North America, and we have been growing that dedicated account executive team across these three industry verticals. And what we will be doing over time is basically verticalize the go to market of the business. 

It will take another couple years to fully verticalize. Some markets globally have already verticalized, just by virtue of the fact that financial services tends to be a considerable piece of their territory. But in North America, which is where we’re starting the verticalization effort, the results have been astoundingly good. We’re looking to go customer segment by customer segment.

On the ISV side, we’re continuing to beef up that team. We’re adding more account executives for the ISV sales team. 

In the third channel, our partnership channel, we continue to hire people within that group to go out to the major GSIs, which stands for global systems integrators, as well as regional GSIs to help them understand what business problems Twilio solves in the industry. We’re definitely in growth mode.

Goldman Sachs announced it’s reached an agreement to acquire buy now, pay later firm GreenSky for $2.24 billion in an all-stock transaction. The acquisition saw GreenSky’s share surge 53% on the news and reflected Goldman’s interest in growing its consumer lending business. 

The transaction details:

1. The all-stock deal puts the per-share price for GreenSky stock at $12.11, making the implied transaction value approximately $2.24 billion.
2. The deal, announced last Wednesday, values GreenSky at more than 50% above the previous day’s closing price.
3. Goldman Sachs expects the transaction to close by the fourth quarter of 2021 or the first of 2022.
4. GreenSky CEO David Zalik will join Goldman Sachs as a partner, and his team will move to Marcus.

What’s in it for the two parties?

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Welcome back to Payments, our bi-weekly newsletter about all things payments — from blockchain to BNPL to B2B. It’s inspired by our payments coverage as well as the top stories from around the payments space. Subscribe here.

Platforms like Klarna and Affirm have raised the bar on B2C payments by offering a smooth checkout experience with modern payment options and flexible terms. The same can’t be said for B2B, where payment methods are outdated and most transactions are still done offline. Startups like Balance, Melio, and Resolve are mushrooming to modernize B2B checkout and offer a B2C-level payments experience. The digitization of B2B payments should be a space to watch over the coming months.

Our top stories

‘$130 trillion of global B2B trade is coming online’: Balance looks to digitize payments for B2B ecommerce (Outlier member exclusive)

‘E-commerce subscriptions are about stability and predictability for consumers’: Behind Recharge’s recent growth

What buying its first NFTs says about Visa’s broader crypto strategy

Gig workers are paving the future of payments (Sponsored)

How rooting its customer experience in hotels and airfare enables Sunbit to make an impact (Outlier member exclusive)

Through partnership with Mastercard and Marqeta, Synctera adds card capabilities to its platform

Beyond CryptoKitties and bragging rights: A look at the financial use cases of NFTs

Whenever you hear the word NFT, you may instinctively think of a 10-year-old meme of an animated flying cat with a Pop-Tart body, or a digital art piece selling for $69 million for reasons that still aren’t quite clear to you.

But in a few years, the word NFT may conjure up a completely different set of images in people’s heads. That’s because tokenizing digital art and collectibles is just one of many possible applications for this novel technology.

NFTs have potential applications that extend far beyond digital art and sports memorabilia. Financial use cases for this technology could potentially include NFT-backed loans, insurance, investments, ownership of rights, and debt management.

Read more

What we’re reading

Goldman Sachs is acquiring buy now, pay later fintech GreenSky for $2.2 billion (CNBC)

B2B payments firm Melio raises $250 million at $4 billion valuation (Reuters)

Citi, BNY Mellon and Verizon team on real-time bill payments (Finextra)

MoneyLion enters crypto trading with $1 million prize pool to lure investors (Finextra)

Square will let Cash App users make in-store payments with mobile wallet (MarketWatch)

Sezzle’s plans reveal how BNPL could spread further into banking (The Financial Brand)

Papaya Global raises $250 million to grow its payroll platform (PYMNTS)

PayPal acquires Japanese BNPL player Paidy for $2.7 billion (Finovate)

Wells Fargo introduces new AI-powered integrated receivables service (PYMNTS)

MX partners with Payveris on open API digital payments (Finextra)

Coinbase: SEC fight plays to the crypto crowd (FT)

Derek Jeter joins athletes looking to cash in with NFTs (deBanked)

Netspend launches earned wage access platform (Finextra)

Mastercard buys open banking firm, Aiia (PYMNTS)

Revolut is targeting billions in new revenue before IPO (Insider)

Debt collection is becoming a serious problem for BNPL consumers: Report (Crowdfund Insider)

Crypto firms snap up ex-regulators, but some struggle to keep them (FT)

TD Bank is joining the Akoya Data Access Network. 

With this new partnership, TD Bank’s customers can opt to securely share access to their banking data with fintech apps and data aggregators. Third-parties receiving financial data will be able to access TD Bank’s U.S. customer data via APIs, as opposed to the less secure practice of screen scraping.

All data between the bank and applications will move through a single point, Akoya APIs. This data is neither copied nor stored. It is also provided in a standard output based on the Financial Data Exchange’s API standard.

TD Bank can support its customers’ demand for fintech services, without putting their data at risk. For data receivers, this can earn them customer trust, from people who were nervous about sharing their sensitive bank credentials.

“TD has always had a strong commitment to digital innovation, and that means continuing to invest in new ways for our customers to manage their finances online,” said Rizwan Khalfan, Chief Digital and Payments Officer, TD Bank.

Fintechs and data aggregators will have access to TD Bank’s customer data through Akoya by October 2021.

Akoya is an independent company co-owned by 12 North American financial institutions. TD Bank is a part of that group, investing in February 2020. The firm is focused on making accessing and sharing financial data secure via APIs, eliminating the risks associated with screen scraping.

“APIs provide a safer, secure way for customers to share data and will play a key role in helping to facilitate innovation through the creation of data-driven apps and financial services -– a win-win for Open Finance,” said Stuart Rubinstein, CEO of Akoya.

TD Bank is the latest of Akoya’s expanding partnerships, joining other industry leaders like Chase, Wells Fargo, Citi, and Bank of America. 

This year, Akoya has partnered with key financial institutions to get access to their data, which constitutes about 50% of demand deposit accounts in the United States. In addition, core banking provider Jack Henry & Associates was also integrated into the network. The company claims this enables over 400 community banks and credit unions to participate in Akoya’s data network.

Akoya says announcements of more key partnerships can be expected before the end of the year. “We anticipate adding a few more financial institutions to the Akoya Data Access Network and have all participants active by the end of the year – a key goal for the company,” Rubinstein told Tearsheet.

In December 2020, speaking on the Tearsheet Podcast, Rubinstein laid out Akoya’s plan to, by the middle of 2021, “have more than half of the deposit accounts and around half of the credit card accounts in the country.” The next step, he said, would be to focus on data recipients, and develop the demand side of the business.

To achieve their demand objectives, Akoya has been developing its APIs. “We have spent the past year developing several APIs that offer reliable consumer-permissioned financial data, such as account information, balances, transactions, and investment holdings, all delivered in a consistent manner based on Financial Data Exchange standards,” he said.

“As a result, we are beginning to gain momentum in adding fintech, data aggregators, and other data recipients, including financial institutions, onto the Akoya Data Access Network. 

This year, Akoya has signed agreements with fintech firms Pentadata and eMoney.

Direct API access deals are becoming more commonplace. This week Silicon Valley Bank entered into an agreement with Plaid to provide secure and efficient tokenized payment solutions, making the bank the first to provide ACH account token integration with Plaid. Plaid also announced an agreement with US Bank earlier this year to employ a ‘new bidirectional permissions hub’, granting consumers the ability to adjust their permissions quickly within the apps, and control what data is shared.

B2B ecommerce has seen rapid growth in the recent past. A growing number of B2B ecommerce marketplaces have started to emerge, speeding up the digitization of business-to-business trade. This trend has gained further momentum through the pandemic: in the last year alone, sales on B2B ecommerce websites in the U.S. grew by 10% to reach $1.4 trillion.

The rapid growth of B2B ecommerce platforms has been accompanied by an increasing demand for dedicated payments solutions to help ensure a smooth online checkout experience for B2B customers.

This is where Balance comes in. The Israeli startup claims it’s the first B2B ecommerce payments platform that offers a consumer-like checkout experience for merchants and marketplaces. Balance offers flexible payment terms and gives buyers various payment options including credit card, ACH, wire transfer, and check. It also enables merchants to receive their payments instantly.

Balance co-founders Bar Geron and Yoni Shuster previously worked as senior decision scientists at PayPal, where they saw the struggles of B2B merchants who were unable to transition to the digital space because of outdated payments infrastructure. As time went on, Geron and Shuster realized there was a growing need for a dedicated payments solution for the digital B2B checkout experience. This led to the birth of Balance in 2020.

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“​​No documents required. No notarized seals. No EIN whatever the hell that is,” reads the Nerve website. “Just a smart, simple way to manage the money you make from making music.”

Nerve is a challenger bank for musicians based in Austin, Texas that’s readying itself for a September launch. After, it will onboard its waiting list of customers over the next several months. At the moment, Nerve is offering a business account and a savings account with a whole host of other features. 

Nerve CEO John Waupsh says that a business checking account can involve high fees and extensive documentation that can put off early-career musicians who want to open a business account. Often, they’re making between $150 to $500 per month, but the ramifications of co-mingling their money or not managing their cash flow. also weighs heavy, by leaving them open to tax issues, among other things. 

