What you'll learn
- How the modernization of small business payments – including systems integration, advanced software capabilities and omni-channel payments – is enhancing the merchant experience.
- Why an integrated payments ecosystem is vital for small business owners during economic uncertainty, as they look for increased speed of payments and less complexities in financial transactions.
- How advanced software capabilities allow POS technology to do much more than manage payments and why providing insights and customer data is now expected as a modern financial services partner.
Transcription:
Kristin Wheatley (00:10):
Thank you so much for joining. I'm Kristin Wheatley. I'm a Managing Director and Partner at Boston Consulting Group in our financial services practice. I'm joined today by three great panelists. We have Scott Beyer, who is the Head of Business Banking Products at US Bank. We have Julie Kimmerling, who is the Head of Small and Midsize Business Payments and Payment Experiences and Services. I got that right. JP Morgan Chase. And then we also have Hany Fam, who's the CEO and Founder of Markaaz, which is a global platform providing real-time, prospecting, verification and monitoring for businesses. So maybe I'll just say a few words about context around the panel before we dive in, but I think as we all encounter in our day-to-Day lives, the payments experience has become rapidly simpler with the increasing digitization of workflows. The reduction in the use of cash and checks feels much more simple behind the scenes.
(01:08):
However, the complexity for small businesses has actually been increasing, and that's complexity that's impacting both small business customers and also banks. So I think through today's panel, we'd like to touch a little bit on some of these, shed some light on some of these challenges and opportunities that we see facing small businesses today in this evolving landscape. So maybe to start a little bit broader than payment specifically, we would love to get the thoughts across the panel on some of these unique challenges that small businesses are facing. So maybe I'll go to you first. Scott would love to hear your thoughts on some of the challenges that you see and what you believe some of the foundational elements are that we need to try to overcome.
Scott Beyer (01:51):
Yeah, thanks Kristin, and great to be with you all this morning. I think we actually just conducted a US Bank small business study recently, and the good news is customers, small business owners are quite optimistic. Nine in ten said they're optimistic about the outlook of their business. 73% grew in the last year. And so I think for the most part, yes, there are challenges, but overall, unsurprisingly, I think business owners are very optimistic and they're very resilient in the payment space. I think one of the things that we felt in other products in the past is the complexity, as you mentioned in the setup, Kristen, is that we offer a lot of solutions and I think one of our, we sort of anchor back to more optionality is better for customers. And I think that's oftentimes a mistake. I think it's really difficult for small business owners to weed through different products, different payment options, and so it's incumbent on us to really drive that simplicity. And so I think that's one of the biggest things in the payment space right now that's creating challenges for the small businesses.
Kristin Wheatley (02:55):
Thanks Scott. Julie, love your thoughts as well.
Julie Kimmerling (02:58):
Yeah, great. Thanks. And it's wonderful to be here today. I think echoing off of your statement, Scott, I totally agree. I think at the end of the day when we at Chase think about our small business customers, we're really focused on their needs. And small businesses overwhelmingly tell us that their number one priority is to operate and run their businesses. And so to that end, our job in banking is simplicity. And then also we're incredibly focused on a couple of key objectives, the first of which is meeting them where they are. So increasingly that means omnichannel experiences, the ability to start in one channel, complete another track activity status across all the channels where they interact. The second is of course being easy to use, minimizing friction wherever possible. But of course then also balancing that with friction that's necessary for trust and security in particular. And then along with that capabilities for easier access, whether that's in our mobile series, shortcuts for frequently used payments or in long press access that skips over confidential account information. And then last but not least, empowering our customers with a lot of increasing choice. So that's in data, greater transparency, speed where they need it and in value added services.
Kristin Wheatley (04:21):
That's great. Julie, Hany, anything you'd like to add?
Hany Fam (04:24):
Sure. I think a lot of it's been said already and it's great to be here. I think the very relevant points, I think there's two sides of the equation and Scott and Julie have sort of articulated what businesses feel, but there's also a counter side of that, which is what the enterprise, the bank and the providers of services need. So I think for both parties, access to relevant access to timely access to accurate data is really important in underpinning this whole payment ecosystem and infrastructure and providing actually that access to small businesses. We hear a lot the businesses are spending, and you said this a minute ago, spending about a third of their time verifying and re-verifying themselves. So anything that can be done to reduce that, to streamline that is going to be really important.
