An Innovation Mindset is Needed in Payments

Jim Marous:

(singing) Hello, and welcome to Banking Transformed, the top podcast in retail banking. I'm your host, Jim Marous, owner and CEO of the Digital Banking Report, and co-publisher of The Financial Brand. We continue to see the rise in digital commerce, based on customer adoption of innovations like digital wallets, buy now pay later, instant payments, instant issuance of cards, and cryptocurrency. It is expected that the payments industry is primed for even more innovation in the years to come. The bottom line is investment in payments technology is needed more than ever to enable financial institutions to be more agile and future-ready, delivering faster speed and scale of innovation, and greater revenue.

My guest on the Banking Transformed podcast today is Dan Hanks, vice president and head of product development for lending at i2c. He'll be discussing the evolving opportunities and challenges available in today's payments ecosystem. More than ever, financial institutions, fintech players and even big tech and non-banking organizations need a deep range of payment product solutions that can support cards, mobile payments, as well as traditional lending services and buy now pay later. These solutions require access to every major network partner, as well as value-added services such as fraud prevention, contact center support, dispute management, and even white label web and mobile apps.

You know, more importantly, these solutions must be highly configurable to enable customization at speed and scale of change today. So, welcome to the show, Dan. You know, it's always interesting for me to do research before my podcasts to see the background on my guests. Much like me, your background really includes a long history of working as several traditional banking organizations before joining i2c. What prompted you to jump to the other side of the desk, as I say, from working within the financial institution, to actually supporting financial institutions with the products you provide?

Dan Hanks:

Yeah. Thanks, Jim. Yeah, I've spent most of the last say 15 years or so managing all or parts of credit card businesses for different banks in the U.S. and Europe. One thing I always liked was the growth part. You know, I liked building stuff, I guess you could say. That's really what attracted me to i2c. So i2c is a next-generation issuer processor ... Considered a modern issuer processor, then considered different than some of the old legacy ones that are on the older tech stacks and the like. And one difference we have with our other modern competitors is that we have credit built in as a core to our platform, on a single tech stack. And so it's an advantage for us, and one of the reasons that I came here was to keep building that up, building out that advantage.

So I mean, you know we're seeing credit growing considerably among fintechs. We see a number of smaller banks looking to self-issue, maybe who were in agent bank relationships. And my job here is to keep building out that functionality, building out those capabilities, and keep expanding on it. So that's what attracted me here, and I've been here about a year and a half now.

Jim Marous:

You know, it's interesting. There's probably no area of financial services that has seen more transformation since the pandemic than payments. What have been some of the most dramatic changes that you've seen in the past years from the consumer perspective?

Dan Hanks:

Yeah, I mean I think the two biggest changes are something we internally call the D suite, the digital suite. And this is really where the pandemic ... I don't know if it changed things so much as it accelerated things that were already slowly happening.

Jim Marous:

Yeah.

Dan Hanks:

So one of them is just the idea of mobile banking, digital banking and the like. So before the pandemic, certainly many people liked it and were using it. But there were others who were still in that more traditional, go to the branch model, right? It's just the way they'd always done it, and maybe that baseline skewed a little bit older. Some of them were just people who weren't as comfortable with technology to do it. Well, then the pandemic came and the branches were all closed. So suddenly you had to be able to do it this way, and what customers found was that it wasn't that hard.

Now, there are differences in banks, and this is something banks have been challenged with. Some banks did that much better than others in terms of how they support that. But customers found that yeah, they can do mobile. They can do digital. It works well. And even when the branches reopened, you see a lot of customers still preferring to do it that way, and therefore looking to make sure their bank has all the functionality that they need to be able to do it. So I think that's something that definitely accelerated considerably.

The other one on the digital side was just how customers are making payments. Like I say, the idea of mobile wallets, the idea of using your Apple Watch, things like that to make a purchase, certainly people didn't want to be handing over physical cards, have somebody touching it, giving it back to them, right? And so that's another thing that accelerated. It was always out there. It was more of a niche of people doing it, and it's still not a majority of transactions or the like. So I don't want to claim that, but it's definitely accelerating.

Jim Marous:

So it's interesting. In my situation, I've gotten to the point where my wallet is in my glove box in my car.

Dan Hanks:

Yeah.

Jim Marous:

And I search out those places where I can go and not take anything but my phone. Number one, I do it for security purposes.