Waupsh says that banks often don’t have a good understanding of how artists make money or get paid. Artists today can have up to 20 to 50 streams of revenue, not necessarily generating big dollars but contributing to their income nonetheless. Nerve provides a way for artists to consolidate revenue from each source into their Nerve account.

Moreover, banks have little idea about what social media data has to do with income generation. As such, the banking app is equipped with a feature that allows customers to link their social media and streaming data into the app. Instead of visiting apps like Spotify and Instagram separately, customers can log into their Nerve app and have all that data there, side by side with their money, with just a swipe. 

“A big part of creating a sustainable business is knowing whether you’re winning or losing,” says Waupsh. “Having [the data] right next to the money [was] really important for musicians who are [creating] sustainable businesses.”

SPONSORED

While Nerve doesn’t offer any lending products at the moment, pulling all that data into Nerve will help build the case for each musician to borrow when Nerve launches lending products. Nerve also provides a private networking feature to help professional musicians find each other, make payments, and collaborate. Nerve customers will also get free instant payments to other Nerve accounts, as well as access to 55,000 free ATMs

Nerve is working with Piermont Bank to provide FDIC-insured business debit and savings accounts to ‘help musicians separate his business and personal financial life.’

“We are excited to be the bank partner who provides the banking products and services behind Nerve’s offerings. As a bank with expertise in supporting the fintech ecosystem and entrepreneur-led businesses, we find good synergies in our partnership with Nerve,” says Rodrigo Suarez, head of innovation at Piermont Bank. “We are in an excellent position to work closely with Nerve’s team to support their product roadmap to serve independent creators in the music industry.”

Josh Liggett, principal at investment platform OurCrowd, is a little skeptical. He doesn’t so much mind that there’s a niche challenger bank for musicians but that in his experience, most challenger banks aren’t doing anything particularly disruptive or groundbreaking from incumbents. Liggett gives the example of his musician wife, who gets cello insurance and buys an airplane ticket for the instrument when she travels with it. Liggett would like to see customer-specific offerings from challengers targeting certain market segments — in this case, something different like insurance or discounts on air travel for seats bought for their instruments.

“If you want to have a whole challenger bank dedicated to a market segment, that’s fine,” says Liggett. “But you better offer something that’s really interesting to them. And if you’re just offering regular banking services to somebody like musicians, lumberjacks, astronauts or scuba-divers, it doesn’t matter until you’re actually providing something that’s unique to them.”

By Kevin Hughes, Connectivity & Information Services, Fiserv

Using information to enhance consumers’ experiences and earn their loyalty

Aggregating data from a broad range of sources is critical to enhancing the consumer experience and providing the most innovative offerings. And offering new data sources, such as crypto assets, is becoming a differentiator among aggregators. Finding the right data aggregation solutions and providers requires clear alignment between their capabilities and business objectives.

Through partnerships with banks and other financial institutions, data aggregation platforms add a critical access layer. They are “facilitators,” each with purpose-built technology to rapidly and reliably supply data as consumer demand for apps beyond traditional banking grows. Platforms each offer unique strengths. Platform providers differentiate themselves in everything from their relationships with FIs to the mechanics of data structure. They vary in privacy controls and data use, too. These differences and others underscore the importance of intelligent evaluation when selecting a platform partner.

Financial institutions and technology firms may choose from various methods and platforms for aggregating data. For implementation, three factors define success: reliability, adaptability, and security.

1. Reliability

Reliability refers to a platform’s ability to maintain continuous, live connections to data sources and to correctly extract data. Reliability is the foundation for building a successful data aggregation platform. For example, when borrowers fill out mortgage applications, the right infrastructure should be in place to quickly and accurately access their data and verify assets to prompt next steps in the application process. Instead of chasing down paper documents, financial institutions can use data aggregation to automatically pull existing digital information. 

Data reliability shortcomings are the death knell for financial apps. If the complete picture of customers’ information requires multiple interactions or is interrupted by incomplete data pulls, then higher abandonment and churn will follow.

To help ensure reliability, a data aggregation platform should have the infrastructure to:

• Ensure data requests are processed quickly and seamlessly
• Update and repair connections quickly
• Solve problems in real time

As technology facilitates more personalized offerings, quickly adapting to evolving needs and supporting additional business models is paramount. 

2. Adaptability

Financial institutions and technology providers need data to be more adaptable in response to changing consumer needs. Adaptability means that a platform provider, working with its sources, can rapidly adjust the structured data provided to its customers’ needs. 

As technology facilitates more personalized offerings, quickly adapting to evolving needs and supporting additional business models is paramount. Depending on the financial institution or technology firm, that could mean implementing new data elements or enhancing API structures.

Adapting to new offerings — and quickly implementing them — is key, as is partnering with a data aggregator to expedite new offerings. Data needs to available in weeks, not months; any implementation delay will shorten the market differentiation offered by new, exciting features.

Key takeaways regarding adaptability considerations include:

• Business models change; ensure that a platform can quickly expand the range and type of available data
• New apps and data insights reflect a platform providers commitment to innovation
• Are fintechs viewed as partners or is every service an upcharge?

3. Security

The protection of data by the integration platform on behalf of its data users and sources is a fundamental concern. In periods of disruption, such as the ongoing COVID-19 pandemic, concern heightens as consumers increasingly rely on digital applications to complete financial transactions.

Cybercriminals continually devise new methods to access and exploit data, which is generally more secure when it’s actively protected by the same partner providing the aggregation platform. As handoffs and exchanges of data occur, the possibility of data being intercepted or corrupted can increase. For compliance and security, it’s important to work with a data aggregator that will not sell consumers’ data and uses only consumer-permissioned data for your application.

Loss of data and any activity that compromises information are the largest threats to a company’s reputation and viability. Enlisting a partner with wide-ranging experience in the financial industry and extensive data-warehousing capabilities helps ensure a better understanding of an organization’s unique business environment, including the many regulations that protect consumer data.

For fintechs, an aggregator’s security approach matters for two key reasons. First, any data loss poses significant reputational threat. Second, data connectivity relies on the FI’s comfort with an aggregator’s security. For fintechs, an aggregator’s security approach matters for two key reasons. First, any data loss poses significant reputational threat. Second, data connectivity relies on the FI’s comfort with an aggregator’s security.

Financial institutions and technology firms should ask data aggregators several important questions regarding their security protocols:

• How is your data protected and stored? What methodologies are used?
• What are your data retention policies and what happens to the data when a customer terminates or deletes an account?
• How is data transmitted?
• Is your annual System and Organization Controls (SOC) report available for clients to review?

4. Changing Regulatory Environment

With anticipated commentary from the CFPB, the expectation is that there will be an emphasis on the open and free access by consumers to data that they own.  There are many organizations who take action to block aggregation activity whether due to security concerns or infrastructure issues.  The CFPB is expected to recommend that organizations make efforts to move to standardized structures and data formats, with the ultimate goal to remove credentials from the marketplace.  

Considering these anticipated directives, it becomes increasingly important to understand the source of data connection requests, the purpose of the connection, and the protocols that exist to protect and secure that data as well as any customer information.  

Meeting expectations, earning loyalty

Fast, clean, and wide-reaching data access drive innovations. For fintechs pulling consumer or SMB financial data, understanding the extent of these in a platform is critical. So too is understanding security and compliance as the stakes around consumer data handling grow.

In a competitive market, the proficiency with which financial institutions and technology firms obtain data can determine how consumers view their solutions. 

Working with a partner that can reliably aggregate data with built-in adaptability and security will help organizations stay ahead of technological advances. That assistance can provide durable financial applications to help enhance consumers’ experiences and earn their long-term loyalty.

Covid has reshaped shopping, not only in terms of going online to buy stuff, but also in terms of how consumers go about these purchases. 

The Amazon-minted one-click buy is not the only thing that’s in vogue, it seems. The subscribe button is clicking with consumers more than ever. 

In just under a decade, subscription business revenue grew by 437%, according to a survey by Zuora, a subscription software provider. The global subscription e-commerce market is estimated to reach a market size of $478 billion by 2025, growing at a CAGR of 68% during the forecast period 2019-2025, according to a report by WiseGuy Research Consultants.

When there are so many unknowns floating around, people may seek comfort in brands they already recognize and trust. That whole sense of serendipity you have when you go to a physical store is sort of lost in an online setting, And in that case, consumers may just be looking for a shortcut to get to the products they know and trust. Subscriptions can act as a solution.

“A time of enormous uncertainty may be leading people to value the stability and predictability of finding something they love and knowing they can count on its arrival on a regular basis,” said Stephanie Lemmerman, CFO of Recharge, a company that provides ecommerce subscription solutions.

Recharge was founded in 2014 with the goal to help Shopify merchants keep consumer interest even after a transaction was made. This led to the idea of a subscription product. Today, merchants can use Recharge to offer consumers a choice to make a recurring purchase. The software is designed to be pretty flexible. Some examples include monthly delivery of a pet food brand or a bimonthly shipment of 18 bars of caffeinated snacks.

One thing Recharge enables is consumers’ ability to adjust their subscription in real-time, including skipping or delaying shipments, and swapping products altogether. Oatly is one of Recharge’s customers. The merchant creates different oat drinks that act as substitutes for milk. Since oat milk isn’t at staple product level the way milk is, a service like this could help keep customers recurring — specifically those that might not have access to the product in their local grocery stores. 