Kristin Wheatley (05:20):
Thank you, Hany. I think building a bit on what you've each been saying, one of the themes that came out quite acutely, I would say in a number of the panels yesterday was this theme around building trust and how critical it is to be able to build that trust among small business customers. This also came through really strongly in the voice of customer work from American Banker Scott, I'd be curious to retain that trust. What are some of the key steps that banks are taking to ensure that security and compliance keep pace as you're innovating your products and offerings?
Scott Beyer (05:52):
Yeah, I think there's probably three main themes that I would say the first two being around fraud, and you mentioned American Banker, we heard it in recent Barlow studies. The small business owners obviously expect the bank to protect them. And some of that is through really two means. I'd say there's the part of offering tools and services that historically may have only been available from a fraud protection standpoint for more commercial customers. And so allowing access to those tools to help business owners help themselves with regards to security. But then it's also incumbent on us as banks to ensure that we're using more sophisticated fraud analytics, other tools to be able to help prevent fraud more generally. And I think that is a big element of the trust equation. Customers obviously choose a bank, choose a financial institution and big part because of trust, but it's obviously lost very quickly if you are doing the right things.
(06:56):
So those are two. And then I think from an innovation standpoint, one of the things that we've done at US Bank is we've embedded a lot of our risk team members, first line of defense risk team members directly in our agile delivery teams, in our scrum teams. And so as we innovate, as the industry moves, they're not reacting to that, they're learning it with us. That has been a huge, we really made that change back probably 2018 through some of our digital transformation. And I think it's become even more important in the payment space because it is complex and rather than them having to react to it, they're along with us, right, for that ride. And then it's always great when you've got a risk person thinking about the user experience and the impacts of that or a technologist thinking about risk. And so bringing those teams together, including risk, and that has been a big win for us.
Kristin Wheatley (07:51):
Awesome. Thanks Scott. I feel like Scott, you covered really nicely within the bank proper, how you think about that security piece. Julie, I'd be curious your perspective when you think about managing partnerships, obviously a really key key thing in small business, especially with all the different networks, how do you think about security and scalability in that context?
Julie Kimmerling (08:09):
Yeah, absolutely. I would say that in the payments ecosystem, obviously the criticality of all the different players is there without any particular piece of it. Payments wouldn't operate as smoothly as it does. I think there is uniqueness to the relationship between financial services providers and the networks themselves. So whether that's the card networks or EWS early warning systems, which is the network behind Zelle or the clearing house, the network behind RTP or NACHA behind ACH and same day ACH, no complexity at all. No complexity at all. I think that there is such a critical role to play, especially as we see that fraudsters and wrongdoers in the ecosystem are becoming increasingly organized and sophisticated. And so some of our best tools really are in a very pro-competitive fashion working with the networks. And there's a variety of really great examples around risk insights and data sharing, really coordinated wrongdoer management and frameworks for that.
(09:20):
And so the notion that if you see wrongdoers in one part of the ecosystem, they really shouldn't propagate through to another. And then there's really wonderful examples of amplified system system-wide customer facing education. If any of you have used Zelle in the last couple of years, you probably have noticed more scam intercepts. That was actually a network-wide action with alignment around similar UI as an example to really amplify again, this similar messaging from a customer perspective. And then last but not least, working with the networks with a variety of different players, including with those upstream of payments. So as an example, working with social media companies and marketplaces and really thinking about where scams are originating from. And then of course broader advocacy with the government and regulators.
Kristin Wheatley (10:16):
Awesome. Hany. On the topic of partnerships, you obviously partner with a lot of banks in that context. How are modern platforms like Markaaz has helping to build and sustain that trust and what areas in your mind offer the most opportunity for improvement?
Hany Fam (10:32):
So a couple of things. First of all, small businesses today tell us consistently that about 30% of the time when they approach for a product or service, they're declined because they can't be verified, particularly if it's a new relationship. They're very significant stats. The second thing is we don't see today a lot of bilateral sharing, which I think is happening. And a lot of the things that Scott and Julie shared are great, where the end user and the bank are seeing the same data at the same time, so that there is a simple education in terms of, well, I'm seeing what you're seeing and highlighting or alerting some of those challenges in a real time manner between both parties. We provide that. We provide that across the world. One of the things we hear a lot from banks that we speak to and payment providers is they say, well, my customer relationship with me is one thing, but what about their relationship with their counterparties?