Dan Hanks:

Yeah.

Jim Marous:

I certainly do it for ease. And it's interesting, because some of the late arrivals on the retail side or on the other side of the transaction, namely restaurants as much as anyplace else. It's amazing how quickly they've embraced mobile payments at the time, you know? Sometimes it's a QR code. Sometimes it's a device that they hold. We were really laggards in the U.S. compared to other countries, that that's been the way of doing things for years. But you know, it's interesting. More than just the changes in the consumer payments behavior, we're seeing massive changes going on behind the scenes at financial institutions as they try to modernize their back office for the future of payments. Can you share some of the major initiatives the leaders are doing in this area?

Dan Hanks:

Sure. You know, I think every single large bank in the country has some sort of digital transformation project going on. Some of them call it that. Some of them use a different name, but it's all sort of the same thing, and it all started at the same place. They look at their ... They're in an old tech stack, old legacy processor, mainframe-style systems of what they're doing internally and the like. They know, "This isn't how you're going to succeed in the 21st century, right? We need to upgrade. We need to have better functionality." And I think the other piece for the banks is, "We need to be faster."

Jim Marous:

Yeah.

Dan Hanks:

It can't take 18 to 24 months to launch something new, when competitors are launching it in six months, or maybe a fintech is launching it in three months, right? And that's really a piece that ... I think we work at a lot of large banks as well, who are looking into the space saying, "We need to do something different here to get faster," more than anything else, and to have the functionality. I mean on the digital side, just talking about mobile payments, one thing we see is very popular, something we support as virtual cart. So as soon as a customer is approved for a credit card, you can immediately send them their card number and they can use it online. But then we can push provision it instantly into an Apple Wallet, a Google Wallet, Samsung, Fitbit and so forth.

So literally, a minute after you get approved you could be out of the store with your Apple Watch, making a purchase. And you know, there was a time those kind of things were just nice to have, niche things, edge cases. They're becoming more like table stakes, because if you see your friends having them, and the other banks have them, well, why don't you have them? And especially for like midsize banks, regional banks or smaller, this is really a challenge because the bigger banks need to get faster, but they have the budgets to build whatever they need. Like, Chase can build anything. They have almost unlimited money for IT, right? But if you're a regional bank or a smaller bank, you don't really have that. That's one of the challenges, like, "Why can't I?" My customers are saying, "Why don't I have the ability to do this and do that?" And that's one of the things that is really pushing them to figure out what they need to do differently in a tech sense.

Jim Marous:

You know, it's interesting because you talk about this ability to actually speed and scale. We talk about that a lot in this podcast, and most institutions, Chase included, have realized that working with third-party providers who focus on the ability to build platforms and build technology that is really adjustable at speed and scale, where you can actually innovate as quickly as you can, is a major, major difference in the marketplace. I mentioned in recent podcasts that when I was around the beginning of 2020, I was at Shenzhen, China and went to WeBank. I realized they said they were doing innovation at scale and at speed, whereby they can move from ideation to implementation in 14 days. Well, legacy tech stacks, you just couldn't do that. And in fact, most financial institutions still look at innovation and new introductions on an annual basis. One of the things I go out there a lot and talk about is, "Guys, this is not acceptable anymore."

Dan Hanks:

Yeah.

Jim Marous:

In fact, even a month is not acceptable, and we need to change that. Well, the best way to change that is to find outside third-party providers that can provide that capability, and the compartmentalized nature of it where if you only want to change part of that product line, you can change it. And you know, so as we're looking at the economy slowing, how is that affecting what issuers are looking for?

Dan Hanks:

Yeah, I mean and that's a big change of what we're seeing just in the last few months because of what's happening with the economy. You know, you go back a year ago and everyone was in growth mode, whether it's banks looking to regrow revolving balances, whether it's fintechs just getting customers and not even worrying about profitability because all that private equity and VC money was covering all of the losses. It was all growth mode, right? Now you're seeing that shift back to risk management. And I think one of the big things they're looking for is ... And it's not that risk has gotten bad yet. I mean, delinquencies, charge-ups, starting to tick up, but still at much lower levels than you saw a few years ago, even pre-pandemic. But you know, the storm clouds are on the horizon, right? Everybody can see what's coming probably into next year.

