Among the things you'll learn
- What are the biggest catalysts driving investments in payments.
- How do banking leaders view the expected impact of the new Presidential administration on global payments.
- What's driving bank and fintech partnerships for payments innovation.
- Which payments technologies are banking leaders most interested in offering including crypto, wearables, embedded payments and more.
Transcription:
Michael Moeser (00:10):
I am really excited to sit here and share with you some recent research and have their distinguished panel provide their feedback in terms of what they think it means to you folks, what it means to their organizations and the industry in general. And so I'm Michael Moeser. As Holly introduced, I'm your host and moderator for today. Molly Hugar is joining us. I've got the different order. I'm sorry we changed the order, but okay. Molly's over on the far right. Molly Hugar is a Senior Vice President and lead payments advisor at KeyBank. She oversees KeyBank commercial payment clients in Buffalo, Rochester, Syracuse, and Albany. I sure. She's a big Buffalo Bill fan at that and is responsible for delivering the bank's products and services to middle market customers. Previously she was a commercial banking middle market manager at M&T Bank. Welcome, Molly.
Molly Hugar (01:02):
Thank you.
(01:03):
Tiffany Patrick, right here on my right is Director AML and innovation at Citibank. Tiffany is a seasoned and multifaceted compliance professional with a broad base experience in financial crime, risk identification, investigation, assessment and management. Welcome. Thank you. And Nageswar Cherukupalli, Nageswar is a senior and accomplished leader with more than 28 years of service in technology and financial services. He's an SVP and Business Unit Head responsible for building synergies with clients and driving growth in the banking and capital market businesses of Cognizant. Welcome Nageswar. So what we're going to be doing is we're going to be talking through some research that we recently conducted, hot off the presses, if you will. And so we reviewed, we surveyed, I'm sorry if we could advance the slides down here on the monitor. I would appreciate that. We surveyed approximately a hundred individuals, director level and higher. And the purpose was to ask for their outlook on the payments business, explore attitudes about payment technology and what they believe that the new administration policies will be and how that could potentially impact their businesses.
(02:19):
So in our first section, forecasting the future, we're going to talk about the regulatory environment. And I'd like to lead off with a couple of slides. The first one talked, we surveyed the industry and roughly eight in 10 believed that the new administration, surprise, surprise, we're seeing that now would impose tariffs and what that means to us personally. I think we chatted a little bit about that, but certainly we would like to hear from our panelists in terms of how their customers are reacting. And the second question we asked, how will that impact the overall business in terms of transaction volumes? Will it drive the transaction volumes higher? Roughly half said significantly. And so we've got some significant perspectives both domestically and internationally that are going to be driving that volume. And I'd like to start off maybe a question here for the panelists. If you could speak to the new administration and I'll leave it as what would you say? What would you ask for? Nageswar would you like to start off?
Nageswar Cherukupalli (03:29):
No, absolutely. I think,
Michael Moeser (03:30):
Well, if that's a hot seat question,
Nageswar Cherukupalli (03:34):
No, no, that's putting me on spot. But one thing that I did, Michael, I was just mentioning to you, right? I just, I turned in my lease of the Ford car and got a new one two weeks back, so now I don't have to.
Michael Moeser (03:47):
Was it the BMW you were chatting about?
Nageswar Cherukupalli (03:49):
No, that's a new one that I'm going to postpone it. I'm not going to buy that. I probably have to think about that in future. But I think if I talk to the administration, I think there's always this fine balance between what are those regulations that are important. And obviously banks want to be more competitive. They want to deliver services, they want to make sure that they are able to do it in a much faster basis rather than get hindered by the regulations. And also make sure that from a consumer perspective, they're protected. This morning we have seen a news, I don't know how many you actually have seen that CFPB as we drawn the case against all the banks, right? I mean, that's like $800 million hold for consumers.
Michael Moeser (04:39):
The Zelle fraud issue.
Nageswar Cherukupalli (04:40):
Zelle fraud issue.
Michael Moeser (04:41):
Yes.
Nageswar Cherukupalli (04:42):
So that's a big one. So obviously things like that would probably stop the banks from innovating faster and investing more in terms of technology, but also make sure that from a consumer perspective there are enough protections and checks and balances. So that's what I would say. Talk to the new,
Michael Moeser (04:59):
Let me ask a question to the audience. I mean before Tiffany and Molly sort of provide their perspective. Now we just talked about CFPB and the guest brought that up. And so let me ask the audience in terms of a question, what should happen to the CFPB? And just by a show of hands, I'd just like to see that I am blinded, so I can't actually see everybody, but what should happen, should it be eliminated or cut back severely? Thoughts, perspectives eliminated. Okay, what about folded into the Federal Reserve or another agency?