Recharge’s software allows Oatly’s customers to choose how many times a month they want a delivery to be made and gives an option to pause, adjust, or cancel the subscription. 

The subscription set up process for merchants is also designed to be pretty easy. Recharge’s website claims it only takes minutes. Merchants also get analytics features which help them gauge how well their business is doing.

On the consumer side, customers can manage their subscriptions through texting. Users can text Recharge SMS to change anything that has to do with their subscriptions, including making one-time changes to an order. There’s also a customer portal, where merchants’ subscribers can log in and choose what they want their subscription package to look like through prebuilt templates.

As of May, Recharge says it serves 15,000 merchants and enables subscriptions for 20 million customers.

Recharge earns revenue by taking 1% + 10 cents of every transaction. Its standard account is free, while its Pro account costs $300 per month. The Pro account includes a customizable shopper portal, which lets merchants decide what the subscription service will look like to the customer. There are also more specific analytics features. Examples include the ability to see product SKU levels, which helps the merchant figure out which product is selling best, and media attribution, which lets merchants see how customers are getting to the site.

Recharge saw some significant growth last year, including an overall merchant subscriber growth of 91%, and its own revenue growth of 136%. Through its series B funding, the startup raised $227 million, which valued the company at $2.1 billion.

Merchants’ subscription growth is not just appearing in typical categories, like content streaming. Some of the biggest sector growth Recharge has experienced came from unexpected sources, according to Lemmerman. Merchants falling into beauty and care product categories, for instance, saw subscription growth of around 120%. Food & beverage merchants saw subscription growth of 100%. Pet food companies saw the biggest increase in subscribers at 147%.

But even if the subscription payment model starts cartwheeling into different industries, Recharge still has some challenges ahead. 

For one, Recharge’s success as a business is tied to that of the merchants it services. And in that case, the startup is sort of in a race with competitors to get to the most promising businesses first. That can be tricky, since it can sometimes be a bit of a luck of the draw scenario, as well.

Take Recharge’s direct competitor Zuora. Zuora is a subscription service that became a unicorn back in 2018. Zoom is among the merchants the company serves. The video conferencing tool started implementing the software in 2015. 

In its fiscal 2021 Q4 earnings report, Zuora reported that it saw a total revenue increase of 13% year-over-year. Like Recharge, Zuora makes money off of subscriptions and transactions. Its subscription revenue was $65 million — a 19% YoY increase. 

Another question is whether subscription software is enough to stand on as a payments company. Stripe, PayPal, Square, and others all provide subscription payments as just one thing on their payments menu.

Recharge may need to think about scaling its services to stay competitive. Recently, the startup rebranded itself from ReCharge to Recharge, which could hint at a goal to eventually add more services.

“Our original branding spoke just to the literal nature of recurring transactions,” said Shan Miller, creative director of Recharge.  “Recharge enables more than that – we help turn those transactions into valuable long-term customer relationships.”

The entire banking ecosystem has been upended and transformed over the past few years, and COVID-19 has accelerated that process by leaps and bounds.

Tearsheet’s Challengers Conference brings together senior leaders from banks, credit unions, challenger banks, payments firms, and firms outside of banking for a candid discussion about what the top firms are doing with products and services, strategy, talent, and customer acquisition to thrive in today’s unprecedented environment.

The Challengers Conference seeks to recognize companies and professionals that are forging ahead with new services and products to help customers save, move, and borrow money in the modern era.

Join us for one day online of insights and new connections with an influential group of decision-makers. 

We’ve got senior professionals from firms like Wise, Current, Upgrade, BlueVine, Credit Sesame, and more. 

The Challengers Conference 2021 is entirely virtual.

So, join us. Get your tickets here.

Visa has jumped onboard the NFT train, paying $150,000 in ethereum for a CryptoPunk 7610 NFT — a female Punk with a mohawk, lipstick, and green-rimmed clown eyes. While the purchase is not a significant investment for the company, what could it mean for Visa and the NFT market?

The NFT that Visa bought is one of 10,000 unique avatars from the CryptoPunk collection, made by Larva Labs back in June 2017 and stored on the Ethereum blockchain. Upon release, the avatars were available for free for interested collectors.

In a recent report, Visa described NFTs as a promising medium for fan engagement. This view was developed in the pandemic year, when entertainment and sports industries suffered measurable losses of income — an estimated $18 billion was lost in global sports revenue. This loss in revenue meant that the industry needed to develop new revenue streams. The NBA, in partnership with Vancouver-based blockchain company Dapper Labs, launched a blockchain based trading card system, called Top Shot. Fans can purchase highlight clips and digital artwork from their favorite teams and players, with packs priced as low as $9, which are often sold out. A Lebron James highlight, part of the NBA’s Top Shot collection, was sold for $387,600 earlier this year.

By March 2021, nearly six months after release, NBA Top Shot had done nearly $500 million in sales with more than 800,000 accounts.  This makes the soil fertile for a payment processor. With transactions ramping, Visa spots an opportunity. “Any digital transaction needs someone to enable it,” said Eric Christensen, the Chief Payment Officer at Digital River.

Visa’s strategy is to participate in transactions, from cross-border to e-commerce to push payments. For the payments company, NFTs represent a new commerce category.   “The ability to track and leverage a digital asset in multiple environments could mean exciting new opportunities in ticketing, gaming, music, art and beyond,” said Cuy Sheffield, the head of crypto at Visa, noting that the market is gaining momentum.

However, the NFT market is still in its infancy and extremely volatile, which has made it subject to heavy public skepticism. Often dismissed as a fad, valid questions about NFTs’ long term value and legitimacy are raised. But it is NFT’s authentication of digital assets that has piqued Visa’s interest and may mean the trend has legs.  “We believe that the ability to own and prove the authenticity and provenance of unique digital goods will have a lasting impact on retail and commerce, and strengthen their engagement with their customers,” said Sheffield.

There is optimism about the potential of converting assets into digital tokens, transforming industries like real estate and auto ownership and financing. For Visa, it’s still early.

“Think back to the early days of social media — it was hard to imagine that every major brand would have an actively managed account and interact directly with these online communities,” said Sheffield.

“Similarly, while Visa is one of the first major brands to do so, we expect that over time, many brands will recognize the value of collecting NFTs to express their brand identities and connect with passionate communities of creators and collectors.”

Additionally, NFTs can open new revenue streams for small and medium sized businesses, making the transfer of goods faster, easier, and more efficient. Sheffield noted that with the ecommerce boom, SMBs have gained the ability to reach global audiences with their products, though with high upfront production and shipment costs. “NFTs give small businesses an opportunity to harness public blockchains for producing digital goods — which can be delivered instantly to a crypto wallet,” he said.

How far will Visa’s dedication to project NFT go? Well, Visa will likely purchase more NFTs to add to its collection, Sheffield confirmed, with the objective of supporting a diverse group of artists and creators. The company plans to enable its ecosystem to support Visa products for this new category, too.

 “We are building products and partnerships that help issuers, merchants, brands, and content platforms participate in NFT commerce – we don’t have specifics to share quite yet, but look forward to sharing more in the months ahead,” Sheffield said.

Last month, Visa entered into an agreement with Zipmex, a trading platform for crypto-fiats, in a bid to make crypto transactions more convenient. With this, Visa aims to provide further crypto payment integration in the Asia-Pacific region. During an earnings call in January 2021, Visa reaffirmed its commitment to building cryptocurrency payment and fiat on-ramps in a bid to support digital asset trading.

The NFT market has been growing lately. The first half of 2021 saw a record $2.5 billion in NFT sales, up from just $13.7 million for the comparable period in 2020. On August 28, OpenSea, an NFT marketplace where 98% of ethereum based NFTs are traded, set an all time weekly trading volume record, hitting $1.14 billion.

Fast, a company with one-click checkout options, saw a lot of growth over the course of Covid, when online shopping became the new go-to for so many consumers. In one year, it went from two employees to 100.

But finding new talent means knowing how to look. That’s where Peter Grassi comes in. As senior director of talent acquisition, he’s in charge of hunting down and fishing out the perfect candidates.

Before joining Fast in 2020, Grassi spent almost twenty years in the gaming industry, working at companies such as Sony, EA, and Zynga. The two industries actually have a lot of similarities, he said, which made his transition to fintech much easier.

“Mobile gaming’s a constant area of development, where you’re beta testing continuously. And I think also on the fintech side, especially from what I’ve seen in product management here at Fast, there’s this same sort of concept of principles,” said Grassi. “After [one-click] checkout was launched, for example, we were continuously looking at data and feedback loops to see what it is our users cared about and where we could build up further features in the years ahead.”

Though Grassi’s breakfast may be Spartan, his day definitely isn’t.

Sifting through candidates, jumping through meetings, and still finding time for nightly art classes, here’s a day in his life.

Morning: Newsfeed, Slack, and a Spartan breakfast

I really have a pretty simple routine in the morning, by design.

The first thing I do every day is check the NASDAQ. I don’t know why. Maybe that’s some habit out of my years at Zynga when the company was public. I liked looking at the stock price, and I think I still have that habit. So I’ll check the NASDAQ and NYSE. I’ll sometimes also put on Bloomberg News and see what’s going on there.

And then what I’ll quickly do is scan a little bit of Slack activity to just get a sense of the pulse and climate of the day.

