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Fintech developments that are changing the payments landscape

Monday 24 April 2017 | 01:28 PM CET

Todd Latham, Currencycloud: Firms selling big data solutions, analytics or compliance services are the ones to watch

What recent fintech solutions have caught Currencycloud’s attention in terms of market disruption potential?

There are obviously a lot of interesting fintech propositions out there, and we continue to be really optimistic about the growth of fintech in general. But the nature of fintech is changing. A lot has been made of the first wave of fintech firms, which generally focused on consumer experience, providing an app layer over an existing solution. The real innovation is at the model level, changing the infrastructure of financial services. So firms selling big data solutions, analytics or compliance services are the ones to watch. These sorts of companies are on the face of it less sexy but satisfy a real long term demand and are incredibly sticky.

How exactly do new fintech solutions help B2B ecommerce in the context of growing cross-border ecommerce transactions? What opportunities are there to explore?

What we see is that there is a wide range of companies driving innovation in the fintech space, and what unites them is that they are all trying to do something different. The issue is that, when trying to build new solutions, the existing traditional finance infrastructure is often too big, too slow, too inflexible, and simply does not understand what the innovators are trying to do. Compliance departments will arbitrarily label an activity as ‘high risk’, when what they really mean is ‘we do not understand the risk’. IT connections are laborious and poorly documented. Workflows are driven by suppliers’ internal requirements, and do not fit the customer’s model.

The reason that companies like Currencycloud are growing so quickly is that we speak the language of the innovators. We know what problems they are trying to solve and provide a massively flexible infrastructure for them to solve these issues.

During this year`s Moneyconf edition, Currencycloud CEO Mike Laven stated that “a fintech model based on price will lead nowhere” – could you please elaborate on this statement?

As with any burgeoning sector, there is investment chasing fintech companies because of the long term potential of the sector. But, underlying this, every business is one day expected to make profit. If your revenue growth is based on ‘cheap’, you engage in a race to the bottom and your business is hard to sustain. But, in financial services, as in all industries, customers are willing to pay for value, be it great service, great user experience, or benefits they cannot get elsewhere. Value pricing is sensible, cheap is unsustainable.

In the digital ecommerce space, it is harder and harder to segment the market players. Could yo explain how have we come to this situation and where is the digital market heading in this new context?

We used to live in a world where segmentation was easy. You might be a retailer, or a furniture manufacturer, and there was a nice SIC code that could identify what you did. However, the world in reality is far more complex than that, and financial services segment is no different. For example, is Revolut a bank, a pre-paid card or an international payment product? The answer is all three. What we see is that the world can increasingly be segmented into three buckets – digital firms, innovative incumbents and dinosaurs.

The digital market is interesting because, whilst there might be many different business models, there are some unifying characteristics. These firms are internet first, and increasingly mobile first. They use unconventional means to solve conventional problems. They value the customer experience, and aim to remove friction from the process. In general, these are the firms who find that traditional financial services models simply do not work for them.

While the B2B international payments segment is now estimated to be 10 times larger than the B2C sector in transactional volume, innovation in B2B payments has lagged behind. In your opinion, when will the fintech revolution reach B2B payments?

In short, it is already here. B2B Payments has never been as bold or as brash as the B2C sector, however B2B empowers the B2C sector with the ability to be ‘sexy’. Traditional financial service providers would only be interested in large value – that makes traditional remittance and cross-border payments expensive. Banks charge a fee to cover the cost of processing what they see as low-value payments.

Without fintech companies operating in the B2B space and acting as aggregators – companies would not be able to offer consumers the savings that they do today.

What is Currencycloud’s vision on the future of payments?

Fast, transparent, global, data rich.

About Todd Latham

A bit of a nerd at heart, Todd is genuinely fascinated with how technology is transforming people's lives for the better. Todd has extensive experience in the technology and financial services sectors, where he has delivered for American Express and Microsoft.

 

 

About Currencycloud

Currencycloud‘s Payment Engine is driving the transformation of the global payments landscape. Re-imagining the way money flows through the global digital economy, Currencycloud allows payment firms to remove the friction and inefficiencies of traditional cross-border payments using its flexible APIs. Currencycloud is regulated in Europe, the US and Canada.

This article is part of the exclusive Online Payments and Ecommerce Market Guide 2016, an educational overview of the global payments industry. For more insights into the latest trends in ecommerce and e-payment methods developments please download a free copy here.

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