Audience Member 1 (05:38):
How many regulators do we need?
Michael Moeser (05:40):
Okay, I like where this is going and maybe, well, I could ask the last question left alone to continue its charter, but I think that probably would fall on deaf ears. So I guess we've sort of got a sense for the audience here, Molly, Tiffany, thoughts, perspectives here.
Tiffany Patrick (05:56):
I think if I had to say one thing, it would be whatever direction we're going, we need clarity and consistency and let's not lose the heart of what the regulations were meant to do to begin with. We did have an overwhelming number of regulations to have to worry about. However, we still need to make sure that they were there for a purpose and we don't lose sight of that purpose and that we continue to protect consumers, but we also have it to where it's consistent so we don't have nuances across states and we already have to deal with cross border. So to make it consistent within the US is a really big key thing
Molly Hugar (06:31):
Yet. No, I would agree. And actually what I would bring is the perspective of what we're seeing now just with all the changes that have happened over the last couple of weeks. So given my location in Buffalo, we have a large cross border population in our portfolio. And so just last week I was on the phone with a $200 million company that manufacturers pipes and different tubing supplies in both Canada and the US, but they primarily are manufacturing in Canada. And so now they're needing to set up more accounts in order to be able to pay the tariffs that they're anticipating for US manufacturing needs. And this is going to be a 100 to 200,000 a month that they're foreseeing and really not wanting to change business practices yet because there's so much uncertainty as to how long these will be in place. So it's getting into a lot of strategic conversations for a number of our customers because there's just so much uncertainty out there and how much do you want to pivot and change today versus wait and see what the impact will be longer term. So that's a lot of the dialogue that we're having with that population.
Michael Moeser (07:40):
What does it mean for fintechs? I think we've seen with a lot of regulations and last few years and now regulations appear to be loosening CFPB, changing its grip if you will. What does that mean for the fintechs? And I won't call out who those people are, but just in general.
Tiffany Patrick (08:00):
I think for them, I mean it's still pretty much BAU, right?
Michael Moeser (08:04):
This is usually,
Tiffany Patrick (08:05):
We still have the need to enforce existing regulations, ensure data requirements, make sure that the transparency is there for all of your non-financial crime needs. It's not just the wild wild west all of a sudden they can go do whatever they want. It just needs to be responsible. I think that there's a lot of freedom that's happening in the FinTech space now, but with that comes a lot of responsibility.
Michael Moeser (08:29):
Do they have more freedom do you think than banks?
Tiffany Patrick (08:33):
I think they can experiment a lot easier than banks just because of the way that they're regulated, which is, oh, sorry, go ahead. Oh,
Molly Hugar (08:39):
No, no. I was just going to jump up and I was going to say however, and I would be curious to get your perspective. So I was talking to some colleagues and even though they have more freedom to experiment still they're reliant on banking and financial institutions to actually kind of have the full payment rail continuum through
Michael Moeser (08:55):
The last mile.
Molly Hugar (08:55):
And so indirectly we're forcing a lot of KYC on them that actually were required to adhere to. And so they kind of end up having the regulations in a backwards way. So is that
Tiffany Patrick (09:08):
What
Molly Hugar (09:08):
Your teams are working at?
Tiffany Patrick (09:09):
They take a product forward, they come to us, they could come to a financial institution with a proposal, and then all of a sudden it's, oh, here's an additional stack of homework essentially to do before you can move forward. So it's still there, but I think that innovation of fintechs helps move traditional finance forward because it's all moving one direction. We move a lot slower, but it all moves one direction and then able to see that. And then I think the ability to co-create and really strategize with fintechs instead of making it more friction to say, you have to do all of this, let's solve that problem together.
Michael Moeser (09:44):
Nageswar, any thoughts on that?
Nageswar Cherukupalli (09:46):
Absolutely. I think what we are seeing from a system mitigated perspective, we've been working with many banks and we are actually creating an ecosystem. I mean, I think one thing is for sure regulations might loose up, but it'll not go away.
(10:01):
You'll still have some regulations and it's always going to be challenging for these fintechs to be able to adhere to all those regulations. And that's where the banks come in. And as both of you have mentioned, right? So what we are working with banks in terms of creating those integration points and helping them work closely with fintechs. Now it's also important that these fintechs actually drive more innovation. I can tell you we have got a platform called Cognizant as a platform that process healthcare claims called TriZetto. About five, six years back, it was only fintechs that were coming in talking to us about embedding their payments. But today I can tell you at least four or five banks are actually talking about it. How do we actually embed and offer more services to your clients, to the providers, to the payers within the healthcare? So I think banks are evolving, but also the FinTech partnerships are happening and payments predominantly is done by PayTechs or fintechs,
Michael Moeser (10:59):
Right?