One of the things that we're really seeing a lot of focus on is around risk management and collections management. That's something that's also changing with digital world. You know, the old way was you just do brute force calling, call centers, dialer strategies, just flood them with calls until you get somebody on the phone, and if they're delinquent, try to get them to pay their bill. And increasingly, that just doesn't work anymore. One of the key metrics there is called right party contact rate, and it's just what percentage of the customers that you tried to get, did you actually get on the phone? And that number just keeps going down year over year, and it's because of cell phones, right?

You know, if you see ... You can see who's calling you. First of all, if you see it's a collector, you're not going to probably pick up. But even if it's an unknown number, you're probably less likely to pick up, let it go to voicemail. There are also some regulatory limits about doing dialer strategies out to cell phones for collection calls. It makes it less efficient. What we're seeing across the industry now is a much greater focus on other communication channels. So, and this is something we support on our platform with our communication tools, but it's things like SMS, email, push notifications on your phone. We even tie it into our IVR, so if you're using our call center services when you call up, you can get a message. It's trying to connect to ways that you can actually connect to people.

And it isn't necessarily just a message of, "Pay your bill." It could be something like, "Hey, we know you're having some issues. Please contact us. We can work through this with you," right? So let the customer call you, and then maybe you have some tools. Like one thing we support are settlement work-out plans. You can't pay the debt how it is now? Maybe you can restructure it and put it into a loan and pay it differently, things like that. But you know, the key with collections is just somehow to connect to the customer and keep them paying, do something with them so you're getting something back. But that's another one where you really need the more modern tools, because that old way of just calling people four times a day, it just isn't working anymore.

Jim Marous:

You know, it's interesting. You just came back from Money20/20, and I've been to many events. I wasn't at Money20/20 this year, but another trend that we're seeing, because of the down economy or the transitioning economy I guess, is that people are cutting back investments, the financial institutions are. They're trying to figure out, how do they reallocate funds? Because they're first and foremost looking at, "How do I drive the efficiency? How do I still make a profit? How do I cut costs?" And it's concerning to me, because a lot of areas we don't want to see cut costs. And in fact at most of these events, you have an overabundance of sellers and a lack of commitment of buyers. We're seeing it at every event, and that's not because people aren't interested in it. There's just not the investment level. There's not companies investing in events, but more importantly, they're cutting back investments in major technology.

And I think when you look at what you're providing, more than ever, the ability to transition, to find those third-party players who can keep you at speed and scale despite a down economy. More importantly, keep you in the game during this time period so that when the economy reenergizes ... And oh, by the way, payments hasn't changed. You know, you're going to be part of that. So are you seeing this also, where it's sometimes maybe a little bit harder to convince financial institutions that you need to invest in this now so you don't fall even farther behind?

Dan Hanks:

You know, I think that ties into your earlier point about like more of the overall capital investment of the team, versus outsourcing. So I think that's what we're seeing, is internally it can be very difficult for some banks to ... You know, especially not the huge banks, maybe midsize banks or smaller, to get that large capital investment to be able to do it. But if you outsource, then it becomes maybe more of an operating expense, right? And if you have a vendor and somebody who can do these services at a reasonable cost for you, that becomes a lot easier over time because you're now matching your expenses to your revenue in the future. It's not about 10 million or 100 million dollars today, hoping that-

Jim Marous:

Right.

Dan Hanks:

You'll get a positive ROI in five years, with all the uncertainty that comes with the economy. So that's certainly something we see, that other banks which might have maybe a few years ago invested themselves, looking to come to us to say, "Hey, how can we leverage what you've already done," right? "You've already done this investment. How can we leverage this with you?" And then that's more efficient for us going forward.

Jim Marous:

You know, another benefit you have too is that you don't have to buy the entire core back office at the same time. Your organization's a great example where you can compartmentalize the solutions you're trying to answer to, which really works well on the clients' behalf, but also works well from your standpoint because you learn how to integrate with the other platforms they have. That's a big change we've seen in the last several years, where the ability to innovate in certain areas faster than others and actually deploy it is really important.

You know when we're ... You talk about the innovation side. I was at an event, geez, about three weeks ago. The event asked the players, and they were the major financial institutions in the U.S., "How many of you are working towards thinking about instant payments and rapid payments and things of this nature?" And it was interesting, because everybody was interested in it, but I was amazed how few really were doing anything toward that. The overall attitude was, "Well, we want to see if this answers a problem. We want to see how other people would innovate. We want to see work deploying and then we'll do it." Is this a real concern, where organizations still have the legacy mindset of being a fast follower, as opposed to being a cutting-edge, maybe having a transformation and challenge their mindset?

