Track 3: In the Air, at the Table and at the Doctor's: Evolving Consumer Demand for Payment Options

Transcription:

Jamie Walker (00:08):

Hey, good afternoon everybody. It's great to be here. I'm Jamie Walker, CEO of Elavon, and if you don't know Elavon's part of US Bank, one of the largest acquirers globally. We support Europe, Canada, and North America. I've been with the organization for 23 years, so it's great to be here. I'm going to introduce, I have my colleagues introduce themselves to Nicole.

Nicole Tackett (00:35):

Nicole Tackett with US Bank, and I am Head of Merchant Revenue for our corporate and commercial bank, so our medium to enterprise size customers.

Mia Huntington (00:46):

I don't know if my microphone's on, but I'll just speak really loudly. Mia Huntington, I am also with US Bank and Elavon. I have been with the company for quite a long time. I came as part of an acquisition of an e-commerce startup many, many years ago, but now I'm leading a new part of the bank where we've invested in point of sale lending and buy now pay later capabilities that we'll bring to our merchants and bring new consumers into the bank as well.

Jamie Walker (01:17):

So let's start out just a general question for the group here is how are payments evolving and what we consider these larger, more complex industry like airlines, restaurants, hotels, how do you see those evolving and what have we seen since it's been four years since the pandemic and how things moved along? I think I'll start with you, Nicole.

Nicole Tackett (01:43):

Sure. So I mean, our clients are definitely looking to improve their customer experiences, but as Jamie said, the environment is much more complex. It's much more uncertainty in the just global economy itself, and the competitive pressures are at an all time high. So where do you make these investments to improve that customer experience is really important from a prioritization standpoint. And customers have a choice, let's face it. So if their experience isn't intuitive or easy, it can be really impactful to growth. So that's what some of my customers are facing today.

Mia Huntington (02:18):

Yeah, I mean I think the only thing I would add is I think from a merchant perspective, everything that they learned during Covid in their personal lives probably now comes fast forward into what their expectations are in their business lives too. So the instant everything, the digital, everything, the being able to self-discover and research and know the proposition of what they're looking for, what they're willing to buy as a business, they take those personal experiences and they expect the exact same thing in their business lives too. So I think for Nicole trying to sell into a merchant base, that's something that's kind of top of mind for all of us.

Jamie Walker (03:00):

Great. Nicole, obviously you get to lead. We're one of the largest acquirers in the world for airlines, so we get to see all the different opportunities with airlines as far as the e-commerce experiences, digital experiences, either online or in app, what are some of the biggest changes you see happening in airlines right now from a payments perspective?

Nicole Tackett (03:24):

So I think to your point, Jamie, we've been processing payments for the airlines for 34 years. So it's something that we take a lot of pride in and do really well and partner with our airlines very closely. In the US there's 2.9 million passengers a day across 5,000 different flights. So there's a lot of touch points for payments on a daily basis, and our customers want to remove that friction. But if you look back, even just maybe 10 or 15 years ago, you had the main flight purchase, there was no ancillary fees for luggage. There was printed paper vouchers to go get your food at the restaurants and it was cash only on the airplane. So that is all electronic now. And so we've helped grow with our customers to make all of those payments across all of those multiple touchpoints as smooth as possible, kiosk, mobile in app, and all those ancillary purchases. I think we continue to focus on reducing that customer friction. And one way we're doing that from an in-app perspective is we've launched with a partner for tap to pay. So you used to have the phone and then the terminal to plug into the phone, and now the terminal, the Apple iPhone is going to be the app. And that's really exciting because two improved customer experiences there, one for the flight attendant and one for the actual card holder. So we're really excited to promote that.

Jamie Walker (04:49):

And it really for the airlines, it reduces the amount of breakage they have for in purchase type things that we've seen and the feedback we've gotten for that type of technology. So it's been really well done.

Nicole Tackett (04:59):

Yeah, I would say the flight attendants are probably the most excited about it. You don't think about little things like if the lights are off on a plane and they have a card and the card declines in the terminal, they have to turn on the light and then manually key enter the card number and they don't want to disrupt passengers with the light on an evening flight and things like that. So it's been very game changing for those flight attendants.

Jamie Walker (05:23):

So a bit of a shameless plug, but we just hosted our airline symposium here about a few weeks back and hear anything else from the industry of what you're hearing from them.