Nageswar Cherukupalli (11:00):
They are ruling the world.
Michael Moeser (11:02):
Well, that's a great segue for our next slide in terms of forecasting the future, the industry growth. When we asked our survey respondents, banks, payment firms, credit unions, how do you believe that the new administration, the changes in 2025 will impact overall transactions? Both us and then also in terms of the dollar volumes? And it's interesting to see that 45%, almost half say it's going to significantly grow the business from the transaction perspective, but even more so almost two thirds are saying the dollar volume will grow and that could potentially be larger transactions, larger size transactions. So I would ask the distinguished panel here, two questions. What are the biggest opportunities? And then second is what are the biggest hurdles as you look to take the payments industry by storm?
Tiffany Patrick (11:58):
Yeah, I think for what I look at from a compliance perspective and enabling the growth of the business responsibly, I think the uplift to ISO 222 for data requirements is an opportunity and it's a hurdle at the same time because everybody has to get there, but once it's there and you have more consistent federated data, you have faster payments, but you also have more transparent payments, and then you'll have the ability to have stronger compliance and enable more flows. So that's what we're really focused on right now.
Michael Moeser (12:28):
Is that tomorrow kind of issue or is it?
Tiffany Patrick (12:32):
No, it's tomorrow, but very soon. Tomorrow, very soon. And it's incremental. So when we create new products, we're already with those standards and then the rest of it is to uplift the existing to match the new. But I think with any new payment product that's out there, any new channel, there's a lot of opportunity there.
Michael Moeser (12:52):
Molly, I guess thoughts,
Molly Hugar (12:55):
So I guess I'll bring a different perspective on not just the opportunity for growth of new payment rounds, but also I would say what's in existence already, the adoption is what I'm really looking for. So there's so many great solutions, automation tools, different payment rails out there, but when you're looking at the consumer, that's where the individual falls on the adoption curve. Sure, they make their own choices With the customers that we're working with, it's a whole different ball game because it's a collective decision. So there are technology partners involved, there are CFOs and treasurers trying to see what makes sense for the team, and then they're the actual individuals that are doing the work on a day-to-day basis. So a lot of times when we're talking about bringing forward new solution sets, it really is a matter of time and resources that they can put towards these projects that will bring them so much farther ahead of where they are today.
(13:52):
But it's hard to see the forest through the trees with any given project. So for example, I have a billion dollar customer that automated their AP practices about six years ago, and their AR is so antiquated, they have a team of seven doing manual cash applications. The youngest person on the team is 58. And so there's just so much institutional knowledge and there's business risk too as these people look to retire and leave. And so while there's a true identification of a need, there's no problem with the cost, it's really the time and the ease of that onboarding. So I see the opportunity as the more we can do to simplify our solution sets that we're bringing to bear and they're in existence today, but how can we just tighten it that much more so that file requirements mapping integration with existing systems are easier. So it takes those barriers down a little bit more and helps us penetrate so many customers that know that there's the need. They just have capacity constraints internally. So I know that's a different slant, but that's what we're seeing.
Michael Moeser (14:56):
That's a lot of stuff though. I mean, when you go to a client and you mention all of these systemic issues and clearly with the issue of retirement, the institutional knowledge leaving, how do you start? I mean, do you take the baby steps? Do you look at, let's start small with one of the elements that you mentioned.
Molly Hugar (15:14):
Yeah, no, we do and that's why a lot, and I'm sure not just key, but other organizations have module or based solutions so that we can start small on where's your biggest pain point? Okay, cash application, let's just start with that piece and it might not even be one of our tools. A lot of times it's little process improvement techniques that we can help with, but the other risk is not just people retiring but not being able to rehire for those positions. There's not a 27-year-old that wants to walk around and get checks signed on a day-to-day basis, and how do we create more meaningful value add tasks? It's not taking people's jobs away, but it's redirecting resources to doing something that's more engaging for them and more valuable for the company. So yeah, it's definitely long sales cycles and processes and it's why we're so passionate about being a relationship based organization. You really have to have that trust factor and handhold through what is a very long onboarding. At times,
Michael Moeser (16:13):
In a lot of the research that we do, we see as new technology comes in, there's always the issue, will it replace jobs? And many times the answer is it will actually enhance the jobs that are there. It'll create a difference in terms of, as you mentioned, the 58-year-old versus the 27-year-old, they want to do different things, so it may actually change the role of that job, but there definitely are teething issues there. And I'd love to hear from, Nageswar in terms of as you work with clients and they're thinking about these new technologies, what are some of the biggest challenges and then also opportunities obviously.