Dan Hanks:

No, I think it is. And you know, it tends to be a culture at larger banks to be more conservative. That's where it's interesting you mentioned Chase, because they're doing something similar; watching what the fintechs do, and then jumping on it, and maybe in Chase's case maybe actually buying them or investing into them, because they're large enough to do that. But it seems like more of the innovation right now is really happening on the fintech side.

Jim Marous:

Yeah.

Dan Hanks:

And that can be product features. That can be even just segments you're looking at. I mean, we represent a number of fintechs who are looking ... Who are really focusing more on younger customers, thin file, like less extensive credit history, things like that which the banks, being more conservative, sometimes overlook. And there are reasons. I mean, it's more difficult to underwrite people without a long history, you know? But there's opportunity there, and if you get those customers young, maybe you keep them as a loyal customer going forward, right? So there's a lot of innovation going on there, and more in the fintech space I would say right now than the bank space. It'll be interesting to see to what degree ... How fast can the fast followers be, right?

Jim Marous:

Yeah, that's a good point.

Dan Hanks:

I mean, if they start losing customers like that, and it's a long-term issue, to be honest. You know those younger ... From a bank point of view, those very young customers aren't really going to be very profitable, right? They're probably not going to take our mortgages, not going to be approved for large car loans. They don't have homes, so they don't have HELOCs and so forth. But you know, that 22-year-old is eventually going to be a 32-year-old who is your very profitable customer as a bank, who's doing all of those things.

Jim Marous:

Yeah.

Dan Hanks:

So I think the question for banks are, if you lose them as a 22-year-old, can you get them back as a 28-year-old, or does that fintech just become a bank? You know, that becomes a neobank which becomes ... And they start doing all of their services, and you just lose them and don't get them back. And you know, I think that's something that Chase and Jamie Dimon's spoken about a lot.

Jim Marous:

Yep.

Dan Hanks:

That's where he sees a lot of the risk in terms of fintechs, probably not today, but where it's going. Some of the other banks probably have more of a short-term focus and are not looking at that as much.

Jim Marous:

You know, it's interesting. We talk about Jamie Dimon a lot. He got slapped on the wrist, and the investor public didn't really appreciate the fact that he said he was going to double down on R&D.

Dan Hanks:

Yeah.

Jim Marous:

And he said, "You know I have to, because I'm having my lunch handed to me by a lot of players that most financial institutions aren't even keeping track of." We talk about it quite a bit on the podcast where it's not like organizations are losing customers. They're not losing accounts, I shouldn't say. But what's happening is these customers are diversifying their players, who they're working with. And you mentioned it, and it's the difference between small and big players, but also the difference between traditional and what I'll call non-traditional. That can be either fintechs. It could also be the big techs. It can be retailers.

You know, are there any other differences you're seeing between ... And I always say the ones you want to look out for are the very big organizations and the really small. They're doing really good things. It's that big middle market, we'll call the number 10 to number 150 financial institutions, that really is stuck in the past in many cases.

Dan Hanks:

Yeah, and that's been a challenge because it's much harder for them to do the technology investment to keep up. You know, if you're that number 50 bank you probably don't ... You can't be putting 100 million dollars into tech investment every year.

Jim Marous:

Right.

Dan Hanks:

So I think that's what we're seeing a lot to say, they're definitely looking more to outsourcing, versus the other ones who are more likely to fall behind. Like Chase, Citi, they'll invest. They'll stay where they need.

Jim Marous:

Yeah.

Dan Hanks:

The small ones are a challenge ... Are stuck in the middle, where it's tough to invest, to stay on that cutting edge. The fintechs, what we're seeing ... One of the big things we're seeing really is the growth of credit. It's because of a drive for profitability, right? Again when you're in growth mode, getting a lot of customers, and there was a lot of prepaid and debit cards, and but they were very successful in getting a large number of customers. I mean millions, even 10 million customers, some of these fintechs, but it's not very profitable if you're just making your money off debit card interchange.

Jim Marous:

Right.