It doesn’t always mean that I’m responding to everything. Oftentimes, I kind of want to look at some content, get a sense of some themes of the day, and then reflect on those before I actually start to engage and respond to things.

I don’t really have much of a morning ritual in terms of preparing breakfast and reading The Times, or something like that — although I like the idea.

I tend to start the day in a little bit more of a Spartan way, with a cup of coffee and a pastry.

It’s always been that way.

Breaking up the day into beginning, middle and end

I like to deliberately break apart the day, so it has a beginning, a middle and an end. And that means actually blocking out a lunch break and coffee break into my calendar.  I encourage members of my team to do the same, so that they can have that time set aside.

Because when everyone’s scheduling, they’re looking for availability. And then they can be mindful of times that someone has personal commitments or things they’d like to do.

Diving into the workday with a train conductor’s attitude

Typically, outside of meetings that are happening throughout the day, there’s a lot of different situational work because we’re dealing with a lot of candidates, both here in the US, all across North America, and globally, as well.

And these candidates are in different stages of the process and funnel. They could be candidates that have received an offer from us, and they could be candidates that are completing a series of interviews.

And so given that we have a bit of a big recruiting team, I’m also the person supervising all that activity to make sure everything is moving forward: unblocking things for both candidates and the recruiting team, and making sure approvals and processes are happening in the right cadence.

I’m kind of like a train conductor, where I’m looking at a lot of different things happening across the deck, and leaning in to help in a proactive way, and in sometimes an improvised way. Meaning, I do have my set of meetings throughout the day. But I also like to replicate what used to be the ‘Hey, what do you think of the person next to you?’ approach.

And so often what I do there is jump onto various Zoom calls with members of the staff and ask things like, ‘Hey, how’s it going? And how can I help?’ it can also be more specific things like ‘How’s the candidate thinking about our equity? What are their immigration needs that we need to be mindful of? And how can I help with some of those elements?’

So there’s a little bit of situational work as the day begins.

Catching up with the recruiting team and the business

There’s also somewhat of a cadence of repeatable meetings or one-on-ones that could be team updates and work of that nature. So that’s a little bit of some of the tactical things that happen throughout the course of the day.

Because we’ve got a live product out there, Fast has teams cast in different lanes that are focusing on different aspects of the business, whether it’s checkout, identity, or dashboard.

These teams have needs that are continuously evolving. So to further sharpen what it is they’re looking for on a talent basis, I’m also checking in with the business, making sure that the searches that we’re doing are still relevant and current, and that the spec doesn’t need to change.

So I like to really engage with the business as much as possible as a partner, as a collaborator, and as someone that can help.

Lunch break: stepping away from the screen, and exploring new ideas

I like to take a walk outside during my lunch hour. I find that responding to different stimuli helps me feel how the day is progressing. I also find that good ideas tend to come when I’m away from the screen and allow myself to just process.

Engineering the perfect job descriptions — especially for engineers

I think it’s important that once you’ve got a job posted, it doesn’t become something that’s idle. Just like we continuously look at data and consumer behaviors to shape the features that we drive, we also need to do the same with job descriptions.

The descriptions should be somewhat dynamic. You need to look at how the business is changing, as well as how candidates are responding to content, which also means figuring out different ways to engage candidates in what we’re presenting to them.

In the early days, we had a propensity to hire developers that have experience with specific tech stacks. Because when we were really small there really wasn’t anyone there to mentor or to train up new hires — at the time, we only had around 10 engineers.

Today, though, we have well over 50, I believe. So we’ve kind of expanded our requirements to really attract talented engineers that have a wide range of experiences. That could be by company, by industry, by geography, or by technical expertise.

So we spend a lot of time calibrating our interview panels, making sure we can catch the right signals from someone that might not know the tech stack that Fast is on, but can quickly learn and come up to speed.

The more specific you are in the job description, the more specific the candidate tends to be. But that can be somewhat narrow. I consider the job description like a guide, not like a menu in a restaurant. Someone  doesn’t need to fit the exact criteria to be a great fit for the company.

Wrapping up the day, but not the brain

I like to have a period of time after the day has concluded to wind down, decompress, and let things be still for a moment, and then make a deliberate transition to doing something specific, whether that’s preparing dinner, or getting groceries.

And that means turning off the computer, and not opening Slack or checking emails — which tends to be a slippery slope. I also like to take a walk without my phone — that’s also a way of releasing.

I’m also transitioning to different activities that I only do at night. I took a class in virtual reality through the SF Art Institute here in San Francisco, for example. And that was really great because I met artists and other people doing completely different stuff than what I do during the day, with different perspectives and different things they care about. And I found that to be really great.

In general, I take a fair amount of classes through City College or SFA — usually art classes.

I’m a person with a ton of different interests and a lot of projects. I’ve got a YouTube channel where I talk about vintage comic books, for example, which is wildly different from anything I do during the day. So sometimes I’ll shoot those videos at night, and I’ll post that content.

I’m also very active in the collectibles community, at large. So quite often, I’m on online bulletin boards, chat groups, or social media. So I’m catching up with very niche content in the collectibles space in the evening, that speaks to the things that I like collecting and doing, which is a lot in the whole spectrum of collectibles I’m active in, including everything from rock and roll memorabilia, to vintage video games, to vintage comic books.

And these things really help me unwind, relax and engage in something completely different. I pack as much of that into the evening as I possibly can.

I’m a person who stays up late because I like to. In fact, when the lights go out, I’m like, ‘Oh, there are like three other things I wish I did and saw, but I didn’t have a chance to get to.’

Whenever you hear the word NFT, you may instinctively think of a 10-year-old meme of an animated flying cat with a Pop-Tart body, or a digital art piece selling for $69 million for reasons that still aren’t quite clear to you. But in a few years, the word NFT may conjure up a completely different set of images in people’s heads.

That’s because tokenizing digital art and collectibles is just one of many possible applications for this novel technology. In simple terms, NFTs are digital certificates of authenticity. This means that any item that may benefit from being more easily verifiable and interoperable with the blockchain could eventually become an NFT.  

This has implications for various industries including real estate, advertising, healthcare, fashion, and sports. Yet, finance is the sector that may benefit most from the emerging use cases of NFTs in the coming years. Everything from insurance and bonds to fraud prevention and debt management could end up being verified using blockchain-based NFTs.

Everett Kohl, founder of NFT marketplace Dbilia, says we will gradually see more people viewing NFTs as powerful tools for recording and verifying the provenance of business contracts, especially in finance. Consumers could use an NFT to confirm the existence of an insurance policy or a land title record to prove ownership of an asset. This would be especially useful in jurisdictions that rely too much on paper records or suffer from corruption. “Using an NFT to record ownership provides a proof that can’t be taken away, which gives an extra level of certainty,” said Kohl. 

Existing use cases of NFTs are primarily found in the worlds of digital art and gaming, where NFTs represent ownership rights of the underlying asset. However, these can also be considered as financial use cases, according to Victor Zhang, founder and CEO of AlchemyNFT.

Zhang points out that we’re now seeing the fractionalization of expensive NFTs such as digital art pieces, which has turned individual NFTs into investable products. Fractionalization is the process of splitting up ownership of a single, high-value NFT, so that several people can simultaneously invest in it – kind of like buying shares in a company. Each fraction represents partial ownership of the NFT.

New models are also emerging around gaming NFTs. Yield Guild Games is a community of blockchain enthusiasts who create NFTs representing digital assets, such as a virtual piece of land in a video game. An investor can buy this virtual property and rent it out or sell it to players who need to use the land for certain in-game missions and tasks. Millions of dollars have already been invested in these virtual properties. 

Beyond these existing use cases, NFTs could represent or record any tradable and non-fungible rights in the future. They could be used to represent a variety of financial instruments, including loan agreements with banks, bonds, insurance policies, and asset packages. 

Zhang adds that in the future, NFTs will offer widespread digital identity verification, which would enable real-time, one-to-one transactions between individuals, and eliminate traditional middlemen, including investment brokers, credit card companies, and banks. “I could make an offer directly to an NFT owner, who could then accept my bid without intermediaries,” he said. “This type of transparency and ease of use could be extended to other digital assets, which would disrupt the existing financial system.”

The most immediate future use case of NFTs that could potentially take off over the next few years is that of collateralization and lending, according to Sasha Fleyshman, portfolio manager at Arca, an investment management firm for digital assets. “Being able to post an NFT as collateral to take out a loan seems like a natural fit in the finance space,” he said.

Fleyshman adds that another potential use case will be the ability of business owners to digitize and split their revenue into separate categories. For example, restaurant owners could choose to separate the revenue earned on their alcohol sales from their food sales. This would also allow investors to get a more pointed exposure to the part of the business model they are most interested in.

Progress won’t happen overnight

There seems to be a lack of consensus on how long it would take for these financial use cases of NFTs to be implemented. Although some experts predict that NFTs will become commonplace across many industries including finance in the next 3 to 5 years, others believe it could take several decades before we see widespread adoption of NFTs for financial purposes.

Of course, the speed of adoption would vary with the type of use case. While we’re already seeing NFTs being sold or auctioned for the funding of new DeFi protocols, their large-scale use for debt, credit, and larger fundraising initiatives will take a considerable amount of time to materialize.

