Episode 21: The battle for customer experience

Transcript of the recording

Cyrielle Chiron:
In his keynote speech at the 2021 summit, Michael Abbott, Senior Managing Director, Global Banking Leader at Accenture, looked at the past to talk about the future of payments. Michael suggested that the birth of the Credit Cards in the 50s, can teach payment leaders valuable lessons at their work, to keep place with the rapidly evolving customer expectations. Why are these lessons so critical? Well, because the next gold rush according to Michael Abbott, is for customer experience. If you own the experience, then you own the value. I'm Cyrielle Chiron, Chief Strategy Officer, at Payments Canada, and host of The PayPod. In this episode, we are going to go back to the future of payments. We'll be catching up with Michael, to dig deeper into the topic of customer experience. What lessons can we learn from the past? How Digital-First is transforming the payment ecosystem, and what he sees for the future. But first, let's set the stage with a re-airing of his keynote from the 2021 summit.

Michael Abbott:
Hi everyone, I'm Michael Abbott. I lead the global banking practice at Accenture, which includes our payments practice. I'm sure like you, I can't wait for the day when we're back in person. Keynotes are so much more fun in person. Over the last year, we've talked to hundreds of clients, thousands of consumers in too many fintechs account. And what we've learned, is that below the plastic surface we see today, there are turbulent forces re-shaping our industry. The good news is, we've seen this movie before. And as an industry, we can write the ending. But the decisions we make over the next few years, will determine what the 2030 Payments Canada keynote will be all about. The question is, will banks continue to drive the incredible innovation that has fueled the payments industry? Are we about to become credits at the end of the show? It's back to the future, so let's dive in.

There is zero doubt the pandemic has changed payments forever. Tap & Pay has exploded. Digital adoption has gone through the roof for all age groups. 2025 is happening right now. And what we are seeing is the convergence of two supercycles, that are quietly influencing every aspect of financial services. The first supercycle is a Neo Normal. It's the convergence of tech and banking. We are playing in the same increasingly crowded space, and differentiation is hard. In north America nearly every banking app is rated 4.8 or higher. It's a [CS sameness 00:02:58]. Digital is no longer a differentiator, and consumers are spending more time on non-banking app marketplaces, and platforms that are making payments invisible. We all know who they are. The Amazons, the Ubers, the DoorDashes. As my wife told me the other day, the fun is buying not paying. Whether we like it or not, we are entering the post-digital aid of banking.

And the second supercycle, and perhaps the most important one to banking and payments, is The Battle for Experience. For years, we've heard that bank data is the holy grail for fintechs. It's worth a fortune we're told. Well, I have an inconvenient truth to share today. On the open market, consumer banking data is close to worthless. Well it's not exactly worthless, but today we can buy card transaction data for our retail partners for around 10 cents a person. That's right. Card transaction data on the open market is worth about a dime, a dime for your data. And if we think about it, it's not surprising. Just ask yourself, is Facebook's data worth anything without Facebook itself? I'd argue it's not worth that much without Facebook. It's the ability to change experiences using data, that ultimately creates value. Not data itself. Own the experiences, you own the value.

The good news is, we've been here before and the industry has risen to the occasion. It was the 1950s, and payments were about to change forever. It was the birth of the Credit Card. And the 1930s during the depression to drive sales, merchants began extending credits to consumers. It was a simple closed ended system. Today we call it private label. The digital equipment equivalent in our market today, is our banking app. It's a closed end application. Eventually though someone asked, "why carry all those card? Why carry all those apps? Couldn't one do it?" And in the 1950s, Diners and American Express appeared on the scene. They were the first open loop products. But banks weren't worried. They owned the deposits, they owned the branches and take up was slow. Today, that's Google and Apple Pay. Eventually though banks realized they had a problem, and they started innovating.