Nageswar Cherukupalli (16:49):
Absolutely. I think Molly and Tiffany talked about the opportunities, but I'll talk about some of the hurdles that we see. The biggest challenges that we encounter. I mean I put it in three different vectors. The one is obviously the experience. I don't know everyone that goes to, I'm sure you would see in LinkedIn, everyone that goes to India or one of these developing nations, they'll come back and say, what an amazing payments infrastructure. I mean, it's true embedded real time payments. I mean you experience, it's a different kind of an experience, so customer experience is changing. Everyone wants to get that kind of an experience. How do I actually make it more real time? I think this morning someone was talking about how do I actually embed within the various platforms that we have so that they don't leave the platform. So that I think will keep changing and it's more dynamic and that's going to be the one biggest hurdle that every bank, every FinTech needs to tackle.
(17:46):
Look at what are the options available and how do we quickly get those options onboarded? Well, the second biggest thing that I would say for getting those options onboarded, the payment rails to be onboarded is the technology Today many of the banks are pegged with this legacy technology that is out there. So the biggest thing, the recommendation that we give for many of these banks is actually modularized to the extent possible and look at how do we hollow out some of the core and try and modernize in a phased approach. I think that is something that's needed and thanks to some of these loosening up of regulations, indeed, I have started seeing banks diverting some of that money into investing in transformation and starting to bring those capabilities to the forefront. The third biggest one, I would say payments growth industry is going to grow. It's going to grow at 30% CGRI would say, but fraud also is going to grow. That is the next big thing. I mean, we see that fraud's going to grow by at least 80 to 20%. It's going to be a fast follower, so how do we tackle that, right? Today we have technology access to all the tools the banks have, fintechs have, but even the fraudster have access to the same tools and they probably are a little bit more smarter in terms of doing it, but they're more agile, they're not regulated. So that's the biggest thing. Those are three things.
Michael Moeser (19:11):
I'm curious in terms of, I was going to talk about the legacy issue, legacy technologies that you brought up, but you raised a very interesting point in terms of as the payments industry evolves, fraud evolves as well as, I don't know, Tiffany.
Tiffany Patrick (19:24):
Yes.
Michael Moeser (19:25):
Maybe if you could talk about that. That is clearly in the news.
Tiffany Patrick (19:30):
Yeah, no, there is no shortage of fraud scams out there because as said, fraudsters will adopt the newest technology. Any bad actor is going to adopt the newest technology, figure out how to use it and exploit it as with let's say instant payments
(19:49):
That we have now, everybody wants their value faster, but with that convenience comes a risk of fraud. So you have to weigh your balance of convenience versus control. I think it also comes down to two points. One, we need better detection to understand with a data-driven approach of what fraud looks like and apply those typologies overpayment patterns. And then we also need to make sure that our consumers are educated. It can't just be, okay, great, I hit this button, I get what I need. It's examine what it is. I mean, even on the way to the airport, there was a billboard for the sun pass in Florida for the tolls and it says, do not respond to the scam text. There's literally, I've gotten those a text scam saying you'd have an unpaid toll easy pass to New York state. So they actually devoted money to put up a billboard to have people stop clicking on a link, right? There's a knowledge gap of consumers who just prioritize convenience but also don't understand They need to be educated at the same time. So as much as we monitor the activity, we need to make sure our customers are equipped with the basics to identify what is and isn't fraud.
Michael Moeser (20:59):
It's interesting that you mentioned that yesterday. I took a walk from here down to Pier 39. I walked down the Embarcadero, and as you get to Piers 15 and on, you'll see there's a lot of parking for different events and it's all digital pay with your license plate. And the city of San Francisco is these large signs do not pay an individual who asks for you to pay for parking. And I'm just looking at all the people hanging around, do I look, I'm not driving a car. But it is gotten to that point where that's a challenge.
Tiffany Patrick (21:32):
Which is something that I think consumers struggle a little bit to understand. So now that everything's online, they expect whoever's operating the platforms or the services online are monitoring that for them. Whereas if we go back a couple of decades and you would just pull cash out of the ATM and you handed it to that person who was a fake parking attendant, there's no recourse. You need to be responsible with your stores of value and when you need to make sure that continues, even if it becomes more electronic, we are here to help. We were here to do that, but they still need to treat it the same way they would treat cash.