Nicole Tackett (05:35):

So airlines continue to need to optimize. They need to be extremely efficient to maintain their profitability margins, and so having really high authorization rates, having a high uptime reliable system really fuels the payments ecosystem for them across those multiple touch points with their customers. So that's really important and we continue to focus on that with them, but also helping them reduce fraud and chargebacks to control those costs is really important and they continue to be engaged on how to keep all of that to a minimum.

Jamie Walker (06:13):

And I think one thing we hear a lot of is just one thing we kind of forget about table stakes. What are we here to do is approving and authorizing payments. And that constantly is a thing the industry is trying to improve upon is make sure we're maximizing those approval rates and obviously reducing fraud. Mia, we will change here a little bit. So we're going to talk about advance and also just what we're seeing from a point of sale lending from an industry perspective, as you think about buy now pay later, it's gone from a pretty commoditized type product to one, it's much more of a one size fits all product segment into a really diverse category. So this as being part of a large bank organization, what opportunity do we see here from a point of sale lending perspective?

Mia Huntington (06:59):

Yeah, I mean we sort of started with what happened during covid and how have things evolved, and I would put this in that same category. The fintech's absolutely started, I would say, and grew the demand for this from a pure consumer perspective. And now it's at a point where I think it's 43% of consumers would say they would defer or completely cancel a purchase if they didn't have the option to finance presented to them by the merchant. So the lens that we took is, and if you really kind of pull back, what are we all trying to do in payments, generally speaking, right? We're trying to facilitate that payment, we're trying to make it as frictionless as possible, and we're trying to give the ability to make a purchase affordable, whether that's putting something on a card or giving you access to your funds in your checking account through a debit transaction or in the case of something like buy now, pay later or point of sale lending, it all kind of achieves that same end outcome with consumer choice.

(07:57):

So from our perspective, the way we looked at it was it's great that fintech's have created this demand. It's clearly a persistent need that that's coming to us from consumers and just the ever-changing and evolving nature of how consumers want to pay. Why aren't we participating in it as a bank? And when we looked at all the parts of the ecosystem that it takes to be in this space as a financial institution, we have all of those things. We have money movement, we have lending, we have, in Elavon's case, we have merchant acquiring. We really have all of the parts of the ecosystem that allow us to bring a product like this to market. So from a strategy perspective, we think it's a really great opportunity to both service our merchants with alternative payment forms. Nicole's talking about approval rates for airlines, for example. How do we just give more ways to pay for that airline consumer to be able to make their purchase? And we also think for bankers in the room, it's a pretty low cost of acquisition channel for us to acquire consumers as well. The merchant is introducing the consumer to us as a bank and we are offering the end consumer a lending product while also servicing the merchant with a method of payment. So it's a pretty unique use case and B two, B2C in its truest form, kind of crossing a lot of bank silos, traditional bank silos.

Jamie Walker (09:28):

And so we spent a lot of time, we just launched our product here a couple months ago, just maybe how did you build it?

Mia Huntington (09:40):

Building things in large banks is always an interesting adventure, but I'm really proud to say that we really took, as I said, we had all of the ecosystem internally at the bank and we did a lot of analysis to decide do we buy builder partner to get to all of this part of the market? And we ended up really building in house for pretty much everything we did. We strung together many, many systems that already existed and we really put a digital layer around the whole thing. I'm super proud to say that we did that in a really short timeframe from the original designs all the way through to launch, it was about nine months. So we moved really, really quickly because we had the advantage of not just the technology stack, but also think about things like writing a credit policy or doing underwriting, assessing merchant risk. We're good at all those things. It's the nature of exactly what we do. So we had a bit of a leg up I think in terms of that go-to market and design from scratch.

Jamie Walker (10:44):

Thanks. Switching gears here a little bit, restaurants, restaurants are no different, the pandemic probably more so than any other business who really changed how we pay at restaurants, how restaurants interact with their consumers. How do you see that evolving today, Nicole.

