The Future of Payments: A View into Emerging Global Trends

Malik Abdullah :
Hello everyone, this is Malik. And on behalf of Discover Financial Services and 451 Research, which is now part of S&P Global Market Intelligence, I would like to welcome you all and say thank you for attending today's webinar titled The Future of Payments: A View into Emerging Global Trends.
Just a few quick housekeeping items before we get started. To ask a question, simply type it in the question box on your screen. We will get to as many as we can during the Q&A session. The presentation slides are available for download in the resource section in the console. And finally, the on-demand version of this webinar will be available shortly after the live event concludes. We welcome our speakers today, and with that, I'll turn it over to Jordan McKee, who will be leading this event, to kick it off. Forward to you, Jordan.

Jordan McKee:
Thanks so much, Malik, and thank you everybody for joining. We are very excited to give you a view into a recent study we conducted on the state of digital payments and fintech globally, and we're going to cap that off with a discussion on what Discover's seeing in the marketplace. So, to begin, let's do a quick round of introductions. I'll kick it off. My name is Jordan McKee. I lead the fintech research and advisory practice here at 451 Research, which is part of S&P Global Market Intelligence. And I'm excited to be joined by three great panelists from Discover: Greg, Joanna, and Tribh. Guys, it'd be great if you could each introduce yourselves and maybe tell us just a bit about your role and your position within Discover. Greg, let's start with you.

Greg Rains:
Yes, hello and good morning everyone. Thanks, Jordan. My name is Greg Rains. I lead Emerging Products and Solutions for Discover Global Network, really focusing in on some of the new and emerging things that are happening, building and incubating new products and services that we didn't have previously. And then the solutions aspect is more around working with big tech and fintech partners on solving their commerce opportunities. Joanna.

Joanna Hanner:
Thanks, Greg. Good morning and good afternoon everyone. I'm Joanna Hanner. I am a director within our Corporate Strategy and Business Development team. So, I have lots of conversations with partners and with our different business units within Discover around opportunities of how we can best grow our business. And Tribh.

Tribh Grewal:
Hi, I'm Tribh Grewal. I'm Head of Fintech and Commercial Solutions or Commercial Payments for Discover based out of London. And my team and I, we look at the emerging trends and the new fintechs and how we can partner with them to create new solutions and also how we solve those commercial payments challenges.

JM:
That's great. Thank you to each of you for joining us and we'll hear from y'all in just a bit here. First, I'm going to set the scene on the study and share some of the key findings and then we'll get into that discussion around what you're all seeing in the marketplace. So, this is our second year collaborating with Discover on a global survey of consumers and fintech vendors. From our vantage point, it's the largest of its kind and it's fairly unique in the sense that it provides a view into how fintech vendors themselves are thinking about the market, which generally as an audience we actually don't see called on too often in the form of primary research. Really the goal of the study was to better understand how consumers are leveraging different types of digital payments, products and fintech services, their preferences in terms of providers who do they want to use these capabilities from and their interest in different types of emerging use cases, things like connected commerce and open banking.

And on the other side of the coin, the objective was to gain a view into the challenges that are facing fintech vendors. Where do they need support within their organizations? How are they thinking about partnering with incumbents in the payments ecosystem? And very similarly, what is their interest in pursuing different types of emerging use cases, running the gamut from blockchain to open banking to real-time payments? And I would say the overarching objective was really to provide a view into how both new entrants and evolving consumer demands are sort of coalescing and starting to shape how our market is coming together and really where it's headed in the future.
Just quickly to set the scene in terms of what this research initiative actually consisted of, we surveyed more than 4,000 consumers and 850 fintech vendors located in North America, Europe and Asia, specifically the U.S., Canada, UK, Germany, China, Hong Kong, India and Singapore. The fintech vendors we surveyed operated across more than a dozen different segments. So, we had a really good pulse check on essentially the fintech ecosystem as a whole. We talked to payment processors, money transfer businesses, those that operated in the lending space, those providing investment services, digital banking. And then there was a long tail of additional fintech segments like crypto, open banking, B2B payment services, insurance and the list sort of goes on and on there.
We spoke with a broad range of company stages all the way from pre-seed companies. Those that were just coming out of stealth mode all the way up to Series D and exit stage. And we spoke with a very senior respondent base. We talked to VPs, C-suite or founder roles within these fintech vendors. So, to kick us off here, it was interesting last year in the inaugural study, we fielded this really for the first time on the backside of COVID as we were really starting to see digital adoption accelerate.

And that came to life in a pretty big way, in the findings this year. And what consumers are increasingly telling us is that the direction of travel and commerce is digital. 58% of consumers globally told us they plan to spend the majority of their discretionary income online this year. That jumps all the way up to 69% of millennials. As you can see in the chart here, it's as high as 79% in markets like India. An important caveat on this chart, we are talking about discretionary spending. So non-discretionary, still largely card-present, though we have seen some pretty notable shifts there in areas like grocery during the pandemic. But really the takeaway, the action item to walk away with on this slide is that digital is becoming the first and many times the only touchpoint that a merchant or a business is going to have with many of their customers.