Michael Moeser (22:05):
Molly in business, we've seen the whole business email check scam I your CFO, I'm the CEO, we need to send a million dollars here or there, and the dollars are clearly much larger and the cash is chuckling. He's probably seeing this thoughts there. Perspectives.
Molly Hugar (22:22):
Yeah, we're seeing it all the time. I mean unfortunately my email comes through with probably three to five check frauds a week, and those are ones that aren't caught with positive pay or something else.
(22:33):
And we have a lot of tools. We constantly arm our clients with what's needed and also do seminars and partner with some cyber insurance partners to try to get information in their hands. What I think is the most scary that I've seen probably five major over the last two years is true account takeovers. And we've had a couple companies really get very large threats with $5 million ransoms and others that they have to work with. Consultants like Booz Allen is very well known in that space. And it's amazing as you're going through these negotiation practices talking about the good and credible bad actors and we're happy that you're working. This is who took over your accounts because they actually mean what they say and their reputation means something, so they'll give you your data back if you pay them. I'm like, what world are we living in right now? I love that, that we're talking about the credible bad actors, but so there's unfortunately, and that always comes from just a simple wrong click in an email, there's something that gets access. So unfortunately there's been a handful of those too that just cause a lot of business disruption if your systems are down for a period of time and then the repercussions of paying that out.
Michael Moeser (23:49):
So I can see why people would be reluctant to click any link from it or somewhere just for the fear of like, I don't want to bring in a virus or open the door there. Nageswar any final thoughts before we move on?
Nageswar Cherukupalli (24:01):
No, no. I think I always am tempted to open that file for that email from Nigeria. Oh, the prints right back. I probably should not click on that one, but I think the most important thing is we should take this as an opportunity. The new administration is more favorable in terms of trying to help the banks and the financial institutions in terms of managing the regulations and invest that money in modernizing the infrastructure and create this ecosystem with the various players together, the fintechs, the banks and everyone. And obviously experience, as I said, has to be in the forefront when you are trying to drive this growth and start looking at fraud more seriously and invest in tools. I mean, it's an evolving landscape. More and more tools keep coming. We got to keep investing and experimenting.
Michael Moeser (24:57):
Well, speaking of investing in tools, the next section that we talked about with our survey respondents was tech investments. And what we saw is that nine in 10 are really looking to expand their investments in the payment franchise. So these questions were specific to the payments franchise at that bank, at the credit union pay tech firm. And so really 9 and 10 are looking to expand the investments. We asked the graduated question spend 10% more, 10 to 19, 20% or more. And overall only about 5% of survey respondents said 20% or more when it came to payment technology in general. But when we narrowed it down to AI specific investments that popped almost a quarter said they were going to spend 20% or more. So very significant. And then when we asked why, it's a myriad of answers. There's no silver bullet, no, even though gen AI has really been in the news quite a bit, it's a variety, a variety, can't even talk. Variety of a variety of answers. Everything from changing consumer habits, managing security risks, managing compliance requirements, very significant that especially I think as Tiffany and Molly had mentioned, when you're working with fintechs having to push down those KYC issues, everything's getting more complex. And so there are a number of issues and I'd really like to maybe ask or start with a question of how are banks and payments firms working to increase adoption and particularly of the tools, I dunno if you want to start Tiffany.
Tiffany Patrick (26:42):
Yeah, I can start For the adoption of the tools, for me, it's going to be on the backend in the second line of defense, but right at that 41% of managing compliance requirements, you start small, there's a myriad of use cases and really just look to take the use cases that you have enough understanding to implement AI with. Right? So
(27:05):
Don't get out over your skis, don't boil the ocean, right, exactly, exactly. And make sure that you've got the right partners at the table and the right experts. So if you don't understand it, find somebody that does and then just sort of work through step-by-step the same way that you would approach using a new language, use it to solve your problems because you had problems that existed. So for us, we have a multitude of documents, regulations, KYC records. We have so many steps in so many backend processes that require data aggregation, and we spend so much time doing that. And then we have our subject matter experts spending a minuscule amount of time actually assessing. We didn't hire people to be data aggregators. That's an AI solution, just begging to be taken. So doing that and then enhancing the role, as you said before, we're not replacing, we're enhancing. So that's where we're looking in that space right now.
Michael Moeser (27:59):
Nageswar in terms of the clients that you work with, and I mentioned boil the ocean, Tiffany had getting over your skis, great analogies, but it can often be I guess a challenge of getting started starting that learning the new language. What's been your reaction in the industry?