The use of NFTs in areas of finance such as bonds and insurance would be quite complicated, as it would require complex smart contracts that are interoperable across platforms. “You wouldn’t want a 100-year bond to be issued on a blockchain, only to have that blockchain go out of business before the bond matures,” said AlchemyNFT’s Zhang. “Deeper use cases for NFTs in finance will need more structure to handle these complexities, and to give the industry confidence to invest in these assets in the longer term.” 

The rate of adoption of NFTs would also depend on how quickly governments are able to recognize their potential. Bill Sebell, director of ecosystem development at open-source blockchain platform XinFin, says that at this point, the limiting factor is not the technology itself, but rather the challenge of getting government agencies and established businesses onboard with this new technology.

“As soon as people recognize there is value, they will race to create the front-end UI, the strategy, and the marketing for this tech,” said Sebell. “The first mover race is still on, and whoever creates the best user experience for this technology will likely win market dominance.”

Mainstream adoption isn’t guaranteed

Although the NFT industry seems to be headed in the right direction, there’s still much ground to cover and many obstacles to overcome. There are a number of conditions that must be met for the real potential of financial NFTs to unfold. Perhaps the most important one concerns regulation. 

The U.S. regulatory climate has created uncertainty around blockchain innovation, which could seriously impact NFT innovation as well. Regulatory bodies such as the IRS and the Federal Reserve need to consult the existing community of creators on how best to achieve balanced regulation that doesn’t cripple innovation.

“If we face the same stringent regulatory policies that China enacted, we will see a big impact on the NFT market,” said Anthony Georgiades, co-founder and COO of Pastel Network, a blockchain-based NFT platform. “The inherent decentralization in NFTs makes them a very useful solution for various applications in finance – but if we lose that decentralization, their advantages are seriously undercut.”

There’s also a need for a drastically improved user experience that increases the accessibility of NFTs for the average consumer who isn’t crypto-savvy. Tal Elyashiv, founder of blockchain-based venture capital firm Spice VC, says that creating an NFT currently involves a complex and lengthy process that mirrors today’s disjointed crypto experience.

“NFTs currently have a crypto-esque user experience, which is not always user-friendly, especially for those who are crypto-illiterate,” said Elyashiv. “This needs to evolve to an Apple or Amazon Prime type of experience, if widespread adoption is to take place.”

Another necessary condition is the provision of simple crypto onramps for users, so they can easily buy and sell NFTs. “The onboarding from fiat to crypto is a huge barrier right now that could benefit from a smoother process,” said Elizabeth Strickler, founding director of the Blockchain Lab at Georgia State University. “Most NFTs are held on the Ethereum blockchain, so there’s a need for greater adoption of Ethereum by the average person.”

Closely tied to this are concerns around the environmental impact of NFTs, since each Ethereum transaction currently consumes a large amount of electricity. However, by the end of this year or early next year, Ethereum is expected to change its consensus mechanism from Proof-of-Work to Proof-of-Stake, which could help reduce its energy consumption by as much as 99.95%. Moreover, other blockchains that support NFTs – such as Solana and Tezos – are already much more energy-efficient.

The road ahead

At present, NFTs are static, and they mainly represent digital collectibles. Spice VC’s Elyashiv believes that the industry will eventually move to a point where NFTs become dynamic, evolving and updating in real time with the item they represent throughout its lifespan. The introduction of dynamic NFTs would allow developers to build a new class of auto-updating assets that are more fluid, accessible, and data-driven. This would expand their utility far beyond digital art and collectibles.

“NFTs are the safety deposit box of the 21^st century,” said Elyashiv. “For decades, people have trusted banks to keep their most valuable items in an airtight box that requires a physical key or a code to enter. Instead, the NFT can act as a digital box that safely holds all of a person’s precious possessions, including wills, testaments, jewelry certification, and important financial documents.”

Provided that their growth is not handicapped by restrictive regulations, NFTs could have a major impact on finance and fintech by tokenizing a wide range of assets and connecting real-world finance origination to DeFi markets.

AlchemyNFT’s Zhang predicts a future where all tradable and non-fungible rights will be tokenized via NFTs, which would prevent them from being locked in a single platform. These tokenized rights could be traded on the market and integrated across systems, forming frictionless global markets that are effortlessly integrated. “While all this may sound a bit pie-in-the-sky, finance has always been one of the most creative industries when it comes to experimenting with assets, derivatives, and emerging markets,” said Zhang.

“There are certainly entrenched interests that may not see the benefit in these decentralized tools, but the writing’s on the wall. The momentum is building, and it’s only a matter of time before NFTs-as-utilities make inroads across even the most conservative corners of the finance industry.”

It’s hard to look at anything these days outside of the prism of the environment. 

The financial services sector is coming around to putting the environment near the top of the agenda. Major financial institutions like JPMorgan Chase and Citigroup have made commitments to become carbon neutral and the Net Zero Banking Alliance includes firms like Barclays, HSBC, and Bank of America. According to the UN’s 2021 SDG Report, the average annual spending on climate finance is about $48.7 billion. 

FIs are getting the gospel of green finance and acting deliberately to change their business practices to make them more sustainable. Morgan Stanley, JPMorgan Chase, and Citigroup have all said they won’t fund arctic refuge oil drilling. An increasing number of lenders and investors are making decisions in accordance with ESG criteria.

This move towards green finance isn’t lost on fintech firms, either. Many are partnering up with incumbent financial firms to neutralize carbon emissions and accelerate their move toward sustainability. 

All these efforts are being met by consumer demand for environmentally-friendly products and services. Younger generations prefer to do business with companies that share their own values, pushing the industry towards exploring new green products and services.

Green finance speaks to the future of financial services. 

Tearsheet is launching the Green Finance Newsletter to cover the news and analysis surrounding the move toward environmentally-oriented financial services.

Subscribe here to the Green Finance Newsletter.

By Nigel Vaz / CEO of Publicis Sapient 

The financial services sector is facing unprecedented digital disruption. New entrants with agile processes and modular technologies are raising customer expectations. It’s essential that legacy financial institutions understand what’s driving these changes. By embracing digital business transformation and changing the way financial services institutions think, organize, operate and behave, they can turn threats into opportunities while maintaining their competitive edge.

Successful fintech startups knew banking was ripe for disruption. Now it’s time for established financial institutions to learn from these innovators. They can start by taking stock of four forces of connected change that are reshaping financial services today: customer behaviors, new technologies, evolving business models and societal impact.

Subscribe: Apple Podcasts I SoundCloud I Spotify I Google Podcasts
The following excerpts were edited for clarity.

Customer Behaviors

We now live and work in the era of the customer. 

Digitally enabled companies across sectors are delivering frictionless and rewarding products and services. This raises expectations across the board. With the help of a customer data platform, banks can collect and organize customer data for unprecedented insight into their needs, desires and behaviors. If banks cannot deliver digital experiences that rival what banking customers are accustomed to in other industries, they will lose business to fintechs that can.

New Technologies

Technology affects every aspect of banking today. And the rapid rate of technological change is driving the imperative for digital transformation.

Entering a physical bank is becoming less necessary. Digital channels will be the primary way customers interact with their financial institutions. As the public becomes more comfortable managing money online, banks need to serve their customers through the digital channels they are demanding, especially with the proper infrastructure to support them.

The right technology and data vastly improve a financial institution’s view of its customers’ needs and behaviors, as well as its ability to deliver relevant products and services.

Evolving Business Models

Specialist fintechs are cannibalizing even the world’s most established, diversified financial services providers.

Rapid technological progress has created an extraordinary gap between organizational change and technological change. But this exponential evolution of technology has also given rise to a variety of new business models that do not rely on owning supply chains or inventory. Platform business models, for instance, are revolutionizing the world of business by facilitating exchanges between various players in an ecosystem.

Through embedded finance, the integration of banking services into a nonbank’s product, financial institutions can support customers through brands they already trust – in a manner that’s seamless.

SPONSORED

Societal Impact

Today’s customers increasingly want to do business with organizations that strive to make a positive impact on the world.

A sense of purpose galvanizes a financial institution’s talent and attracts customers who share in their vision. Financial institutions have an opportunity to expand their services to unbanked populations around the world. Firms can establish strong environmental, social, and governance (ESG) policies to govern their own choices and investments and reduce dependency on energy-intensive products and practices.

Every Organization Can Become Digital At Its Core

I firmly believe that every organization can become digital at its core. It’s not just about technology. It’s about reimagining your business in the context of a world that’s entirely digital.

It may appear that legacy technologies and regulatory burdens would hamper an established financial institution’s ability to undergo a comprehensive, successful digital business transformation. But they can start by building and maintaining a “digital moat.”

The idea of a digital moat grew out of the phrase “economic moat,” popularized by Warren Buffett in the 1990s in reference to a company’s ability to maintain competitive advantages to protect long-term profits and market share.

Its contemporary equivalent, a digital moat refers to the sum of capabilities that enables an organization to create value and stay competitive in a digital world. Companies can establish a strong digital moat by developing their SPEED capabilities – strategy, product, experience, engineering and data and AI – to create powerful digital products and services.

In banking, this means adopting the latest cloud-based technologies, which enable the creation of innovative applications and services that improve customer lives and experience. But it also means tearing down silos across an organization so every department gets a full view of the customers and their needs. It means making sure call centers can leverage important insights the same way tellers or money managers would. Everyone and every tool at the bank need to be part of the digital business transformation effort.