Of course initially building their own close networks, like Bank of America. But eventually they figured out, that payments is a network game, better played as a team sport. So they got together, collaborated and created Visa and MasterCard. The challenge is today, there's no digital wallet analogy for Visa and MasterCard. And there are big differences this time around. Technology has changed everything. We no longer have decades to innovate, at best we are going to have years. Digital payments are everywhere. Consumers spend over $35 trillion globally on cards. So we need to ask ourselves a simple question. What would we pay to influence $35 trillion expand? That is the battle for experiences. And innovation happens in years, not decades. When Neobanks enter banking, they almost always attack payments. N26 in his partnership with Transferwise, let you move money cheaply and with ease. My son who happens to live in Germany, needed to move money locally.

He got an N26 account in a matter of minutes, linked it up to his US account using Transferwise. And now he moves money back and forth, and he will never go to a major bank again. Chime is another great example. During the pandemic, they added eight million users. Their value prop, simple. Get your paycheck a couple of days earlier, that's it. Just get paid faster. These are product innovations first and foremost, centered around payments. And everyone is becoming a terminal. Whether it's Square, Venmo, Interact, WePay, AliPay. It won't be long before we can just simply flip our phone over, and tap to pay anyone. We are all becoming terminals. And last, our phone is becoming our wallet. Nearly everything we had in our wallet is now on our phone. Our payments apps of course, our passports, our loyalty cards, our health apps, our drivers license.

The only thing missing right now is cash. And that's about to change too, with the emergence of digital currencies. And thinking of digital currencies, if you think one can't exist outside of Loonie I still remember the day when you could just send a [Mictires 00:07:50] to buy a beer in a bar. Maybe it was the original crypto. Truly nothing is really new out there. So let's talk about how tech is changing though the experience. First, we should all understand crystal clear, the next gold rush is for experience. And Apple, Google, PayPal, AliPay, WePay, are all looking to do one thing. They want to own the payment experience, so they can influence purchase behavior. If you own search, you own digital advertising. If you own the wallet, you own commerce. And if you own commerce, you can influence $35 trillion of global spend. And banking and payments are quietly converging.

Just imagine if every time you pulled out your debit card, your balance was printed right on the front. And when you tapped and paid with it, it was instantly updated. Would you ever let that go? The answer is no. Why? Because it puts us in control. There's a reason why 90% plus of bank app usage, is simply checking your balance. We want to know where we stand. It's that simple. Said differently though from a technology perspective, banks are one API away from shifting 90% of mobile banking app usage to the wallet. Think about that. One API could wipe out 90% of reported mobile banking app usage. That's the power and the risk of technology. It's a cold war for experiences out there. And the ultimate goal is a super app. The one app where you can shop, pay, save and more importantly bank. Everyone is after it.

Take a look at what Google Plex did in the next generation wallet. Payments, banking, offers, loyalty. We are getting there, and we're getting there a lot faster than we realize. So what's a bank, or more importantly, what's the banking industry to do about this? Well first, we all need to think beyond the payment. How can we bring offers into the payment process? Why shouldn't every card offer promotional financing? Why shouldn't billing information move with payments, not around payments. The ad market is worth billions, yet banking experiences are functionally correct and emotionally devoid. They do little to help me beyond the basics. We have to think how we bring payments to life, and we have to beyond the payment. And we have to innovate, and I believe it's easier than we think. Apple wasn't the first to create the smartphone, but they did it right.

They copied, improved and repeated the formula. Why can't banks offer to provide our paychecks a few days earlier? Why can't banks integrate simple money transfer experiences into their app? Why can't I add crypto to my savings account? Why can't I see offers in my banking app? The best defense to this coming battle for experiences is going to be a great offense. And we all have to understand the battleground is shifting, and it's shifting fast. Focus on the mobile wallet. Here's a simple question for everyone listening today. If you are a banker, why can't I tap and pay with your mobile banking app? It's clear that with just a handful of APIs. Google and Apple can absorb nearly all mobile banking app usage into their wallets. Just look at the Apple Card and look at Google Plex. They're coming. So why can't I tap and pay with your mobile banking app? And think about how to bring your card to life.