Dan Hanks:

Now they're starting to look to say, "Okay. Not just we but our investors are saying, 'Show us your path to profitability.'" And that path is often through credit, which is how banks do it as well, right? There's nothing revolutionary about that. But we're definitely seeing more of those customers getting into credit, looking to get into credit, which will also be some pressure on the banks, right? Because those customers ... Who are they going to be stealing from? It's people who have bank cards today.

Jim Marous:

You know, we've talked about innovation a little bit here. Pivoting a little bit away from cards and traditional credit, we've seen buy now pay later getting a lot of attention lately, both on the good and bad side. How is i2c supporting these digital solutions?

Dan Hanks:

Yeah, this is definitely a big area of growth we're seeing, and we support end-to-end on BNPL. There are really like three flavors of it. One is pre-purchase, like for a debit card customer, you can give them a loan-type offer. "Use this card," and it'll have a loan tied to it. We're seeing some of that. Post-purchase is what you see we support from some of the bigger banks, like Amex and Chase as well. Once you've made your credit card purchases, you can move them into types of installment loans, right? Move it into pay in 12, pay in six, things like that, which again we support and we're definitely seeing a lot of interest in, more as an ancillary product to your existing credit card. The other one is pay at point of sale with BNPL.

Jim Marous:

That-

Dan Hanks:

And the networks are actually doing some interesting stuff here. Both Mastercard and Visa are rolling out the functionality to do this, and if you have a processor who's integrated like we are, if you go to make an online purchase with someone they've signed up, when you put your card number in, you go to the checkout page. It'll give you a BNPL offer right there.

Jim Marous:

Right.

Dan Hanks:

It feeds right back into us, and if the customer chooses it, we can do it. So I think that's going to be an interesting one going forward. It's still in an early stage. Visa more has rolled it out in Canada, and the U.S. is going to be coming. But I think that sort of, at point of sale BNPL is going to be very interesting. Because with the networks doing it, and if you have a processor that supports it, even smaller banks can do it, right? The small banks don't have to sign up merchant partners. They don't even have to worry about how the mechanism works. It's just all behind the curtain. It all just works behind the scenes on the processor side. So I think that's another one where we're definitely going to see more use of it, and more usage of it.

Jim Marous:

You know again, it shows a great example of the integrated solutions that really make it in many cases easier to use credit, but also more responsibly looking at how you're making your payments. I mean, I'm not going to have to worry about a high-rate loan product from a retailer anymore. I can still part it on my card and integrate it through payments over time, which is a pretty big deal when you're buying a TV or you're buying something more valuable. And obviously, the government's getting very involved and it's going to be interesting to see what happens in the regulatory side, because of people using it for everyday purchases. I don't really want to buy over time with my groceries, you know? It's not a good idea. So talking about not good ideas and things that are going wrong in this space, you know the fight against fraud and financial crime continues to grow in scale and importance, as the fraudsters get better at what they're doing. How is the industry and providers like i2c working to stay ahead of this problem, and that only obviously seems to be getting worse?

Dan Hanks:

Yeah, and there are really two parts, one sort of from the bank side, one from more the issuer side or from the customer side. You know from the bank side, the issuer side, application fraud is increasingly an issue, right? As you get more sophisticated blocking fraudulent transactions, your fraudsters start looking at things like synthetic ID, stolen ID, things like that to do until you really need application fraud tools, stronger KYC, know your customer-type checks upfront, to make sure you're not letting the wrong people in, right? Because if that happens, there's not a lot you can do about it until it's lost. So I think that's sort of the front end piece of it.

On the transaction fraud, you know it's remarkable how sophisticated the fraudsters are. If there is one chink in the armor, they will find it. But on the bank side, I've seen so many examples of that where it's the weirdest of edge cases. You would never even ... It would never even occur to you that there could be fraud here, and they found it. We found some around pandemic fraud with that, and things like that. At i2c, we provide full fraud support. We even provide something we call premium fraud, where for issuers we will actually take the fraud risk. So we'll charge them certain basis points to spend, and then that's on us to do well. And then because we have a large fraud team here that for all of our clients just analyzes all the data, runs the models, machine learning, all the cutting edge stuff to try to stay ahead of it.

But you know, there's no magic bullet. You have to keep staying ... You have to have a good fraud team, or working with somebody who can manage this, and you just have to stay on it day after day after day, because next week they'll have found something else that you're going to have to now shut down. That one flaw that you're going to have to fix, which no one knew existed, and it just never ends. I mean, there's never a point where you say, "This is it. It's fixed." Now the important thing too from the bank side is, good customer experience, good customer service. If there is fraud, you handle it well. You handle it smoothly. That's so you at least make it as smooth and painless as possible for the customer, but that doesn't mean there's not pain for the bank.