The beliefs and behaviors of digital business transformation must permeate every part of an organization. There are several steps financial institutions can take:

1) Stay close to the two ultimate goals: creating an organization that can continually change at pace with the changes around it; constructing the capability to identify and realize value for your customers and business through digital

2) Align your team around the shared vision

3) Get buy-in from key stakeholders

4) Clarify which behaviors will result in the desired outcomes for the company

5) Identify and communicate quick wins

6) Iterate: build, test, learn and repeat quickly

7) Make sure your transformation teams are cross-functional, agile and empowered

These approaches are second nature to successful fintechs. But financial services institutions can learn from these digital challengers. The legacy institutions that internalize the lessons of digital business transformation will be well-positioned to thrive in the next era of financial services.

The following was produced by Tearsheet Studios. We worked with Fiserv, a financial services technology company, to create a four part podcast series on the role and changing nature of data aggregation in the financial industry. 

Data is the foundation of the financial system, making the smooth aggregation of it an imperative task. It means streamlining the sum of an individual’s financial life into a single view, and creating a user experience that uplifts the data to benefit both the individual and the bank — while simplifying the complex, and keeping it all secure. 

Subscribe: Apple Podcasts I SoundCloud I Spotify I Google Podcasts
The following excerpts were edited for clarity.

Kevin Hughes, Fiserv: I’m Kevin Hughes, and I am the senior product manager for the AllData product suite, which represents all of our aggregation services. At Fiserv, we’re part of an organization called Digital Payments. I’m responsible for product strategy, roadmap development, engineering priorities, and working with a lot of the data sources and industry organizations to make sure that we’re all aligned both from a tactical and a strategic standpoint. 

I’ve been here for nearly six years. Before that, I’ve been involved in a number of different areas within the financial services industry: started my career as a product manager at a regional bank; managed back office operations for a large wealth management firm; and then other product management type roles, particularly in areas of emerging products, or looking at new ways to leverage existing product frameworks into new markets. 

And that served me well because we’ve really seen quite an explosion in the number of different applications that use components of the engine that we provide, and we’ve been really focused on building that foundationally. I’ve been able to draw on a lot of the experiences that I’ve had in leveraging technology into new markets and new applications.

It was Hughes’ experience managing both money and people that led him to the role of senior product manager at Fiserv. It’s his understanding of customers that informs his role everyday.

Kevin Hughes: As we look at developing a roadmap and strategic direction, the key thing is understanding how customers are ultimately going to use what you’re doing, and how to structure things in a way that really adds the most value to that overall experience. Taking in that kind of perspective really prepares you well for this type of role.

Data aggregation can at times seem complex, and incoherent to anyone outside of it. But in fact, innovations in aggregation shape our financial lives and make them easier — more than we realize. What’s something that aggregation has made possible? 

Kevin Hughes: Two or three years ago, if you were applying for a mortgage, even if you were applying online, you were gonna upload copies of your statements; you could do it electronically, but you’d still upload the statements in, and type in all the different stuff. 

When you look at that process today, almost every mortgage lender has a link, and instead of uploading statements, you enter information into the application, where they use the technology behind the scenes to connect to that institution using aggregation and they pull in your account and transaction information as well as your balances and statements for the past two or three years. And they do it in session, so that you can get a response a lot quicker. 

A couple years ago, we went through this process with Fannie Mae, in their Day 1 Certainty program. It was a fascinating process to hear where they wanted to be from a technology standpoint, and how organizations like Fiserv, and our aggregation product AllData, could help them with that.

There’s a lot of discussion in Washington about regulatory and legislative action on the horizon. The Data Protection Act enacted in 2018 set forth the ‘data protection principles’, which all personal data handlers must follow. That’s impacting Fiserv and other players in the financial data industry.

Kevin Hughes: One of the good things here is that the number of true aggregators in the space is relatively small — it’s not an easy industry to break into, per se. It takes certain expertise, certain resources and technologies. Fiserv has been in this business for almost 20 years, so we’ve built the framework, the process, and the methodologies. 

What is really changing are a couple of dynamics. One is the growth in the number of ways this technology is used — data aggregation is used today in ways we wouldn’t have thought about five years ago. The other is the number of applications — and it’s growing. That’s caused issues for many of the data sources, particularly the larger institutions that have seen a big increase in traffic.

The technology has become more sophisticated. So there’s access to more sensitive data. There’s been a push around the security of that process, as well as the underlying security of what happens to the data when it gets to where it goes. 

And, there is the focus on consumer orientation. There’s a recognition that consumers want to use this data — it provides a significant value to them to be able to connect data from one institution to another. There are so many different ways that it’s being used. There’s really a need for the financial institutions who are the core providers of this data to really make sure that that data is first, protected, and second, that it’s being used with the consumer’s consent so that it’s not being sold for other purposes.

The regulatory focus is about trying to create the balance between open access for consumers to this data, while at the same time protecting the consumer and protecting the sources of that data from different external threats.

The regulatory efforts in the market are about keeping data both open and secure: giving consumers open access to their valuable data, while also keeping it and its sources protected. And that means standardization.

Kevin Hughes: Our banks and credit unions look to Fiserv as an organization to provide them with updated technology, and with ways to do things that they can essentially buy off the shelf and implement pretty easily. We’ve looked at that in terms of developing products and services that we have. Our role as a service provider is really to translate that functionality, and that of those applications into something that’s consumable, while still offering value for these banks. 

But the move to technology — specifically around banking and payment APIs — is not an obvious move for all financial institutions. While the major banks have allocated budgets to technology and transformation, this scaling up may be out of reach for the smaller and mid sized ones.

Kevin Hughes: Banks and credit unions as a whole operate in very different markets, and some of them have very different strategies. We have a lot of conversations on a broad level with many organizations around digital strategy, safety and security. If they could, some of them would implement that kind of standard API solution on their own. But at the same time, there are others that we have to convince about the value of having a solution like that in place.

Some banks or credit unions are very small, serve a very local market, their client base doesn’t have as complex of a financial portfolio as others, they may not be as engaged with digital solutions outside of their own organization — so they don’t necessarily see the impact or see the threat.

It’s for those banks and credit unions who are ready for the next step, but can’t go it alone, that Fiserv created AllData Connect. And fun fact — it even won the Innovation Award at Tearsheet’s 2021 DataDay Conference. How is it making an impact for those institutions? 

Kevin Hughes: One of the key components of this standardization is around API connectivity. When it comes to reliability of data, it helps with managing traffic, and understanding and gaining insight. But at the same time, for a lot of organizations, it requires support and maintenance. So you can’t just plug in an API per se.

What AllData Connect essentially does is take the framework that’s built on the open authorization networks that these banks are using as their technology background, while using our core AllData technology to provide the front end for our banks and credit unions — and it’s very easily implemented.

When a client of ours signs up, we’ll host where the customer validates their account by providing their credentials — so the credentials no longer have to be shared with a third party application. We’ll get the same information as the big banks, then we’ll turn around and provide an API with that data back to the third party. But at the same time, we’ll capture that same level of insight and control that they would get if they developed their own open authorization framework.

The pipeline continues to grow at a pretty rapid pace, we’re seeing a lot of engagement — they understand the value, they really see how it really will assist them in a number of different ways.

In the changing treatment of financial data, standardization goes hand in hand with open API access. Both moves promote greater reliability, security, and connection. But screen scraping may never fully go away.

Kevin Hughes: I think screen scraping gets a worse reputation than it deserves, because there are some bad players who have taken advantage of that methodology and the lack of control around it to create issues for different banks. 

Screen scraping as a term covers a really wide variety of different different ways of connectivity — there are a lot of ways that it’s done behind the scenes that are more than just data aggregation.

There are a lot of smaller organizations who look at the way that we do things, and can get beyond that kind of negative connotation around screen scraping, and realize that if the right partner is doing it and it’s done the right way, it really is as secure as any other methodology. We as Fiserv get a little bit more leeway there, because we’re a bank technology firm, and have those security processes and protocols around our data. Our clients understand what we do and why we do it, and in many cases they are happy with us continuing to do that. 

We do want to see the industry migrate to more of an API based solution as a whole, but I do think we have to recognize that there is still a place for some of that third party directed connectivity. If it’s done correctly, safely, and securely, it can be done with very limited impact to the bank itself. And quite frankly, there are some banks that would prefer that that continue.

With six years of experience in managing data aggregation services under his belt, I asked Hughes: what’s the most challenging part of his job?

Kevin Hughes: The organizations that we’re seeing a real uptick in our engagement and sales with are really true fintech type organizations: they are very nimble and tuned to meet very specific needs of a customer segment. They require a partner who can essentially match their agility. We’ve been working on a lot of initiatives here to streamline some of the processes because we recognize that when an organization comes in, they don’t want to wait for development to occur or for enhancements to be made; they want to be able to take it, plug it in, and be in market in 30 days. 

The biggest challenge is trying to be proactive, think ahead of the trends, and identify some of those things to say, ‘Hey, this is a way that we can do some optimization now that will prepare us for these types of clients coming in.’

For all players in the industry, the pace of change is faster than ever before, and formerly inconceivable use cases are becoming normal parts of reality. Where is this field heading? 

Kevin Hughes: We’re seeing a lot now the need for immediate or real time account verification — to facilitate a transfer, payment, or point of sale purchase. We’re doing a lot of work right now utilizing this technology that we have to continue to have a customer engaged by giving them the capability to link an account immediately. 

