When I was a student at MIT, I recall arriving back in the US after going to Canada for a break, only to find I had left my Form I-20 at my Cambridge residence – the documentation I needed to present at immigration to show I could legally study in the country at that time. I vividly remember calling a friend from the airport, asking him to pick up the physical, paper document at my home and shuttle it to Logan as quickly as he could (which he did).
This is of course far less likely to happen to any international student today – because I could have pulled up the form on my mobile device in a matter of seconds.
I bring up this example to show how quickly things become digitized, and how quickly the digital way becomes second nature – even if it had been done the same way for decades before. We wouldn’t conceive of calling a friend now for something like that. We’d call upon the powerful computers in our pockets.
And it’s really not an overstatement to say that nothing is racing faster toward digital adoption than everything in the financial services ecosystem. The range of technologies enabling digital financial transactions in many forms are now more widely adopted than streaming services and social media, Plaid’s annual consumer survey, “The Fintech Effect” recently showed, coming in second only to the Internet itself.
I thought about the places where the fintech effect is having a major effect right now, and I see three.
Banks. When I went to Money 2020 back in October, I noticed something new: there was a larger presence of banks than I had ever seen before. Banks want to partner with fintechs, and vice versa. Stronger partnerships between banks and fintechs are both a cause and byproduct of fintech’s rise. The two are now more like pieces of a puzzle coming together than the Tetris-like landscape of years’ past. There’s no longer this frenzied determination to figure out whether there is a fit. Incumbent banks are living fully in the fintech present, and more than ready to make plans for a future together.
Business buyer expectations. There’s excitement around industry-specific solutions that solve unique payments challenges. Every business and organization on the planet needs to send and receive payments in a secure way. But the notion of software driving value in payments is taking a firm hold in the form of industry-specific payments solutions. Optimizing payment processes – both payables and receivables – means more optimal cash flow, and more accurate numbers for budgeting and forecasting for businesses and organizations. Building industry-specific software on finely-tuned platforms provides the same familiar advantages businesses have had for many years now by means of implementing verticalized enterprise software. Vertical payments software handles unique regulatory concerns, provides templates for tracking relevant metrics and KPIs, and even applies business intelligence functionality to payments processes. I’m excited to see more specialization, as fintechs aim to solve challenges for highly regulated industries such as manufacturing and utilities.
B2B payments. The B2B payment challenge is real, and there are a lot of companies trying to solve it – with a varying spectrum of capabilities to do it. Checks continue their steady decline as the preferred B2B payment method, but still remain a major B2B payment method. On a related note, another area to watch where B2B payments are still decidedly non-digital is cross-border transactions. For more than 80% of the respondents to AFP’s most recent electronics payment survey, some percentage of their organizations’ total B2B transactions by cross-border payments are done via Swift (wire transfers). Flywire, for our part, is well aware of that reality, and choice of payment methods is one major advantage our network provides.
It’s exciting to think about how much innovation is in store – and to consider that much of it will make an enormous difference in these areas of our lives and the businesses we work for and lead – and what will become second nature next.