(11:43):
I mean 40% of trade and supply chains for US companies as tied to supplies from other parts of the world. And so if you're going to take a holistic view of trust and a holistic view of fraud prevention, you've got to look through the customer to their customer as well. And that's not well done today collectively in our environment. So one of the things we've established as a single source of truth for every business on planet earth, we have every business in a pre-populated directory with a very extensive data set in near real time and in some cases real time information to support financial institutions with their customers and to help them provide their customers with tools to manage their own business abroad.
Kristin Wheatley (12:29):
Thanks, Hany. Maybe if we shift our focus a little bit to looking for the next decade of small business payments. So Julie, obviously faster money movement is a critical enabler for small business growth. How do you see innovations in real time payments and faster money movement shaping the future of the small business payments ecosystem?
Julie Kimmerling (12:48):
Yeah, I think this is a really exciting advancement that obviously has been in the works for many years. I think it's not surprising that our small business customers would be demanding more real time experiences and faster payments. In many ways, this is the payments analogy of Netflix DVDs to streaming. And so the good news is I think there's been many new methods of payments that are coming live that are certainly more real time in nature. So whether that's literally RTP or same DACH or Zelle for small business, I think that the ubiquity of those offerings and more financial services participation is a great trend. On the customer side, we're seeing really terrific customer adoption of those services and frankly, more understanding of the ability to use those services as we continue to grow. I think there's a few things that as an industry we should continue to invest in.
(13:57):
I think there's the obvious as we mature along the curve for those offerings, more investment in thinking through customer protection frameworks, deepen operational constructs around dispute resolution, et cetera. So there's a lot more work to be done there. The more real time, the faster the payment is obviously a lot more that we need to think through. And then especially in the realm of these pay by bank options, thinking about fit for purpose, use case expansion. And so there's obviously huge differences between requests for payment versus commerce use cases and thinking through the data enrichment that's required, thinking through customer facing UI, merchant facing ui, how do we think about all those experiences and how everything flows through. So really tremendous opportunity for growth and increased strategic collaboration across the teams.
Kristin Wheatley (14:51):
Great. Thank you so much. Julie, if we take maybe a little bit more of a product lens for you, Scott, small businesses are increasingly looking for tailored solutions custom to fit their specific needs. When you think about product innovation and payments, what do you foresee in the future and what do you believe what will drive that innovation?
Scott Beyer (15:09):
Yeah, it's a great question. And I mean it's one we think about regularly. I think we talked a little about it a little bit earlier, the product complexity, the more payment offerings and just hearing it here, obviously all of you are familiar with all of the options. For a customer, that's great. It offers flexibility, it offers competition, all good things for the client, but the complexity is very difficult for someone to weed through. And we know that small business owners are pressed for time. They don't want to spend their time thinking about what's the best payment rail to send money through. They want to think about their business. And so I think it's necessary for us to take a step back and think about the specific use cases, the jobs to be done by those customers and build product solutions that whether they're bundled offerings or whether it's just taking the complexity out of the equation for the customer based on the size of the transaction, the speed they need at there, those types of things to be able to offer a solution, a tailored solution for the customer without them having to be an expert in the different banking products.
(16:18):
And quite frankly, I think we've gone through this evolution in products previously. So if you think about the digitization, a lot of us have been on digital journeys over the last decade. If you think about the original online applications for a credit product or a deposit product, what did we do? We took, our first thing we did was we take our forms that were in our branches or on our branch computers and we just digitize that form and we put it online and customers, we put all the complexity of that on the customer. And then through I think iterative development and really thinking about the job to be done, we've spent a lot of time streamlining that and putting the customer at the center of that using third party data sources using Prefill from our existing systems of record, stripping out questions to be able to get a customer through that process as quickly and easily as possible. And I think the same thing is true about payments, and so it'll be a journey. Certainly I think the sophistication, this is on the tail end of some of the products that we've, but we've seen this before, so it's not new and I think we just need to execute on that.
Kristin Wheatley (17:22):
Yeah, I love that idea of that simplicity, customer-centric mindset as we think about how we evolve the payments landscape, Hany, taking the view in the lens of the infrastructure provider, what do you see as some of the collective industry actions that can underpin the type of innovation that Scott and Julie are talking about?