When we’re online, and we’re within an application that doesn’t do what we need it to do within 30 seconds to a minute, we’re on to the next thing If you can do something and deliver something in a very quick turnaround while the customer is in session, you’re more likely to keep that customer engaged. So it’s really about migrating more from informational to transactional, and that’s where we’ve seen a lot of growth, particularly in the last few months.

Digital ad spending in the financial sector is likely to slow down in 2021, according to Insider Intelligence. The rapid rise of fintechs will likely force the industry’s incumbents to reel back on ad spending. Instead, they’ll turn their attention and funds to technological innovations to compete with fintechs. 

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On the podcast and on our site, we’ve explored the world of employment data that’s opening up — it’s opening up to allow new forms of lending and financial services that use employment data as a major input. So, imagine a lender wanting to loan money to an Uber driver who doesn’t have a traditional income source. 

But what if the payroll firm didn’t supply just data to third parties? What if the payroll provider got into fintech itself? That’s exactly what Ceridian is doing with its Dayforce Wallet. The company processes $300 billion yearly in paychecks and it’s helping its clients and their employees tap into their salaries earlier and more frequently than the traditional pay cycle. 

Seth Ross is the new GM of Dayforce Wallet and Consumer Services at Ceridian. I first met Seth when he was at Green Dot, heading up the firm’s banking as a service platform. He joins me on the podcast to talk about Ceridian’s move into financial services and more broadly, to chat about the potential of embedded financial services.

Seth Ross is my guest today on the Tearsheet Podcast.

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The following excerpts were edited for clarity.

My name is Seth Ross. I am General Manager of Wallet and Consumer Services at Ceridian. Ceridian is a global human capital management software business — we do HR software and payroll for about 5000 clients around the world. And my job is to help build the business that we have created to deliver services to the employees of those companies. And the first product that we came out with was a product called Dayforce Wallet, which is a way for employees to get access to their earnings anytime on demand. It’s a really exciting product and growing like crazy.

On average, our clients have about 1000 employees — kind of the higher end of the market and moving up. Our bread and butter has been that mid market. But we’ve been growing our average customer size consistently over the last several years and have won some very large accounts recently.

Sectors

We’ve got a really broad range of clients in a lot of different industries. I can speak to Dayforce Wallet: we have particular strengths in retail, manufacturing, and in healthcare — those are segments with often large populations of workers, many of whom may be hourly workers. And so, those tend to be a segments that our solution really resonates well with.

Payroll and financial services 

I’ve been an advocate for embedded financial services for a long time. I think the leadership and really our CEO, David, also identified that we had a real opportunity here. As a payroll provider, we provide a critical interface between the employer and the employee. We move over $300 billion of funds every year, just as a payroll provider. And so the opportunity to establish relationships directly with the over 4 million employees of the companies that we work with presented a really unique opportunity to make work life better. Ceridian’s motto is to make work life better. And I think there’s a real opportunity, as embedded financial services develop, that being at the source of funds, having integrations with the employer, and having direct connection to the employee to do things for these employees to make their lives better. Dayforce Wallet enables people to get their pay when they need it, on demand.

Early wage access as wedge

The philosophy is that this is our initial product. Like any great fintech, what you need to do is have your wedge product, the thing that you’re going to do better than anybody else, that’s going to earn people’s trust. We have this unique opportunity because of our architecture that we’re able to provide pay on demand, which is honestly a killer app for people. 

You think about the way many neobanks built huge businesses on getting paid two days early. Well, we’re building a neobank around getting your pay anytime you want it. Forget two days early, it’s literally any time. That’s just a tremendous foundational value proposition to start from, and then you build that trust with those users, with those people, and you show them that you have their backs. You show them that you are creating solutions that make their lives better. I think that gives you the license, the trust, to do more for them. Fundamentally, banking and financial services are about trust. And the companies that succeed will be the companies that really nurture that trust and honor the trust that those users place in them.

How getting paid early works

Dayforce Wallet is offered through employers. And employers have the ability to configure the way the Dayforce Wallet is offered to their employees. So if they wanted, they could set a parameter around what percentage of pay they want their employees to have, or how many requests they want to make per pay period or per time period. That is all customizable for the employers, as well.

Go to market

It is B2B2C. There’s a significant amount of education that we provide to our direct clients. We provide a toolkit of how to talk about this type of solution with your employees and how to best get the word out to your employees. So we do a lot of work around that. We’ve recently created some customized videos for clients to use to communicate. But, we found that employees really appreciate and like this benefit that companies offer them. And so, we’ve got a lot of companies with really strong adoption for this type of service.

If you think about it, with every single one of our customers, we have the opportunity for them to be a direct deposit customer. In my old job, I was constantly dreaming and thinking up: how do I get this user to become a direct deposit customer? Well, for us at Ceridian, you can tap a button and you can have your entire pay put onto this card, because we run that payroll. And so that’s a really privileged position and it is really exciting. Frankly, that was one of the reasons why I came to Ceridian nine months ago, having been in the banking as a service and embedded finance space. 

I used to be at one of the pioneers in the banking as a service business, and I got to know the things that really make an embedded financial services solution really work. One of the things that I learned was if you can be close to the source of funds, or you can get a user to make it a primary destination for their earnings, then that’s the Holy Grail. We have that in spades given that we’re already moving over $300 billion a year in payroll funds for our clients. And then on top of that, add our channel for acquiring customers — you’re looking at neobanks today that are spending hundreds of dollars to try to acquire customers. Well, we’re able to do that through privileged channels directly through employers, without the trench warfare of online advertising to try to acquire customers one at a time. It’s really a compelling model for us.

Banking as a service

I think we are in the early innings of embedded finance. There’s actually a great article by Alex Johnson at Cornerstone. He talks about what we went through in banking as a service as sort of the atomization of financial services and breaking financial services down into their individual pieces. And then the reconstituting of financial services in new clusters and new kind of centers of gravity — that’s how he puts it. I think you’re seeing that there are different types of companies that are becoming centers of gravity for financial services. 

And the three that Alex talks about in his article: one is merchants. So where you spend your money. The second is communities. So when you’re working with other people, or connecting with other people, and you want to trade goods or services, or send money back and forth — online communities like Facebook. And then the third, and the one that I think is really compelling, is employers, because that’s the source of your money. And if you can embed financial services there, it’s really powerful.

I’ll just give you an example of a future vision of what we are looking at here at Ceridian. Because we’re a fully integrated solution for human capital management for our clients, that means we do everything from time and attendance for workers, to payroll, to benefits to tax calculations. You can envision a world where a user on Dayforce Wallet is earning their money into this account and spending with this account. We’ve layered on a level of intelligence into that experience to say, ‘Hey, you know, you’ve got your car payment coming up in three days, but you’re gonna run short. But by the way, there’s an open shift at your job tomorrow night, that if you take it, you’ll cover yourself.’ 

So the idea of being able to be proactive and to do things for that user that others just can’t do. That’s where this world is going. There are a host of different kinds of solutions that are going to change how people think about financial services. It’s not an end in and of itself. Nobody thinks to themselves, well, I’m really excited about my bank account. What they’re excited about is what it helps them achieve. I think that’s really where we’re going: how do we allow financial services to help people achieve their goals and live the lives that they really want?

Connecting with end users

There’s a broader trend of the consumerization of work. The best example I always think about is, like back when business travel was a thing. If you think about the user experience when you were trying to book business travel through one of the business travel portals that you had to use, maybe through your corporation. I don’t know if you had this experience, but I certainly have, versus what your experience was when you wanted to book your leisure travel, using a consumer centric site. What’s happening is that people are realizing that the user experience in typical B2B software has been terrible. And what we’re doing at Ceridian is really putting the user first and building beautiful, seamless user experiences for these end users that they actually do build trust with. 

Because ultimately, the new currency of trust is actually user experience. And so if you can make your products work really seamlessly and work the way people expect them to work, then you will build that trust and that brand. We’ve been really focused on creating, even before Wallet, user experiences for those end users that helped build that trust. We’ve got the Dayforce mobile app separate from the Dayforce Wallet app — the Dayforce mobile app is a hugely popular solution for people to engage with their HR software that their company provides. I think we do have a brand, particularly around Dayforce, that we’re engaging with end users and building that level of trust.

Product pipeline

I think near term key focus is going to be around rounding out the product and really building out the trust for those users to use the product as their primary bank account. That means things like savings solutions — that’s a very common request that we get. We’re implementing a rewards program on the products where you can get cash back around certain merchants — merchant funding rewards.

To make the product more appealing longer term, we are growing internationally. We’ve already launched in Canada. So we’re in two markets. We’re looking to launch in more markets next year — more to come there. We’re really excited about this concept we call ‘streaming pay’. You might use Netflix to stream your entertainment, so why not stream your wages? It goes from taking the next step from pay on demand with users taking an action to get paid to having your pay always be on. You can set your configuration and always have it flow into your bank account. We’ll give the user the kind of flexibility to say, ‘Well, maybe I want to stream it all the time every day, or maybe when I hit a certain balance, I want to pull funds forward.’ We are giving more control and more tools into the hands of those users.

The next step is further integrating with our core HR capabilities and really making a reality that opportunity to deliver more earning opportunities both inside your company, and then maybe even outside your existing company into a whole range of companies that are on the Dayforce platform that may have work available for users. We’ve already onboarded and verified users’ right to work and their ability to work. So we can actually facilitate a much larger network of workers and opportunities to be had.

