Banks - old and new - must welcome the emerging trend of marketplaces, ecosystems and connectivity and give customers more choice and control if they are to succeed in the future.

Just before starting his new role as president of i2c Inc., reporting to Amir Wain, founder and CEO, Jim McCarthy, an industry veteran and payments innovation pioneer, spoke to Finextra Research about how incumbent financial players can remain customer-centric and appeal to Generation Z and millennials in this age of credit saturation.

The former EVP of innovation and strategic partnerships at Visa discusses the expansion of digital commerce and the first wave of internet innovation, which was quickly followed by mobile penetration, the modernisation of consumer credit and the utilisation of data.

McCarthy was responsible for structuring the next wave of innovation by working with the likes of Apple, Google and technologies like the Internet of Things (IoT) to establish what he refers to as “connected commerce.”

In this age of credit saturation, are legacy providers threatened? Are new entrants successful because they are stepping away from a siloed approach and welcoming partnerships?

McCarthy highlights that the greatest challenge facing the financial services industry is the speed at which the market is moving. “Commerce is occurring in ways that no one could have foreseen and the challenge for banks that are locked into incumbent processing positions is that they can’t keep up.”

Customisation continues to be a pain point for banks with legacy platforms, since most have not just one, but multiple platforms as a result of merger and acquisition activity. This in turn, results in a range of pressures, complexity and hurdles to overcome.

A singular platform, such as that offered by i2c, which supports credit, debit, pre-paid, instalment lending and open banking capabilities, that is also flexible and configurable, will help banks keep pace, according to McCarthy.

Fintech firms are consumer-centric, focused on delivering great new customer experiences and, while not constrained by traditional infrastructure or processes, they oftentimes lack the experience of established members of the payments’ ecosystem, especially when considering regulation, KYC/AML, program management and around the clock availability for example.

“Bringing together that great front-end customer experience with the availability, security and great customer service on the back end is where i2c is the partner of choice for both banks and new entrants, so partnering is the way to go.”

Referencing recent deals, McCarthy argues that credit seekers still exist, and they are increasingly looking for advice from digital providers, not in the bank branch.

“Pundits would say: ‘millennials don’t want credit’, but what we’ve seen is that this is not the case. Instalment lending is an accelerating trend, with fintech firms occupying the space.
Consumers want choice and financial players need to offer a full suite of products to ensure that the needs of new generations are being satisfied. We can’t be locked into a ‘one-size-fits-all’ model.”

Consumers will continue to seek products that suits their needs and once that choice has been made, new technology allows a digital payment credential to be provided in real-time. The consumer’s ability to use the product is instantaneous, without the need for a physical card.

McCarthy continues: “In the app economy in which we live, ensuring customers’ digital credentials can be used for modern everyday life activities like Uber, Netflix or iTunes is the real sticky piece. The drivers of loyalty are changing. The digital wallets that provide a good onboarding experience, from the point of customer acquisition through the entire payment and service lifecycle will be the winners.”