Mercator attended the FIS Connect 2016 in the fourth week of May. We look forward to this annual event as it provides us unfettered access to FIS customers, partners, and product developers. The purpose of this blog is to describe what we learned directly from our discussions at the event and the ways in which these discussions affect our analysis of the payments industry.PACE (Performance Against Customer Expectations)
PACE, an annual survey conducted by FIS now in its second year, gauges how effectively banks meet their customers’ expectations. The results provide several key observations. Perhaps most important, PACE confirms the results of Mercator Advisory Group’s own CustomerMonitor Survey Series (CMSS) that indicate a significant new interest among U.S. consumers in receiving financial advice. (CMSS survey data and analysis appear in Mercator’s forthcoming Insight Report on the topic of consumers and personal finance.) The PACE survey saw a 9-point increase in this area, one of the highest shifts across all attributes measured.
In analyzing the results of the PACE survey, FIS combined attributes associated with three key aspects of operating a bank:
• Several basic attributes, such as security and creating efficiencies, are aggregated under the heading Run
, including all the consumer-facing operations needed to execute the basic expectations of consumers.
• Several attributes associated with consumer interaction across multiple channels are aggregated under the heading Connect.
• Attributes associated with introducing new capabilities and representing new revenue opportunities are aggregated under the heading Grow
The spider chart from FIS reproduced below indicates that banks have a challenge delivering against their customers’ most basic expectations. While banks perform well on most of the Connect attributes, they underperform in helping consumers and, in turn, themselves to Grow.
The PACE survey’s results indicate that consumers are increasingly expecting banks to provide them more personalized financial advice. These findings align with the information, analysis, and advice offered by Mercator Advisory Group in a research report forthcoming next month on the technology to build a profitable customer base. (This report is part of an ongoing series in the conceptual framework Mercator Advisory Group calls “The Six Million Dollar Customer.”
) Another striking result of the PACE study that bears mentioning is the speed at which Millennials, that large population cohort between 18 and 34 years of age, are opting for digital banks as their primary banking provider. This finding hammers home the need for financial services providers to focus on a digital-first strategy for this increasingly important market segment. FIS has established a survey tool that delivers important consumer insights that can be used by banks to guide both product development and business practices. PACE is well worth a read!
Source: FISAll Things Debit
During FIS Connect 2016, FIS’s debit experts discussed what they were seeing from their vantage point regarding debit and other “pay now” solutions. Debit is very much a commodity product, but it is absolutely central to the relationship between a cardholder and the card issuing bank. FIS has reached out to market product providers to pull in some of the needed solutions for value-added services. The following list describes a few of these partnerships and services.• SaveUp
provides an online tool that uses gaming techniques to engage consumers and reward positive financial behaviors, including depositing to savings, reducing debt, and increasing financial knowledge. Once a user registers an account, the program uses account aggregation technology to detect these positive financial behaviors and rewards “credits” to the user for performing them. SaveUp increases user engagement with financial improvement by encouraging consumers to review their finances on a regular basis, tracking their progress, and prompting users with relevant information and education, challenges, and other nudges to engage in positive actions that will yield good financial results.
• The partnership with Entrust Datacard
is focused on evolving the legacy in-branch, instant issuance solution to ensure it stays relevant with the chip migration. Entrust Datacard is the first strategic partner of FIS that has an integrated chip plug-in solution, which streamlines and simplifies migration of the instant issue channel to EMV chip.• OnDot
is FIS’s partner for card alerts, but it’s more than just a solution to meet the global network’s alert requirements or to send an annoying reminder for every transaction a debit card cardholder executes. This solution has the capability to send a cardholder an alert when the alert can truly inform the individual cardholder of a transaction that is out of the ordinary and through connections with cardholder services, the solution can resolve the problem.
• Cardless cash capabilities were demonstrated at the FIS event. This app enables a cardholder to prestage a cash withdrawal from one of his or her accounts, and then go to an ATM that recognizes the app, zero in on a QR code, and get the cash dispensed in 10 seconds. The really interesting aspect of cardless cash withdrawal is that consumers are recognizing this is not just technology for technology’s sake or a nice convenience. The early adopters understand that cardless cash withdrawal helps to prevent skimming at the ATM. FIS has rolled this solution out with several financial institutions and will soon be announcing a partnership with a major independent ATM operator to expand the number of available ATMs where cardless cash can be used.