Hany Fam (17:42):
Yeah, I think back to this idea of single source of truth that everybody can eyeball with partitions for proprietary information. So Scott's relationship with his customers or Julie's relationship with their customers, being able to partition that, but having a common core about those customers that is shared where the customer has responsibility for maintaining the integrity and efficacy of that data as much as the bank. This is a shared responsibility and having that single source of truth. So the notion of a trust bureau is something that we are advancing very quickly with a number of partners. So that's one thing that I think is needed. The second thing is this notion of a golden record or a unique token for every customer, so a segment of one, and that's something that we already have today and we continue to build that. And that is not a static number, like a credit score or a DUNS number or anything like that.
(18:37):
This is a real time record that changes dynamically and can be seen certainly in terms of the public angle and the information that the business wants to share in the market to be seen in the best possible light within that golden record. And we believe that should be available to be accessed universally. Now for Scott or Julie's customers, they're going to add information to that golden record because they have a proprietary relationship around that. So their model modeling and their thinking about that customer is going to be different to each other, but the core of that truth will be consistent and will be shared with the customer so they can see what's going on so that we can intervene and say there's something going on here or not. So that's one thing. The second thing is around speed with which this is all done. So one of the things we've done recently is migrate all of this into Snowflake to get millisecond response times around everything we're talking about here that enables us to intervene in the transaction flow, whether it's a consumer or business transaction, to append data to that without disrupting the authorization flow to address that 30 to 40% decline rate that we see today.
(19:53):
Linked to that, we have a number of customers who, to Scott, to your point about form fill, are actually now sending us a customer name and one other data element and we're passing back the information. So rather than ask a customer to fill out a form, they're saying, is this you and the form is prefilled, and then the customer has the opportunity to correct data, which does two things. It corrects data for you and it corrects data for them in terms of their public persona in the market. So there's some of the things that I think are innovations that are a collective partnership between all of us that we can work on. And for us, this is our core business, so we're very committed to driving that agenda forward.
Kristin Wheatley (20:33):
That's great. Thanks Hany. So we ended up with a little bit of time left. I'd be happy to open to the room if there are any questions for the panel or similarly, if there's any final thoughts, Julie or Scott or Hani you wanted to add while people are getting up the courage to ask a question. There we go.
Audience Member 1 (21:00):
Thank you. You guys touched on it a little bit with all of the new payment rails and all of that complexity. You touched a little bit on that. You need to make it simple for the customer. How do you do that? Are you willing to share any of those insights?
Julie Kimmerling (21:18):
I'm sorry, I just couldn't catch the last part of that.
Audience Member 1 (21:21):
How do you make it easy for the customer to decide, oh, I want to send this Zelle versus real time versus Fed now versus same day ACH versus wire. How do you help them make that decision?
Julie Kimmerling (21:33):
Yeah, it's a really great question and there's lots of different schools of thought, I think to the point that Scott's made I think, and I think there's a lot of traction behind this notion of how do we simplify choice? And so we've tried lots of various UI experiments around how do you actually simplify that choice to who do you want to send to and how fast, effectively, and really help customers with those core decisions. And then in a way like abstract customers away from having to make real based decisions. Candidly, I think it's been a little bit mixed in those results because for better or for worse, we've trained our customers around this notion of there is such a thing as an ACH payment. And so I suspect that this will be evolving in involving space for all of us. We'll probably continue to educate our customers, we'll continue to think about better design systems for them to be able to make smarter choices. And I think over time I still hope that we can get to a place where we're trying to extract the needs of our customers rather than educating them rail by rail.
Scott Beyer (23:03):
I would just add, I think spot on, first of all Julie, I think it's a balancing act between understanding the job to be done that the customer's asking to do, right? And then obviously there's a lot of risk overlays on that. There's also then the time and the speed, there's the protections for the customer. So there's a lot of variables sort of in the calculus to get to the right rail. I think you can overdo it by trying to ask the customer too many questions to sort of narrow it down. So some optionality is okay, but I think we can't put it all on the customer either. And striking that balance is really difficult. So that's one element. The other element I'd say, and I definitely don't think this is unique to US Bank, in fact I know it's not, is oftentimes small businesses are wedged in between the consumer digital platforms and the commercial platforms.