Why not print the balance in the front of the card? Show your open to buy, your rewards balance. Bring experiences to your customers, not customers to someone else's experience. And again ask and answer the question. Why can't I tap and pay with my mobile banking app? 60 years ago, pioneers in the banking industry got together, and they changed the history of payments forever. They realized it was power in numbers and standards. Today is no different. We must collaborate to win. First and foremost, realize other banks are not the competition. The competition is for experiences. Create the standards for services beyond the payments. The delivery of offers, billing, loyalty. Make them open and available to everyone.

Demand a level playing field for payments. Force an answer to the question, why can't I tap and pay with my mobile banking app? Only experience set the standards, compete on the product. If we write the ending we want, we will change the future of this industry together. If we don't, the ending will be written for us by others. But in the end, I'm confident that together we can, and we will again write the next story of payments. Thank you. I hope to see everyone again in person in 2022. Thank you very much.

Cyrielle Chiron:
Michael Abbott, welcome to the podcast.

Michael Abbott:
Cyrielle thank you for the kind introduction. Looking forward to our conversation today.

Cyrielle Chiron:
So we revisited your keynote from the 2021 summit last Springs, and back to the future for payments. I'm going to start the conversation with the present day payments. You talked about how the pandemic has accelerated digital payments, to the point where 2025 is actually happening now. How would you describe today's environment, and is that accelerated pace of change the new normal?

Michael Abbott:
When you look at the pandemic, what I see is, in many cases we see hindsight as 2020. We realize after something has happened, that has happened and something has dramatically changed. This pandemic is something we can see right now in front of us. And we know it has radically changed how everything is going to happen, especially in banking. And most importantly in payments. I mean, if you look back and you think about just how you would pay before for the pandemic. None of us would've had any problem going in, and touching a keypad, and entering our prelim keypad. Now we go out, and we put gel on our hand and, we-

Cyrielle Chiron:
We don't want to touch anything.

Michael Abbott:
We don't want to touch anything. Because it has radically changed our thinking. And along those lines, what that's done is, is you can see it. There's been a dramatic reduction in cash around the world. It's been well published, and you've seen also. And on top of that, you've seen the likes of Tap & Pay, and mobile payments and all those other features take off. So even beyond just the old chip and pin, is how we used to think about it. Now we are going to move towards things that are just contactless across the board. Cash is going to become reduced.

And at the same time, what you've seen in the banking side is you've seen, a very different population start adopting digital. A population across the board up and down. So all of a sudden now, populations that we didn't think were going to adopt digital payments, are now adopting them at scale and at speed. So this is just started a complete flood of change, that I don't think we will ever go back to the way we thought about payments before.

Cyrielle Chiron:
Yeah, that's good. And that's a good context actually. Better understanding, and I agree with you. There's a lot of things that are changing when very fast. And now we are the new normal, but if I can say that. I like to talk about a concept that you mentioned a lot, which is customer experience, that you mentioned in your video. And going back to your message, which is own the experience, own the value. I have two questions for you. So first is, how is the battle for customer experience transforming the payments ecosystem? And the second would be what roles do you envision for traditional institutions, and then for new and emerging players as well actually.

Michael Abbott:
Oh Cyrielle, those are like loaded questions. And I think we're going to be spending a few minutes on this, and maybe have some questions inside of the questions here. And we'll unpack these, because these are two very big and juicy topics. Let me start with your first one, the battle for the experience. And in the presentation, I did it in a nice politically correct way. But let's actually get into here today, what really is going on. And what's really happening, what you have to worry about. And as payments have been virtualized, and we're starting to tap and pay with our cards, our phones, and all those other things. There's a realization happening in the industry very quietly.