Today, access to the internet and personal devices has never been common. The gig economy — in which an individual needs nothing more than a smartphone to become a multi-tasking entrepreneur — is well on its way. 

And it’s not showing any signs of slowing down. In 2019, Mastercard estimated that the gig economy was predicted to grow by 17.4% annually by the end of 2023. The sharp increase in reliance on digital solutions coupled with the economic downfall of the pandemic have only sped things up. By 2027, gig workers are projected to make up over half of the American workforce. And young people are leading the way — with nearly half of all millennials relying on online platforms to make ends meet.

The rapidly growing global workforce comes with a unique set of practical challenges. It requires navigating complex regulation, stubborn legislating, cultural divides, and evolving trends. As the pandemic wanes and the gig economy is here to stay, the payments space needs to pay close attention to the following changes and their impact for what’s next.

Real-time payments is top of mind for gig workers

On average, gig workers earn about 58% less than full-time employees. This means that getting paid on-demand is ever more important — both to meet their financial responsibilities, and continue affording the cost of doing business. Getting paid seamlessly and on-demand is top of mind for independent workers. So much so that 83% of gig workers said they would even pay an additional fee for real-time payments.

As employers acquire talent further and further around the globe, arranging efficient, on-demand payments becomes more difficult. Settling cross-border payments requires third party intervention, and traditionally this means slow, expensive, and high-friction international bank transfers. Depending on where the worker is based, this also means overcoming a secondary regulatory environment and finding solutions for unbanked populations.

Workers’ rights are changing

In the early days of the gig economy, employment platforms escaped the due diligences by classifying workers as independent “partners”. This left workers ineligible for employee benefits like minimum wage and pension. Since then, the courts in both the UK and Spain have ruled that gig workers are benefit-deserving employees. 

In the US, home to courier giants like Uber, Lyft, DoorDash, and Instacart, the legislative pushback is slower. But as the Department of Labor finds itself carrying the cost of unemployment for gig workers during the pandemic, the shift of burden to employers is inevitable. In California, for example, legislators voted in Prop 22 which keeps gig workers classified as independent contractors while providing them 120% of the local minimum wage and healthcare contribution subsidies.

In developed economies around the globe, legislation is changing to promote benefits and protections, such as paid annual leave, minimum wage, accident insurance, and healthcare subsidies. As gig workers gain equal legislative protections, employment platforms will rely more and more on payments companies to meet the worker needs.

Direct-to-bank payments

Expanding the availability of talent means cross-border payments. Direct-to-bank payments are workers’ preferred method of payment, but come with major challenges. Bank regulations are complex, requiring the receiving end to be licensed money issuer and able to meet international KYC and AML standards. On top of these are the fees incurred for all parties, that chip away at the incomes of both worker and employer. 

To meet the needs of gig workers and employers, fintechs are rising to the challenge of providing agile, nimble solutions. Nium’s gig economy payments solution and global network of partners, licences and real-time corridors helps ease the operational burden for businesses looking to hire and pay gig workers globally. 

“We believe we can be a global catalyst to increase global commerce, removing some of the payments friction which has traditionally held businesses back. The Nium platform simplifies the B2B payments experience by enabling critical financial services to be easily embedded — helping today’s local market players become tomorrow’s global giants.” — Prajit Nanu, Nium’s co-founder and CEO.

Retaining quality talent 

The gig economy is growing largely due to the flexibility it offers — from hours worked to the types and number of jobs held. In the height of the pandemic’s economic downfall, this flexibility helped millions of people support their households, and at times even provide greater income than they would through full-time employment.

With the gig economy here to stay, and the economy coming to rely on local and global talent, the long-term viability of the workforce will depend on businesses planning ahead. Minimum wage alone is not an effective retention strategy. To keep quality gig workers, companies will have to make efforts to offer fair protections, easy payments, and attractive compensation packages, like early delivery and retention bonuses.

The gig economy promises talent availability at scale. But seizing this moment means being equipped for cross-border payments, currencies and cultures. Read Nium’s eBook Paying it Forward: The Future of Payments in the Gig Economy to learn about the four trends to be prepared for this opportunity.

Although there are nearly 136,000 registered barbershops in the U.S., they constitute an industry that has been underserved by traditional financial institutions. Due to the nature of their profession, barbers often have to deal with a unique set of challenges such as unpredictable cash flows, delayed payments, and inconsistent earnings, which can lead to serious financial troubles, particularly in the midst of a global pandemic.

Squire, a booking, management, and payment app for barbershops, has launched a unique debit card to tackle this problem by collaborating with Bond, an embedded finance infrastructure provider. Directly integrated into Squire’s mobile and web app, the Squire Card helps barbershops manage their cash flow, and allows barbers to receive instant payments, pay bills, track expenses, and get early access to earnings.

The card enables barbershop owners to instantly transfer money into their employees’ accounts, which means barbers don’t have to wait until the end of the month to get paid – they can walk out of the shop with the day’s earnings already available for withdrawal. They also get instant access to tips and commissions, which contributes to a more stable income that gets spread out over the month.

Founded in 2019 by professionals from SoFi, Twilio, SAP, Goldman Sachs, and Blackrock, Bond enables companies from any industry to embed financial products and create personalized services for their customers, including digital deposit accounts, as well as physical and virtual debit and credit cards. 

Squire’s CEO Songe LaRon worked as a corporate lawyer in New York for several years before he decided to leave that world and start a barbershop. While running that shop, LaRon – along with Squire co-founder Dave Salvant – saw the financial struggles of barbers firsthand. They learned that many barbers had no bank accounts and lacked access to even the most basic financial services.

This led to the birth of Squire in 2015. LaRon and Salvant started off with a basic booking and scheduling platform for barbershops, before turning to Point of Sale software and payments.

The Squire team underwent an extensive selection process when deciding who should create the Squire Card, from early-stage startups to large fintech unicorns. Eventually, they chose Bond, because its scalable architecture enabled them to tailor the Squire Card to the specific requirements of their customer base.

“Bond’s platform is flexible and enterprise-grade, designed to scale with us as we continue to grow and offer new financial services products,” said Squire co-founder Salvant, who is also the president of the company. “We didn’t want to build up a huge compliance team – we are not bankers and don’t want to be bankers. Bond enables us to offer custom-built services to our community without the hassles and delays associated with building financial services on our own.”

By teaming up with Bond, Squire was able to launch the new card in around 3 months. According to Squire’s research, that’s about 6 to 8 times faster than the 18-24 months it would’ve taken for them to build the card directly with a bank, given the massive complexities of working across companies that don’t have shared goals or technologies.

In the coming years, Squire plans to leverage Bond’s infrastructure to expand its financial offerings to include credit cards, loans, and insurance. “Fintech is the next natural step for Squire,” said Salvant. “We already have deep insight into our customers and know they need more financial services that cater to their specific needs.”

The Squire Card is an interesting use case that shows the power of embedded finance to meet the needs of the underbanked, according to Charley Ma, GM of fintech at identity verification firm Alloy. Looking ahead, he says embedded finance will play a key role in helping non-financial businesses operate efficiently while providing customized financial solutions to their customers.

“We’re at the very early innings of embedded fintech,” said Ma. “The idea of a vertical solution launching a card and bank account would have been pretty outrageous just 5 years ago, so it’s really exciting to see companies like Squire launching a fully built out card product.”

Embedded finance has already become a priority across many industries. A recent report by Plaid and Accenture found that almost half (47%) of over 1,000 non-financial company leaders are actively investing in and planning to launch embedded finance offerings in the near future. Furthermore, nearly 90% of those who have introduced embedded finance products reported increased engagement levels from customers.

Recent examples of non-financial companies introducing embedded finance products include Toast, a restaurant management software that provides loans of up to $100,000 for restaurant owners, and Mindbody, a management platform for the wellness services sector that offers cash advances to owners of small businesses. 

“We are on the cusp of a future where financial products are seamlessly integrated into the services people use every day,” said Roy Ng, co-founder and CEO of Bond. “This future will benefit consumers immensely, especially those not addressed by the current financial system. We will finally be able to reach corners of the population that have been overlooked by traditional finance.”

Big things have been happening in the buy now, pay later sector as providers seek to dominate payments and more. Apple is reported to launch its own installment program called Apple Pay Later, Square recently announced its plans to buy Afterpay, and last week, Amazon announced a partnership with Affirm to offer installment payments on purchases over $50. 

The strategy is simple. BNPL market penetration in the U.S. remains relatively low and providers are doing whatever they can to expand their reach and for good reason. BNPL providers like Affirm and Afterpay have the stature and brand recognition to attract big names in retail and make key partnerships to expand their presence. That forces smaller competitors to improvise.

Sunbit is one such provider. The BNPL has thrived on a strategy to penetrate the service industry market by focusing on small or medium-sized merchants with a local presence. Sunbit can be found in one in four auto dealership service centers, in addition to optical practices, dentist offices, and specialty healthcare services. While its 7,400 merchants pale in comparison to Afterpay’s approximate 100,000, Sunbit is no slouch. In its latest funding round, the BNPL raised $130 million, launching its valuation to $1.1 billion. 

But Sunbit isn’t looking to rest on its laurels. Its chief customer officer Bill Walsh says the next step is to bolster the customer experience journey to woo prospective customers and grow its merchant base. To do that, he’s leaning heavily on philosophies rendered from the hospitality industry. 

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