Jim Marous:

You know, research found that 52% of financial institutions perceive their future operating model as basically being a full-service banking organization. What's interesting is that 32% said that they're tending to be more of a banking-as-a-service model, and almost every organization is talking about embedded banking. How do you see this playing out, and how does this change the way or impact the solutions you're providing at i2c?

Dan Hanks:

Yeah, yeah, our platform ... We work with a number of banking-as-a-service providers in the U.S. and elsewhere, who actually leverage our platform to provide especially credit fast services. It's definitely a growing area, because you have a number of small fintechs or other types of companies like that who are ... You know, who don't have the experience and don't have the team to basically build up an entire credit card organization. So you know, our platform is pretty efficient for them to do it, but then they partner with the best providers to be able to do that.

So I think it's definitely a way ... And you talk about embedded finance ... This is definitely something we're going to see more there, where it's not always traditional fintechs, traditional banks and so forth who are doing this. You know, if you are a retailer, if you're someone like that who wants to get into the space, not just as a co-brand deal but as part of your business, I think the best players are a strong way to do that because you leverage that expertise. And then you can provide what you do, they provide what they do, and then we're the platform behind it that runs it, so we're seeing a lot of growth in that area.

I mean, the other area we're seeing growth is agent banking. You know, a lot of smaller banks have agent bank relationships and they're not really happy with them. They don't get great products. Maybe the economics aren't great. Looking to self-issue, so that's another one where like with our platform, it's pretty easy for a smaller bank to be able to self-issue. We're definitely seeing more, and it's similar to that of like the smaller players trying to get more into the mainstream, rather than just sitting out on the side. So whether it's very small banks, whether it's retailers, embedded finance, I think we're seeing a lot of that. Well, we're seeing it growing, and I think that's just going to increase.

Jim Marous:

You know, it's interesting because you keep on bringing back to the smaller financial institutions. That's one of the major benefits of third-party providers, is that the ability to buy what you need quickly, and have it deployed at speed and scale. I'll make another warning out to my listeners, because it happens too often, is that you need to kind of go along with the providers and take what they're selling, to get the advantages they're providing. Too often, we put stipulations on the providers that say, "Yeah, we want everything you have but we can't do this and we can't do that."

We have to rethink our legacy processes and what we've done in the past, to be able to get the full benefit, no matter how big you are, of the organizations that can come to the table and bring you really strong solutions, be it i2c or any of the other third-party providers in any area of banking. There's a little bit of a commercial there or a warning there, a disclaimer if nothing else, to my listeners to say, "You know, listen to the providers. Try to make it so you can actually deploy it the way it was meant to be deployed, as opposed to putting stipulations that only muck it up, to say the least."

So switching a little bit and changing gears again, you know research found that 75% of financial institutions are exploring the relationship between digital currencies and traditional financial payment systems. This has probably changed a little bit as far as the urgency because of the crypto markets, but what do you and your team at i2c believe the future role of cryptocurrencies will be in traditional banking, and when do you think this change will actually occur, if it hasn't occurred already?

Dan Hanks:

Yeah, no. Yeah, even with the crypto window we're in right now, I mean we're still seeing a lot of things that we support ... We're probably the leading processor for crypto players in terms of payments, in the likes of crypto.com. We just signed with Abra, with American Express, and there are others where ... FTX, the new card is going to actually be powered by i2c and so forth. So you know, we have a number of providers there, a lot of growth with it, and a lot of desire to figure out how you connect sort of the crypto world to the everyday world, right? So that's what we see like with our crypto.com card. You have your crypto.com account. You're earning. You have whatever cryptocurrencies you have in there, but they want to be able to make purchases at the store, right? And how you connect to that, and it's usually more like dollar cards which will then be reloaded. We're definitely seeing a lot of interest in rewards as well.

Jim Marous:

Mm-hmm.

Dan Hanks:

So something we support with our rewards platform, so maybe you're earning 1% back, 2% back, whatever it is off your card, which is now going into your crypto account automatically to add to whatever crypto coins you're investing in, those sorts of things. So I think that's where ... I don't know. I think we're still a long way from using crypto at the store type thing.