That it's the experience. If you own the experience, you own the ability to modify or change behavior. So let me put it in a little bit different context. Everyone in the payments industry thinks their data is worth a fortune. The data is worth all kinds of money. I would argue the opposite. I would say that data itself is practically worthless. Not completely worthless, because we actually buy data payments data for various different entities out there. But it's very cheap. I mean the cost of buying US consumer data, on the open market for payments is about a dime. It's a dime a person a year. And in fact if payments data was worth a fortune, you'd see a line in the PnL on everybody's payments. PnL that says, payments data revenue stream from selling our data. They don't do it, because we don't want to do it.

And so what that leads you to understand is that, where payments data becomes incredibly valuable, is when you can modify behavior. So to give you a contrast, is Facebook's data worth anything without Facebook itself? I would argue probably not. I would argue, Facebook's data is probably not worth much without Facebook. It's the ability to modify behavior in conjunction with the data that's there. So back to your question around battle for experience. So therefore, if you're the largest fintechs in the world or anybody, the real battle in payments is, if you can own the experience, you can own the ability to change that behavior, using whether be the payments data, other data, whatever it may be. So the experience in owning that experience becomes incredibly valuable. So let's just take a little bit of a tour South of the border for a second here.

And if you look at the Apple Card, that was launched by Goldman Sachs. The real innovation in that is not the card, is not the payment product or anything else inside of it. Because the card itself is a regular cashback card. The real innovation is that there is no mobile banking app. And I'd like to just let it sit in. No mobile banking app. The experience is a hundred percent integrated into the wallet. The payments experience has been integrated with a banking experience, and they brought that card to life. So for your listeners today, if you think about... If you're listening from a bank let's say, and you've got a mobile banking app. Data around the world would tell you that mobile banking app usage, 90% of it is just checking your balance. Okay. Just checking your balance. If I were to take a payments customer, and I were to print the balance on the front of your debit card, where just you could see it in real time. And you spun and it went down, would you ever want to let that go?

My argument would be no. Well think about it as one API in your mobile banking app, and if you were to integrate that into a mobile wallet. Into Apple Pay or Google Pay. And all of a sudden your balance was printed on the front of the card, you could envision moving 90% of mobile bank app usage with one API into the mobile wallet. So therefore the battle is for the experience of that, the experience of payments. And if you can own that experience, that's where the real value could be created in the future. Because then you can use the data et cetera. And I know that was a long answer or to your [crosstalk 00:20:34] and serious question. But hopefully it gives you an idea of what we were getting at underneath there, a little more than what you saw in the keynote.

Cyrielle Chiron:
But that's actually good and brings me to having another question. It's because you say... It seems like modernizing. They came up with a new initiatives. And it's when you were talking about API connecting with each others, and it's something that didn't exist in South of the border. So now that you know that there is a lot of countries, so Canada we are one of them. The US one of them as well. That they are modernizing their payment systems. There's a lot of initiatives on the go. And obviously it's on a level. The security, the real time, the speed, talk about the data as well. It's something that you were touching about interoperability with all of this. So going back into the same themes, how do you see these initiatives, and the innovations like the Apple Card, driving new services, solutions and opportunities for consumers? So the Apple Card would be one. Do you see any others that would be maybe in the non card space?

Michael Abbott:
So this goes to another part of the keynote that we were talking about, but again we'll get a little deeper today into it. Because you can only say so much in those nice keynote.

Cyrielle Chiron:
It's true. Yeah.

Michael Abbott:
We'll go a little deeper on that. So what you're getting at, and it was remember the title of Back to the future. The reason why I titled it Back to the future, is because I also believe that how banks need to win in payments, is not a game of win or takes all. It's not that one bank is going to invent something and then just rule the world. Payments is a game of collaboration. And the Back to the future reference was really around the fact that, in the 1950s American Express and Diners Club was coming out. They came out with Credit Cards. And the bank back then said, "Well we've got cash, We got checks. What do we need this stuff for ?" And they didn't pay any attention to it. like our fintech today. And then what happened was they got religion and they said, "Whoa, this payments thing could take off. We need to collaborate."