(23:59):
And so we've spent a lot of time thinking about that both hierarchy of the product and how do you graduate people to more complex payment solutions. But then also thinking about the platforms themselves and being really intentional, not putting that on the customer, but helping guide customers into the right tool to be able to meet their specific needs. And it's easy to draw a line in the sand and say, well, we cut by revenue size or we cut by this product need. But I think if we can get a little bit more sophisticated in that segmentation on the bank side, we can really drive a better customer experience and getting them in the right platform with the right tools to do the job they need to get done.
Audience Member 2 (24:45):
Thank you all for your time here today. I'm going to build on a question I'd ask similarly to some of the other folks. We have some different banks on the panel this time, so see how the answers may vary. But the key thing I was trying to understand, if you think about SMBs, end-to-end life cycle with the bank, when they start evaluating some things to then you're onboarding them, taking 'em all the through the way through to the regular engagement you have and then growing that relationship, you getting that relationship with them. I was wondering how do you US Bank and Chase think about making a properly intelligent meaning data-driven and integrated being seamless experience despite the fact that a lot of that infrastructure is legacy systems that have been around for a very long time, but giving a modern sort of experience on the front end?
Scott Beyer (25:39):
That's an amazing question. First of all, and this is right in my wheelhouse, this is what I think about all day long. I talked about the digital transformation previously, and I think what we tended to do was build a really fancy UI layer or certainly a more fancy UI layer on top of really archaic technology and it works to some degree, but you're limited in how far you can take that and really driving a curated good experience for a customer. And I think it was a faster path to get to digitized product solutions, but we need to invest more in the core, in the abstraction layers and below the glass to be able to harmonize data, obviously to understand our customers because if we don't do that, we can only take that experience layer so far. And so to answer your question directly, I think we're spending a lot of time thinking about that modernization of the infrastructure. It's hard because it's not cheap and it's certainly not sexy when you're going to investment committee to talk about a new tech stack that a customer never sees or a new database, but it's critically important that we get that right in order to offer better customer experiences in the long run.
Julie Kimmerling (27:00):
Yeah, I completely agree with that statement and I apologize. I think I'm in a dead zone, so I'm having trouble hearing some of the mic questions, but I do think at the core of it, our customer experiences are powered by the platforms that we have underlying all of that. So to Scott's point, I think so much of it is about the agility of the applications themselves, whether or not we're able to commonly thread through data. I mean, again, relatively unsexy things in the grand scheme of things, but that become incredibly powerful. For example, seeing a single customer through across multiple accounts, relationships, products, our notion of trust in that user or that customer. And then ultimately I think the more transformation that we go through around our core platforms, the more that we can enable in the front end that truly gets to, I know you talked a little bit about this segment of one that truly get to really, really personalized experiences for our clients.
Hany Fam (28:15):
I'm going to add a little bit to that. You mentioned onboarding. A number of our large customers are actually talking to us about outsourcing their master data management to us because the legacy data that's out there. So we, we've seen a number of customers who are pulling 20, 30 more data sets that's costing them 50, a hundred million dollars a year, and they're still only achieving a verification rate in the fifties or sixties. That's really poor and it's because the duping matching coming up with that single source of truth, it's actually really hard to do, really hard to do. And so this notion of data harmonization, and to Julie's point about getting to a segment of one where at its heart whether Scott or Julie are looking at that segment of one, there's a consistency in the view of that data is really important. So there's a significant cost saving out of the gate in harmonizing that external data and improving it. But there's also a significant uplift in being able to do that quickly, both in terms of onboarding speed and ongoing customer management.
Kristin Wheatley (29:26):
Yeah, maybe just to pile on a little bit, I think whoever made the point about it's the unsexy stuff that fixes it. I think particularly in the small business space, we see often tech stacks and UI that's been kind of a piecemeal of things from the consumer banking things from the commercial bank, relative levels of underinvestment in these areas historically. So I think these problems are often particularly acute for small business and business banks, but actually figuring out the way to make some of those investments and getting the proper customer 360, whether you partner or do it in-house, actually attacking some of that modernization is really critical to that unlock. Because to your point, there's a horizon that's only so far you can get to with just the sort of put the bandaid UI over it. We probably have time for maybe one more quick question if there's anything else. Otherwise we'll wrap. All right then. Thank you very much for joining us today. Thanks.