Think about the last time you purchased with your personal card. Even if you work in finance, the chances are you didn’t give much thought to the processes taking place during the transaction. Yet your bank used a processor to authorize it, checked it for fraud, and then reviewed your balance so that the payment could go through.
Purchases with corporate cards differ, though, as the authorization processes are more complex, i.e. they consider the time of the transaction, the set limits, and the type of merchant.
We recently spoke to Ian Johnson, MD at Marqeta, for our podcast, The Untold Stories of Change. During our conversation, Johnson helped us explore how traditional banks are changing, who operates the crucial behind-the-curtain mechanisms, and what’s new in fintech security.
As a payment processor, Marqeta’s primary goal is to make it as effortless as possible for innovative companies to get their product to market and provide the infrastructure needed for organizations to develop their ideas in financial services further and benefit from numerous market opportunities. Our team at Payhawk has been working closely with Marqeta to enable real-time transactions through our corporate cards and complete control over our customers’ payments — both of which are critical in the expense management field.
“If you think about it, everything we do requires us to pay. Every transaction requires a payment,” explained Johnson, underlining the massive scale of opportunities that exist in the payments industry. Johnson also delved into some of the most common misconceptions faced in the field, the changing role of traditional banks, and the inexhaustible topic of security and trust, which has become as vital as it’s challenging to maintain.
Fintech has been a hot topic in the past few years, with more and more new players sprouting up all over the world. Still, not everyone available on the market offers a meaningful solution, and Johnson has seen a lot of red flags when it comes to digital banking providers.
“People look at the success that organizations have had in the fintech space, and maybe they think it’s too easy. They see some of the things that could be improved and think it’s enough to start a business and launch a successful card broker,” highlights Johnson.
As in any other industry, providers have to deliver meaningful value to consumers, or corporations, for the product to be successful. Yet, substantial differentiation from already established providers rarely occurs, and new players in digital banking can get tangled up in trying to release more and more features instead, which seldom benefits customers. “You’ve got to find that intrinsic value that your product and company delivers, and you’ve got to stay focused on your strategy around it.”
In recent years, the role of banks has seen a lot of gradual changes. And while many fintechs start up with such a premise, Marqeta’s managing director believes that traditional banks will remain the go-to safe option for many banking needs, despite the spur of innovation in the sphere.
“The question for the banks is, how much do they want to own the customer relationship at the front end? Do they want to be the organization that provides the technology and the services that we interact with every day versus retreating into the background and being the organization that manages the behind-the-scenes of the payments industry like transactions, money lending, etc.,” Johnson said.
Contrary to popular belief, banks are not massively lagging behind resourceful and creative digital banking solutions. Instead, it just takes banks more time to innovate efficiently, whether the innovation comes from partnering with fintechs or rethinking its processes and services.
The whole financial services industry is going through a revolution which means that many traditional functions are now different. The emergence of various SaaS tools that aim to optimize internal processes and boost productivity within organizations is something we also discussed with Robert Hadfield, financial manager at Dendra. Hadfield remarked that the capabilities of these new tools meant a fundamental shift in the duties and expectations of a finance team, and Johnson agreed.
“There’s no one size fits all solution on the market. Instead, financial managers are responsible for selecting the right tool that accurately seizes the company goals and team dynamic,” Johnson explained. “Payhawk is the classic example — finance managers don’t have to settle for poor solutions and try to do all additional work to make them fit together manually. Instead, they can choose a supplier that takes care of crucial processes for them and successfully eliminates their pain points.”
“The challenge has always been to convince companies that what you’re saying about your technology is true,” starts Johnson when prompted about the importance of open APIs and the trust factor between providers and customers in the finance industry.
In this era of innovation - especially in the payments industry - you don’t need organizations to take a leap of faith with you as it was before. Now, you can essentially let them test out your product without a signed contract, even without commercial conversations. Does the solution respond to the company’s ideas, does it need tweaking? You can address all these questions before committing to a tool that could eventually turn out to be harmful rather than help you accelerate growth. And, this exploration translates into having both sides confident in the service offered and sets the tone for a solid partnership.
Regardless of what changes the future of the payments industry holds, whether banks will become obsolete or the CFO role changes even more drastically, one thing is sure: digitalization is here to stay. And, digitalization will continue irrevocably changing the way financial services operate.
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