And they created effectively the predecessors with their now Visa, and MasterCard as collaboration tools. So around your point, so what payments can and what others doing around the API centered, and the capabilities to basically enable payments anywhere, anytime, anyway. Are going to is absolutely critical for the future, I believe of payments. And we're seeing it around the world. And it's critical to the future, because it's a way of banks collaborating at a national level, to create a set of standards. Think of it this way. If we all had different Wi-FI, imagine what that would be like. We'd go everywhere, nothing would work. So we need-

Cyrielle Chiron:
It's really hard today. So [crosstalk 00:23:17]

Michael Abbott:
Yeah. Imagine if there was 25 different Wi-Fi standards, we'd go nuts. That's the same thing with payments. We need the standards that set, and the foundational principles that allow us to move money at speed at real time. And then when those are get established, I think that unleashes a whole host of innovation. So think of it this way is that, why can't I while I'm in a texting app, just be able to text money to people back and forth? Does that experience have to be controlled in one place? Why can't that be unleashed in other areas? How could you create... How could you envision whole new merchant networks, and payment networks emerging for specialized areas, and specialized services?

How could you look at commercial and corporate payments, where right now the data associated with that is... tends to fly for the accounts payable, and then receivable in a completely different pipe from the payment. Why shouldn't that all be tied together? Healthcare payments, adjudication, all of this. Is these payment systems underneath become open platforms, that multiple people can tie into? I think we're just at the beginning of seeing how that can unleash innovation. We can only imagine what that's going to look like.

Cyrielle Chiron:
Well that's pretty cool. I'd like to go back to when you were talking about the Credit Cards in the 50s. Because I think it's a good reference point. And you talked about having a good standards, which I wish to totally agree. Is there anything else you think that would be the lesson learned, that the thing that was done in the 50s, that maybe didn't work that well. Or things that in the past, that we could refer to say that we get better understanding for today, and making sure that we don't repeat the same mistakes, or anything else you'd like to add?

Michael Abbott:
Oh, there's some great... Looking in the rear view mirror you can always learn a lot. And in fact I always... I also think you learn some of your best lessons from the failures. Because what you [crosstalk 00:25:05] is you learn a lot from failures. So let's go back in time a little bit. Yeah. And by the way, and we've repeated these failures at times too. Here's one big lesson learned about payments, especially as you think about payment networks. Everyone thinks of payments as paying. But the reality of this is that the way payments scale, is by being paid. And what I mean by that is that, the branding is almost as equally important as the standards underneath. So if you look at AliPay and WePay out of China, everyone thought Alipay and WePay in fact, we did republish something on it a while ago said, oh it's going to be a big trend.

They're going to go all over the world and go there. But you know what, they didn't. And they couldn't even make it in the countries. They went at places like Brazil and nothing ever happened. But here's why, because here's what we all missed. What happened with AliPay and WePay was, they weren't built around payments. They were built around acceptance. So what was going on at the time was a lack of acceptance. The ability to accept payments, and the branding around it. And then once that happened, you move forward. When you try to bring that into mature markets that already have strong acceptance marks, and ability to go there, then it doesn't work. Now take that lesson forward and say, if we want to have a... Let's take our example we were using before, like text messaging and putting it in there.

It's not going to be sufficient just to put it in a text message app and say, you can get paid. People are going to need to know what brand is it. You can pay me via blank on the text message. So getting that branding, and that sequencing right around acceptance in the acceptance forms, is a huge lesson learned. Some other big lessons which are quite obvious, is that no one wins on fraud, in risk. No one wins.

Cyrielle Chiron:
That's true.

Michael Abbott:
So no one wins on fraud in risk. So actually collaborating, and sharing data to reduce fraud and risk, should be something that all of us do out of the gate from day one. Just being the best in fraud and risk is not a winning strategy. It's something you need to collaborate at an industry level, to make happen from that perspective. So it's interesting as we think of payment... as we're payments leaders. We need to start thinking of how we collaborate more, not less. And I think many of us have thought, the bank down the road is my enemy. It's not in payments. It's your friend. And if you don't work with them to establish standards like for Wi-Fi, you're only hurting yourself, and you're giving the market to the fintechs.