Nageswar Cherukupalli (28:19):
Absolutely. I think starting Smalls mentioned is extremely important, but having that whole roadmap on what we want to do, the way I put it is you start with the most important thing customer in the center. The experience, customer experience is quite important in terms of what the clients are looking for. Then the customer engagement, it's an ongoing engagement and working with them on an ongoing basis, making sure that you've got the tools and technologies available at least on the front end that will keep engaging the clients and you're able to respond to them. Use chat bots. I mean today the technology provides you that flexibility irrespective of your backend infrastructure. You can still create a front layer that will have an ongoing engagement. That's where a lot of frustration the clients would have, the customers would have. And the third one is irrespective of what happens with the regulations, I think the protection, the trust and security, customer trust and security I think is extremely important. Give that confidence to the end customers that yes, banking with me gives me the trust and security. So as long as we are able to articulate that message and start small, we don't need to do everything. Not every customer expecting that I need to have 20 access to 20 payment rails. I need to have the best in class AI chat that I get across. I mean, they're saying I'm okay with as long as someone responds, there is someone
Michael Moeser (29:47):
Start somewhere, you're
Nageswar Cherukupalli (29:47):
Saying start somewhere and I have access to a couple of real-time payments rails. I'm good with that. I mean, Zelle is pretty good for me. And the third one obviously is in terms of protection interest. That is a long-term when you explain the strategy, when you explain your environment, the architecture, how you're investing in technology, how you're protecting them, I think that is something that has to be communicated ongoing basis. I mean obviously the ads would help for federal government, for the bank, it has to be a lot more communication. I mean, we keep getting emails from banks, two factor authentication, three factor authentication. Some of those things would only enhance the security and the trust for the consumers. So that's what I would think is the primary.
Michael Moeser (30:29):
Molly thoughts in terms of the P two B space?
Molly Hugar (30:33):
Yeah, I mean, so in my day-to-day job, I'm not as involved in what we're doing at the bank at large in terms of ai. I think it's very similar to what Tiffany was talking about,
Michael Moeser (30:41):
But just in general option,
Molly Hugar (30:43):
Yeah, we do have customers that are starting to look at exactly what banks are doing, how can we solve very specific targeted pain points we have internally with the use of AI. And given that a lot of our customers are middle market and not highly regulated, they have more flexibility to play. It's really just a question of whether or not they have the right people in-house to actually understand how to execute and navigate where AI can work.
Michael Moeser (31:12):
So is your sandbox full with people, developers and all that?
Molly Hugar (31:17):
Yeah, I mean it's interesting. There's a fair amount of our customers, especially on the larger corporate side, that have a number of developers constantly sandboxing trying to solve for problems.
Michael Moeser (31:28):
Super. Well, let's move on just in the interest of time and let's talk about forecasting emerging payment types. And so question came out in terms of introduction of a US Central Bank digital currency. This has been in the news for last couple of years. It's generally a strong sentiment that six in 10 felt that within the next five years we'll see a US Central Bank digital currency in terms of stable coins and non-stable coins. Not as aggressive, but still there's a feeling that there's a place for those within the payments ecosystem. When we asked about, and I believe the last panel talked about embedded payments, not surprisingly, 55% said embedded payments are either being offered or piloted. I know personally I buy stuff off Instagram. I love when embedded payments are, but I'm a payment geek, and so whatever it shows up, wow, there's my favorite payment choice. I'm really excited and yes, it helps me, but maybe not everybody and we've got wearable payments, et cetera. And so maybe I'd like to start off by asking in terms of embedded payments to the team here, the panel, what's your thoughts? Where do you think it's going? Are you excited as me when I click on those sunglasses and there's the embedded payment right there?
Nageswar Cherukupalli (32:51):
I can start with my own personal experience, right? Embedded payments, I think it's most exciting thing. I'm a big fan of EV cars and I've got a Ford EV and prior to last year, Tesla line, before they partnered, it was so difficult for me to actually charge the car everywhere I, I'd go and put the great card because there were different charging networks and it was so difficult to charge the car and now they're partnered. And for me, I just need to go to a Tesla supercharger, plug the charger, and everything is embedded. I've got everything embedded. My car recognizes immediately, the charger recognizes, it gets charged. I don't have to do anything. There's no stress, right? I mean, as it is, have a stress because the battery, I mean you'll only charge when the battery is down to 5%. That's when you remember the charger and on top of it, whether you'll be able to charge or not in that charger.
(33:51):
I mean, this is an amazing use case on how embedded payments, I mean, I'm just talking about my own personal experience on how it made this whole thing seamless. There are many, I mean this is something that would definitely grow exponentially and we start seeing that in day-to-day, right? I mean, we are seeing that today using our watches, IOT payments. You're seeing that integrated with every application, every product that's being released. The first and foremost thing that they're looking at is how do I embed payments? How do I make sure that the consumer is within the ecosystem and not leaving the ecosystem?