Nicole Tackett (11:02):

Besides being asked to be to tip every time, even when there's no service, that's definitely evolved, but so the point of sale solutions have definitely been asked to work across multiple locations in person, online, in app, from invoicing and catering and all of those things. And we are asked to embed our multiple payment methods into those point of sale solutions. But we're also seeing if you're at your restaurant and you are getting your check dropped off at your table and you see the QR code, you can now just do the QR code pay with Apple Pay, you can be on your way so it's not being reliant on the server to come back and take your card. So that actually reduces fraud and chargeback risk and also similarly with the devices at the table. So the server can come up, you tap your card, you touch the card, the card's not getting taken away for any skimming or things like that. So we are seeing those changes in behaviors as well.

Mia Huntington (12:06):

I think we could have used the QR code feature at our table at dinner last night.

Nicole Tackett (12:09):

Yep.

Jamie Walker (12:10):

Yep.

(12:13):

Anything to add on that Mia? For restaurants?

Mia Huntington (12:15):

Yeah, I mean I think all kidding aside, it took us a really long time to get our server to bring our check last night so we could pick, I think it goes back to sometimes things seem like they're so nuanced, you think is it really that big of a deal that somebody wants to leave and can't we just pay in the traditional way that we did, but it just can make such a material difference. Or Nicole, you're better to speak to this than I am, but in most restaurants, how many orders are going out the back door versus people that are dining in. So all of the curbside pickup and all of that technology that evolved really, really important for payments companies to be able to service that population as well. When we think about our merchant base of restaurants.

Nicole Tackett (13:01):

So I live in Maine and we had a power outage ice storm over the weekend, and so I wanted to go pick up some barbecue at the local place down the street. So I go online to put in the order and they're not taking online orders. Well, it turns out they had power and they couldn't handle the demand of people who didn't have power wanting to come into the restaurant. They turned off their online channel and they also had just implemented a new point of sale solution. And so they had a lot going on, but they were able to turn the features on based on the demand that was happening within their restaurant, which is really neat.

Jamie Walker (13:33):

Healthcare, this question for both of you really, healthcare payments continues to really rapidly change. What should this audience understand? How are payments changing that are not already immersed in healthcare?

Mia Huntington (13:51):

You go.

Nicole Tackett (13:52):

I go.

Mia Huntington (13:52):

Okay, you start.

Nicole Tackett (13:53):

So we support healthcare payments from a B2B perspective and also a C two B perspective. And what we try to do is I think to Mia's point, we can integrate from a lending perspective, a treasury management position and our payments so that we can bring a whole suite of working capital solutions on an accounts payable and an accounts receivable side for our customers. But in addition to that, we are partnering with health tech companies and really helping our customers and integrate into that revenue management lifecycle. So those health tech customers have the ability to meet all of the compliance standards for maintaining healthcare records, which are exceptionally challenging and not really, we're monitored from a risk perspective in multiple other ways where we don't want to get into that healthcare regulatory perspective. So by partnering with those healthcare technology companies, we can bring security from both sides.

Mia Huntington (14:55):

Yeah, it's an extension of the embedded payments that we all know and talk about. And I think when you think about it from the consumer lens, look, the term buy now pay later gets a lot of really, really negative news. That's what sells papers too. But there's a lot of nuance to that I think. And if you do it in a transparent and fair and responsible way, it's actually a really, really good service for the consumer that needs to use it. It might improve access to their ability to take a medical service that they need today and don't defer as an example. So in working with the technology companies that we do in terms of servicing the merchant population, that ends up translating into what's the consumer choice? How can they potentially evaluate their option to, can I finance this treatment?

(15:50):

Hearing aids cost a lot of money, they're $5,000. Do I defer that purchase and all the impact that hearing loss has to a human or do I look at options that say, oh, for a hundred dollars a month I can afford this? I can really assess in real time as I'm making that purchase decision. And that's the nuance. I think sometimes the bad rap that buy now pay later gets, in many ways it's often quite responsible in terms of the person assessing in real time, can I afford this? We don't do that with our credit cards, right? Lots of people just whip their credit card out and there's an open to buy and someday I'll pay it and I'm not sure what the interest is going to get calculated on it if I revolve. Whereas in real time by now, pay later lets you assess is this a purchase I can afford? Can I make this monthly payment? It's really quick and nobody has to do any math.

Nicole Tackett (16:46):

And I think there's a big uptick in regenerative medicine. So for example, with your knee pain or your orthopedic needs, like personal experience here, to be able to get that shot in your knee with regenerative medicine can be a big ticket. It can be $2,500, so they don't want to pay this. They'd rather pay the $60,000 for surgery, the insurance company, but not the 2,500 for the regenerative medicine technique. But that's another opportunity that's significantly increasing where there's opportunities for buy now, pay later.