Jim Marous:

Right.

Dan Hanks:

Those rails really just don't seem to be there. But you know, and that's why I think we're seeing increasing interest, especially on the card side with our customers, of the connection. "I have a crypto account. I need to go spend something at the store. How do I connect those two?" And we're seeing a lot of growth, that people want to be able to do that.

Jim Marous:

You know, as we wrap it up a little bit here, what do you see as the number one challenge, and the one number one opportunity around payments today?

Dan Hanks:

Yeah, the challenge is really what I think we've been talking about, is the digital transformation. You know, for somebody who's on an older tech stack to figure out how to do that jump without ... Obviously, you can't just tear out and throw out everything you have, right? So it sounds simple, but the fact that it's taking years for banks to do it isn't really criticism of the banks, because it is an extraordinarily complex project. But I think that's the big challenge. They really need to figure out how to really accelerate that digital transformation, and leveraging third parties to do it, as opposed to necessarily building everything in house.

I mean, I think the biggest opportunity is just what we're seeing from the fintech side. There are customers out there who are looking for innovation, right? You know, it's not ... If you keep offering the exact same cookie-cutter products as everyone else, then okay. If you have a captive base, you have a retail base, you'll sell some of it. Your direct mail will get a certain return rate, and so forth. But you know, there is innovation happening out there, much more so than there was five years or certainly 10 years ago, and that's the opportunity. I mean, it's a risk if you're an incumbent. But if you're not an incumbent, and maybe you're not a traditional bank ... Maybe you are fintech or retail or something like that ... There's a lot of opportunity to start getting a piece of the revenue that comes out of that payment space.

Jim Marous:

You know, finally, i2c ... And I'd be remiss if I didn't state this and then ask you about it. But i2c was recently named best in class for your credit cards and service offering. What do you think set i2c apart from the competition? There's a lot of impressive names there, but what really sets what you offer apart from other solutions in the marketplace today?

Dan Hanks:

Yeah, I think one of the big things is we truly have a single global tech stack, and an advantage we have is that credit is core to it. Like I said, we don't outsource it like some of our competitors do. The advantage of that single tech stack is, first of all we are a true global company. Based in Silicon Valley, but I mean we have clients all over the world who are running the exact same version of all of our platforms on it. And I think what that means is, we can innovate faster, and when we make a change it goes everywhere. It's in the single tech stack. Everyone has it immediately, and it's a configurable platform. So it's not about coding, it's about just configuring what features we have, and that combination just gives us a speed and functionality that puts us ahead of the competitors.

Jim Marous:

You know, it's interesting, and congratulations on that honor. I think again we get back to, it's finding the right partner. It's evaluating all the partners. But most importantly, it's actually doing something about it as financial institutions. I'm a legacy banker so I go way back, but the mindset really has to change. Organizations, and I say this often in presentations I do and then on the road, is that we need to, as organizations of people, embrace changes around us and not fight it. Number two, we have to manage risk and accept risks; risks that are managed as opposed to avoided. And most importantly, we have to disrupt ourselves and our thinking process.

You know, the biggest hindrance to transformation is legacy thinking. Those organizations that are moving ahead in the payments field today are doing it quickly, and at scale. Some small organizations are building platforms where they can become very big very quickly in the payments space, because of the thought process that they have in place. I think as people that listen to this podcast regularly know that I get frustrated at times at the change ... The speed of change, and the lack of it in the financial service industry. But I think more than ever, and especially in the payments area, it is imperative that we look at the innovations that are possible, and move forward today more than ever while the economy is having a little bit of a hiccup, at least, and making sure that you're ready for when everything turns more around.

Dan Hanks:

Yeah.

Jim Marous:

So Dan, thank you very much for being on the show today.

Dan Hanks:

Oh, thank you for having me.

Jim Marous:

Thanks for listening to Banking Transformed, the winner of three international awards for podcast excellence. If you enjoy what we're doing on the show, please take some time and give our show a five-star rating on your favorite podcast app. Finally, be sure to catch the articles I'm writing for The Financial Brand, and the research we're doing for the Digital Banking Report. This has been a production of Evergreen Podcasts. A special thank you to our producer Leah Haslage, audio engineer Sean Rule-Hoffman, and video producer Will Pritts. I'm your host, Jim Marous. Until next time, remember; the speed of change has never been faster, and it'll never be this slow again.