Michael Moeser (34:29):
You have a very high bar. I was just thinking in terms of embedded payments. I like the movie Ford versus Ferrari. I wanted to buy the Matt Damon, Carol Shelby sunglasses. It was in my Instagram feed and I was able to just click one button and there it was. It's on its way to my house. I'm like, you're so sophisticated. Tiffany, give me your thoughts?
Tiffany Patrick (34:50):
Yeah, I think embedded payments is going to increase. I think we see this across multiple platforms. I have a son, so Disney plus is on all the time, and now you can get the merchandise for the show that you're watching right there for that.
Michael Moeser (35:05):
That sounds dangerous.
Tiffany Patrick (35:06):
It's very dangerous. It very much is. But I also look as we look at embedded payments and then you just go to the next top and you're ready to virtual assets, you're at stable coins, non-stable coins. I think that's only going to increase. We've seen across our network of payment intermediaries, they're already accepting virtual currencies, crypto payments. I think the easiest one I think you can go to is you go to Stripe, you just click a button and you say, I want to accept virtual currency. And they say, okay, and it's in USDC. But that happened very recently and it's only going to happen a lot more as people become more and more comfortable. I think something to watch throughout 2025 with the pink international settlement launching project Agora, they're going to have their reports of their experiment done by the end of the year. So that's a private and public sector of an international stable coin network to essentially just move liquidity faster, move your value faster. That's what all of these options are,
Michael Moeser (36:09):
Right,
Tiffany Patrick (36:09):
Is getting what you want as a service and exchanging that value as soon as possible. So what network is going to provide it the fastest? It's probably,
Michael Moeser (36:17):
I could see how for a consumer for a business, how for even a government, that would make it very easy. I just broke it down to Instagram. And I mean, I think if you're the business, I can definitely see that. I'm curious, Molly, from a embedded payment perspective, I guess what are the thoughts there in your world?
Molly Hugar (36:37):
Yeah, so I mean it's a lot of what we're working on today internally and having embedded payment options. I think where we're seeing the biggest demand from our customers is the customers that have a retail customer base. So the B2B customers that are working within businesses, they're not necessarily needing or demanding that right now. But I think it's more of like what you said earlier, Nageswar with healthcare and having the different options to come to the different payers, whether it be the individual or the insurer or Medicaid.
Michael Moeser (37:06):
Makes sense.
Molly Hugar (37:07):
So we have a vertical healthcare vertical too, and that's one of our areas of focus as well as some of our other customer verticals, like the retail space that we're working with that really are needing to keep pace with what's going on and what the consumer's demanding.
Michael Moeser (37:22):
Nageswar I had a question for you, and this was based on our earlier conversation, IOT payments. Will that really be a thing in the next five years or is it like the saying what is always in the future but never arrives AKA tomorrow?
Nageswar Cherukupalli (37:36):
No, I think looking at the way things are moving, I do think it is here and now, right? I mean, I dunno. One example that I can give you is BMW recently partnered with a company called Iden. I don't remember the exact name, but it's It's a FinTech payments. FinTech, yeah.
Michael Moeser (37:57):
Aiden.
Nageswar Cherukupalli (37:58):
Aiden. Yeah, I think so. Yeah. So they partnered with that company again to integrate the payments. I mean for any consumer who's driving a car, they don't need to go through the stress of going through a McDonald's or anything. Everything has to be automated to that extent. I mean that's what the customer experience that they're looking at. So I mean, the example that I gave you where Ford, I take a Ford car and put on Tesla super, everything is seamless. I don't have to do anything. So things like that will start evolving. And I think we already seen about the watch or the aura, all of these already started integrating payments and this will become norm is how I see how mobile payments became a norm. Now these things will start becoming a norm in the next couple of years and it's here in most cases.
Michael Moeser (38:50):
That sounds exciting, but also sounds dangerous, especially with self-driving cars. You want to go to McDonald's and the car says no, we're going to Burger King instead. I dunno if that really could be a challenge. But let's move on to our last section here in terms of forecasting the role of ai. We've talked about AI a little bit here and the question we asked our survey respondents, which are the use cases that you're either currently using now or planning to use generative AI to support your payments franchise? And I think it's very similar in terms of how we had looked earlier in terms of what's driving tech investment, lots of answers. And here we have another a myriad of answers. And I think ultimately when we surveyed the industry respondents, I think 98% said they're either using it now or in the future. And customer service messaging clearly a big one, managing workflow fraud, security risk certainly is very large. And I guess the question, maybe I'll ask Molly right off the bat, can gen AI be a game changer in the payments industry?