Mia Huntington (17:14):

That's a way to finance it for sure.

Jamie Walker (17:16):

I do. It's a small group here, so definitely take questions from the audience. I have a few more questions. We got one earlier. Okay.

Audience Member 1 (17:26):

What exactly talking about the new things?

Nicole Tackett (17:33):

Sure. So next time you're on a, well, we can't announce it yet, but so typically when you're on a flight, you'll notice there's an iPhone with a dongle that's plugged in and where you can swipe or tap moving forward, the phone is acting as the terminal.

Jamie Walker (17:52):

The tap on the tap to approach.

Nicole Tackett (17:55):

Yes.

Audience Member 1 (17:57):

Supporting something like were you the first to do that or joining?

Nicole Tackett (18:01):

So it's our own internal technology and we are one of the first to market.

Audience Member 1 (18:10):

Mentioned something buy couple months ago.

Jamie Walker (18:15):

So we go ahead Mia. Mia.

Mia Huntington (18:19):

We launched in October. The product is called US Bank Advance, A-V-V-A-N-C-E. And high level we are, we call it buy now, pay later, it's more point of sale lending. It is loans $300 up to 25,000 monthly installment repayments, three months up to 60 months loans under $2,500. It's a soft credit pull only. So that's advantageous to stay competitive with the players that are already out in the market installment based a PR based. So anything from 0% up to 24.99 is what the interest rate is that's assessed. And from a consumer perspective, it's exactly what you would expect from any buy now pay later checkout, you're making a purchase from a merchant and in real time you're being presented with an option to pay with a financing option instead of a credit card.

Audience Member 1 (19:18):

Hardware.

Mia Huntington (19:19):

We're not in physical retail yet, so it's all invoice based and e-commerce is where we're at today. Retail is a little bit further out, which will probably be QR code based.

Audience Member 1 (19:29):

Did bank already have a buy now pay later?

Mia Huntington (19:32):

We have something called Extend pay. So there's flavors of buy now pay later. Extend pay is more of a card based product where we're using your existing open to buy and saying, how would you like to turn this purchase you've made that's sitting on your card into an installment loan That still exists, right?

Audience Member 1 (19:52):

I guess what I'm trying to get is how do you see that? How do you, is the flavors and the options evolving way later or something else?

Mia Huntington (20:05):

It's a pretty rapidly evolving market. Even the fintech's themselves are also evolving. When you think about it, they all started with the smaller dollar loans, right? The paying fours, the $200 pair of jeans that maybe the much younger generation person probably shouldn't be buying, but they did and that's why it gets a bit of the bad wrap. The reality is it's a very practical way of assessing affordability and your ability to repay. So even the fintech's that started in this space are evolving, their business models, they all went from high growth, let's get lots of volume and consumers at all costs and not necessarily focused on profitability to now they're being expected to describe their path to profitability. They all started when funds were very inexpensive. So the capital to make these loans was pretty cheap. That's not true anymore, as we all know. So just the whole ecosystem is evolving and because there's such consumer demand, this is a trend that's not going away, this isn't a let's build it now. And in a couple years we'll be saying, why did we spend money on that? We need to be in the game right now.

Jamie Walker (21:19):

Other questions? So we've talked a lot about this one consistent theme and it's kind of why we're here is this theme of embedding payments into every industry and it's much more or less of just a payment experience is a fully software driven experience. Anything you'd want to add to that just from generally? Maybe I'll start with you, Mia.

Mia Huntington (21:47):

Yeah, I mean Jamie, I think about it again a little inside baseball here I suppose, but we as a company made a very major investment in the integrated payment space 20 17, 20 18, something like that. I mean, we could see that the future was getting deeper and deeper in terms of embedded payments, and I'm not even sure back then I would've expected it, but I think that's just accelerated so much even at this point of what the expectation is of both the merchant and the consumer of how they run their business. Let's face it, a merchant doesn't wake up thinking, which bank am I going to do my payments with? They think about which piece of software am I going to purchase that's going to help me efficiently run my business and do it in a way where I can operate efficiently as well as serve my customer base.