Cyrielle Chiron:
And I agree. And then you're right. You can have very good product, but if nobody can use it, who can accept it is useless. You are alone in your space.

Michael Abbott:
Exactly. You and I could send each other money, but [crosstalk 00:27:54] I could send myself money, but what good's that going to do?

Cyrielle Chiron:
What's good it going to do. And I agree with you on the fraud bit. There's nothing. It is the most important thing. Nobody wins if there is this massive breach or... And it is unpayments, but it's the same in data. You just go in back to the data and talk about the customer experience.

Michael Abbott:
Well, and by the way the data is a great one. I'll come back to that just real quick. That's why everyone thinks, oh my dad is worth a ton of money, but we don't sell data. In fact, if our customers ever knew we were selling, or if they thought you were selling their customer data on payments, they'd be upset. So let's face the reality. The customer data is there to help the customer, and what we're going to do to help make their experiences better. And when you think of it that way, all of a sudden you come to a very different spot, in how you think about payment strategy at a national level.

Cyrielle Chiron:
Yeah no, I agree. I have one final question for you. You said that before, and there's a lot of things that's going to unfold. There's a lot of things that we're going to see how it happens, but I'd like to see how excited about the future you are. So when you think about all these opportunities that you talked about, is there one thing that you're most excited about?

Michael Abbott:
Oh, one thing I'm mostly, that is a-

Cyrielle Chiron:
You can say more if you want.

Michael Abbott:
That is a really tough question. But when I'm going to look around the world... I'm going to go around... I'm going to do a world tour. When I'll say one of the things I think that's... I don't know if I'm most excited about it, or I find it's the most intriguing thing that's happening right now. Is that, in some countries in India particular, what you've seen is a mandate, that networks have to cross networks so that... So you're starting to see a network of networks model emerge around the world. Where our payments networks have been. They've tended to be relatively close. I mean, if you're on one, you use it. Visa accepts AMEX et cetera. Obvious point things from that perspective. But the idea of being able to cross these networks very seamlessly, and open it up has an enormous potential across the board. To radically change the way payments work from that perspective.

So to me if you're at looking at the world, and you're saying what could really change payments in a big way? Unleashing a network of networks, and figuring out how that might work long term, could be just an incredibly different. Because then what would happen is, you actually wouldn't get back to our example around having to have a brand. You actually wouldn't need a brand. You just need to know who the person is. And you'd say they have an address. You wouldn't even be worried anymore as a company, or consumer or anything. How the payment was going to happen. You just know, I know by saying I'm sending it to you Cyrielle. I'm good.

Cyrielle Chiron:
It's good.

Michael Abbott:
I don't have to think again. That's a network of networks. That's a pretty... That's like being the king of Kings. It's an interesting idea.

Cyrielle Chiron:
Well I Keep the network. Well Mike thank you very much for joining me today. It was a pleasure traveling through times, but also thinking about the future. And what's next for the payment ecosystem. So I'd like to again, thank you for being with us today.

Michael Abbott:
And Cyrielle thank you for the opportunity. I've always been a friend, and I'm a huge fan of what you're doing in Canada with the Payments Canada conference. Looking forward to being there, hopefully this year in person so...

Cyrielle Chiron:
In person, yeah. Thank you.

Michael Abbott:
Thank you for everything you do.

Cyrielle Chiron:
As we discussed today, the future of payments is here. Keeping pace with change means having a deep understanding of customer needs and expectations, and putting them at the center to succeed in the future. Thank you for joining me for this episode of The PayPod. As we share discussions, taking place across the payment ecosystem. Stay connected to the latest news in payment. Our registering for our annual conference, The Payments Canada SUMMIT @thesummit.ca. I'm Cyrielle Chiron, thanks for tuning in.