Molly Hugar (39:59):
Yes, I think it can be. Yes. No, it definitely can. I think we touched on it before. There's a number of different use cases and again, it's starting with small problems that your example of all of the paperwork that's out there, where do we want to spend people's time? It's analyzing the results and it's not aggregating the information. So,
Michael Moeser (40:22):
Yeah, I mean, could you talk maybe a little bit more about managing workflow or
Tiffany Patrick (40:26):
Yeah, there's a lot there in just those few words of managing workflow, but I think when you get all of your use cases on the table, all of your pain points, because once you start developing the solutions, you can actually start to see where the overlap is. Say, oh, well I have this pain point. Well that's very similar to this one. And so we build and iterate off of these AI solutions,
Michael Moeser (40:49):
Okay,
Tiffany Patrick (40:49):
That we have and again, enhancing the roles, making sure that we've got, you could do even quality controls when you're managing workflow and workload and then just making sure again that whatever you're creating, and this is my compliance mindset coming back into play, whatever you're creating, whatever you're deploying, you better be able to explain it clearly and effectively to any regulator or internal audit or anyone who in your governance body to explain what it is that we have and how it works. Because it should be a tool that's simple. It can't just be, okay, let's just throw it in AI and it'll do something. No, it is more mindful and when we've been experimenting with it with some rudimentary tools so far, when you use generative AI, what you really do is you don't, A lot of people think, oh, you just gen AI and you're going to lose the ability to think for yourself or do whatever, just going to go do research. That's not true. You actually have to hone your critical thought really well when you're prompting AI because you have to be specific, you have to be very clear. And so we've been able to get people to be more specific in what they're doing and actually make their communication clearer,
Michael Moeser (41:58):
Right,
Tiffany Patrick (41:58):
By using those tools as well.
Michael Moeser (42:00):
I worked at Capital One and we had a saying in terms of being able to explain to the regulator or internal audit, you would get in an elevator and you had to be explained what you're doing in that elevator ride when you got to the top because the top was where the big boss was. And it was great when we were in a 20 storey building, but then I got transferred to a seven story building, but you had to be that much crisper. So I definitely feel you. Nageswar thoughts here before we go into closing.
Nageswar Cherukupalli (42:30):
So absolute, I think the last two points that you've mentioned, we see a lot more of that being used today from a programming and fund development perspective. I think that's picked up quite a bit you see in the next 12 months, but I think it is already doing, I mean there's a lot of work products that are being developed. Indeed, there are a few products that you would start seeing launched and banks partnering with them, which help through the positioning process. So I would see there will be a lot of uptake, the customer, the service sales and messaging would probably become table stakes. But where I think the investments will go is in terms of the technology, how GI is going to help in terms of accelerating the product development and product launches. The second one is the whole create positioning how AI can help further make better decisions and aid the understream officers. And then the fraud and risk I think is a third area that I would say where the investments are going to go.
Michael Moeser (43:31):
Well, I'd like to transition, ask the panel to give a couple of closing thoughts and then we'll ask questions of the audience. Well, I guess we're out almost out of time, so closing thoughts. So Nageswar, could you maybe lead us off and then Molly and then Tiffany in terms of what are you seeing based on the research you've seen, what you're seeing in the marketplace? Advice for the audience.
Nageswar Cherukupalli (43:56):
Absolutely. I would say I think like a fraudster. There you go.
Michael Moeser (44:01):
I love that.
Tiffany Patrick (44:02):
There you go.
Nageswar Cherukupalli (44:02):
That's the only way to counter anything.
Tiffany Patrick (44:05):
That's true.
Molly Hugar (44:06):
That's true.
Nageswar Cherukupalli (44:06):
Molly, any thoughts here?
Molly Hugar (44:08):
Yeah, so I mean this room is full of innovators at a number of different organizations and I think the more that we can do to work together to make everything as easy as possible for adoption more broadly is going to help rising tides lift all boats. So I think the more that we can do to make it easy for businesses to adopt, the better we'll all be.
Tiffany Patrick (44:30):
Yeah, absolutely. I mean, there's a lot going to happen in 2025. Piggybacking off of think like a fraudster, I was going to say keep educating yourself, right? Always make sure you're ahead with the new technology. Always find those partners within the bank and make sure that you're all solving common problems.
Michael Moeser (44:45):
Well, I want to thank Tiffany, Molly, and the guests for their time here, and I want to thank the audience for your participation. So thank you everyone.