(22:36):

And so I think that's where we've done a lot of things right in terms of partnering with the right technology companies. Nicole mentioned some of the healthcare providers and the patient portals that we do business with, but we really run the gamut of the industry specializations that we have in choosing the right partners to service those industries. We talked about the evolving landscape, and I think this is another place where it is just continuing to evolve where we go with generative AI and some of that activity as well I think is also going to influence how deeply payments get embedded in the future too.

Nicole Tackett (23:18):

I think it used to be in the day, being a bank was an excuse to be kind of behind in your technology. Banks are very much technology players in the space today. We are just as pivotal in the ecosystem of technology as anybody else. So when people use the word FinTech, we are a financial technology company even as a large bank. And I think that's really important to serve our customers in the medium to large market. There's even services that we can provide within our payments ecosystem just from an API perspective, whether it be more data to help them make decisions and already being easy to integrate with into their ecosystem. And so being able to plug and play outside of just payment methods, but payment data to help inform their decisions and how they drive their business.

Jamie Walker (24:07):

Go ahead Jodie.

Audience Member Jodie (24:08):

Can I ask a follow up question? So you were talking about embedded payments, you talked about three verticals, airlines, restaurants, physician offices. Is there any of those or any other verticals that you're at where the adoption is higher by vertical or you seeing that kind of adoption of software and that payment consistently across?

Jamie Walker (24:30):

I think, definitely the adoption is, I think actually believe it or not, a little slower still in healthcare. You still see, I mean I'm sure you go to your doctor's office is still have a sort of standalone terminal sitting over there, whereas restaurants, I think you see a much more prevalent software really growing at a much faster pace. And I would put, airlines have always been pretty embedded if you would. I mean it's a fully e-comm, so it's a fairly sophisticated from that perspective. So they probably got out first if you would. I don't know if you guys have a different opinion.

Nicole Tackett (25:04):

Yeah, we also do a lot of hospitality. So I don't know if you guys were when you were checking in or if you bought something in the snack room that you saw the Elavon name. So we're very big in the hospitality space and they have their property management systems. And so everything in the ecosystem between checking in room payments, I dunno if you saw in the hotel room here, the ability to tip the cleaning service or things like that. So again, similar to the airline industry and hospitality, there's so many touch points across a customer journey when a customer comes and checks into the hotel and that's wrapped up into the property management system and we are there to support that.

Mia Huntington (25:44):

And I think there continues to be more and more. They're just at different stages from an industry segment perspective. The other one, and where we started with advance was in the home improvement segment. So a lot of contractors are out there, they come to your home, they give you a quote, it's the middle of summer and your air conditioner is broken and it's an unexpected purchase of $10,000. And you're saying, boy, I could put this on my credit card, but do I want to, what are my options to pay all of those kind of home services type companies? Again, they're not using paper checks hopefully, or standalone devices. They're probably using some type of software solution like a Service Titan or those types of organizations that really manage their entire business. Everything from scheduling the appointment to job costing to issuing you the invoice, all of that is sitting in one very powerful software tool that lets every size of business run their business.

Jamie Walker (26:50):

Great. Yep.

(27:02):

Yeah, look, there are some very distinct differences. It varies by each country, quite frankly. You can't kind of lump Europe into one. You think about Germany, it's very much still a cash based society. I mean just the percentage of the credit cards are used versus Norway, it's probably 95% cashless at this point. So each and then the UK is much more, I would say, aligned with the US market, a credit card heavy market. So really varies by country on how much they've adopted. Maybe credit card usage versus alternative payment methods like Poland for instance. Especially for e-commerce, much more pay by bank type mechanisms for e-commerce versus using credit cards. So we see very different trends in the adoption of how they're doing point of sale, whether it's pay by bank more, maybe local, there's some local players there, but the biggest kind start, Germany's a great example, very still cash based society, very low usage of credit cards versus UK would be much similar to what you'd see in the us. Yeah, I mean from an Elavon perspective, we service most of the major verticals. We pick these for this discussion. But yeah, we serve, we definitely have a deep expertise in those three for sure. But we do serve as retail services and other major verticals.

(28:50):

Any other questions? Alright, well I think that's all, we're pretty much up the 30 minutes, so thank you everybody for joining us. It was a good discussion and I'm biased, but I had a great group here, so thank you guys.

Nicole Tackett (29:05):

Thank you.