The cardless cash capability will be expanded further as a feature of FIS People Pay, person-to-person (P2P) service. A People Pay customer will be able to send funds through the service to an intended recipient, who can then go to an ATM and withdraw the cash immediately.
Also demonstrated was the ability to stage a withdrawal using the Amazon Echo voice recognition product, which also supports account balance inquiries and account transfer requests.
This is how you add meaningful services to a commodity product and keep it relevant.
A brief comment about faster payments: About a month ago, FIS announced its partnership with The Clearinghouse to work on a faster payments platform. Although FIS has faster payments through existing rails, such as the FIS NYCE debit network, there is a commitment to create new rails to meet the needs of new digital payment types. FIS sees opportunity with bill pay, which will be an early faster payments initiative, and also with commercial payments leveraging the company’s acquisition of SunGard (see more on this topic below). Developer Websites and the API Economy
The Mercator Advisory Group research note titled The Visa Developer Platform: Opening the Gates to Innovation
identified several reasons why Web development platforms should be considered a new go-to-market channel and predicted that many would follow Visa’s lead. FIS is ahead of that prediction given that it not only has a Web development API available but also is in the final stages of releasing a Web development platform that includes a sandbox that will enable fintech startups to develop solutions that will benefit FIS issuers and merchants. In addition, FIS has opened several Innovation Centers, most recently in San Francisco, and has held hackathons to encourage the use of the APIs by fintech startups.
The FIS Development Platform represents a chance for FIs to “disrupt the disrupters” according to Rob Lee, Chief Product Officer for Banking & Payments. This theme was further promoted by Tariq Bokhari, the new Head of Innovation & Investments for FIS, who demonstrated several solutions FIS has available today designed to help financial institutions to stay relevant in the eyes of Millennials. Leveraging Partners in the Value Chain
Scott Coffing, Executive Vice President for Commercial & Digital at FIS, explained that the 10,000+ businesses leveraging FIS (SunGard) software for accounts payable will be able to digitize payments by leveraging FIS payment solutions such as Clear2Pay. This connectivity enables FIS issuers to connect more deeply into commercial accounts and deliver significant new benefits, including faster and less costly payment of suppliers.
The effort to leverage partners into a larger ecosystem is also evident in a new loyalty product FIS demonstrated called Pointopia. This product is designed to make rewards programs behave more like cash. FIs can work directly with merchants, offering them a valuable opportunity to reach cardholders by enabling cardholders to spend merchant points at other locations as if they were cash. From the consumer perspective, Pointopia users see all of the participating merchants within their mobile wallet and can select which merchant points they want to use and where they want to use them. FIS described the benefits of a pilot implementation conducted with BP gas stations. 56 percent of participating cardholders indicated that this approach offered a better value proposition than any other rewards program, and 88% stated they would like to continue using the product.
The FIS Web development platform under construction is another area where FIS intends to drive additional value to its customers. By providing open APIs in combination with a sandbox environment, FIS will make it easy for fintech startups to identify and use a common set of services that enable interoperability across the associated FIS customer base. As an example, a fintech supplier could utilize a FIS API to collect account balance and transactional data, replacing the need to utilize an expensive service from Envestnet | Yodlee. The startup reduces its costs, while FIS banks gain a new revenue stream and can more directly control credentials and account access for its customers. And consumers also benefit in that the APIs offered by FIS will continue to work no matter what new version of online banking is rolled out. This is in contrast to the interoperability problems that often prevent consumers from receiving updated account information through third-party services.
Last, FIS discussed plans to utilize its cardless cash capabilities to enable value to new partners that will drive revenue to existing bank customers, as they did with the expansion of off-us surcharge revenue capabilities at ATMs and future expansion to new for fee services including PayPal cash withdrawals. Additional partnerships are in the works.
Blog written by Sarah Grotta
, Director, Debit Advisory Service at Mercator Advisory Group and Tim Sloane
, VP, Payments Innovation at Mercator Advisory Group