And as those customers go digital, they're looking for ways to make things easier and faster. Even if that end product or service is still procured in the physical world through an experience like buy online, pickup in store, they're seeking out different ways to streamline that journey and really to remove friction along the path to purchase. And of course, one of the ways that they're doing that is by adopting digital payment methods, and they're doing this very quickly. We saw in the study that 74% of digital payment users began using for the very first time less than three years ago. So, this is a pretty nascent user base to be quite frank. It's one that again was built largely on the back of the pandemic.

And we all know the narrative, right? As lockdowns went into place in 2020, we saw consumers thinking more about social distancing. They were adopting things like contactless payments for the first time. We saw whole swaths of the population that maybe were not active in e-commerce before, now going online and using things like digital wallets to make their lives easier. We saw segments of the population that might've been exchanging cash or checks with family members around birthdays gravitating toward things like P2P payment apps because they simply couldn't see their family. And we saw a lot of segments of the population that we probably wouldn't have associated with digital payments coming online very quickly. And it's interesting, in the early days of the pandemic, PayPal's fastest-growing customer segment were consumers above the age of 50. In markets like Latin America, we saw quite literally tens of millions of consumers using their credit and debit card online for the first time.

So, lots of new-user activation and we're seeing consumers gravitate to a whole variety of payment methods, as you can see on this chart. 53% of consumers globally tell us they've used digital wallets over the past 90 days. 29% have used “buy now, pay later,” which as many of us know has been an incredibly fast-growing area within the payments ecosystem. 40% have used P2P payment services. And then as we look at Asia, which is indicated by the yellow bar on the chart here, really leading the pack as we'd expect they would across all of these areas. 70% of consumers based in Asia tell us they've used a digital wallet, for instance. So, I think we're kind of at the point where it's pretty safe to say that digital payments have become ubiquitous across many markets around the world. Probably not a statement we could have made in 2019, but we've seen so much change since then.
We're at the point as well where usage of fintech apps in general, investment apps, banking apps, et cetera, also ubiquitous. We saw in the survey 87% of consumers in the UK, for example, have used at least one fintech app on their smartphone, that jumps all the way up to 98% in India. So, we're starting to see that foundation for innovation for further progress around digital payments and fintech really falling into place as consumers are becoming comfortable using not only payment services and banking services digitally, but through a range of different providers. And when it comes to digital payment providers, we see a pretty interesting story emerge in terms of consumer trust and preference. And it's interesting if you look at the media reports and kind of follow the conventional talk track in this space, the common narrative is that fintechs have run away with this ecosystem. Our research indicates there's still a very clear and very strong opportunity for banks to more directly participate. We asked users of each type of digital payment service, which type of provider they'd most prefer to use it from.

And actually what we saw is that banks ranked as the number-one most preferred provider across all categories with the exception of “buy now, pay later,” where actually interestingly, merchant emerged as the most preferred provider. When we look at this story around trust, we see an even stronger story. Where banks are outpacing all providers across all digital payment categories by a pretty strong margin. And what that telegraphs to me is that even if the bank isn't the primary provider of a digital payment service, their endorsement, their support is going to be crucial for driving adoption. There's a reason that somebody like Apple went to the card issuers to launch Apple Pay, right? It would've been very difficult to drive adoption if the Apple Card were the only card available in the wallet.

And I think the other takeaway here is just to look at all the colors on this chart. There is reasonably strong distribution in terms of preference and in terms of trust across tech companies, fintechs, banks and merchants. So, what that tells me is there's room for multiple players to compete here. This isn't going to be a winner, takes all type of opportunity, right? There is room for participation across all of these different segments and we'll continue to see a whole variety of different companies look to make inroads in areas like “buy now, pay later,” P2P, digital wallets, et cetera.
When we look at the adoption drivers for digital payment services, this is a story that really has been consistent over roughly the past decade that I've been covering this space. And it's very much aligned to a Maslow's Hierarchy of Needs. It's interesting, right? Because you have those basic needs, which would be things like security, ease of use, speed, convenience, acceptance. Those are sort of your prerequisites for adoption. You can see that called out in the light orange highlighted box on the slide there. Those are the factors that consumers are going to look for at the most basic level before they make that adoption decision.

Once those are met, it's about the psychological needs or in this case, it's value adds, right? It's things like contactless, rewards, multi-country support. And then finally you hit that self-actualization stage or in our case, this is going to be recommendations. It's recommendations from your bank, from your friends, from your family. And my takeaway here is that really any marketing or messaging around digital payments, before you get to the value add, before you get to kind of the big picture, first need to hit on those basic needs. How is this payment offering faster than what's available in the market? How is it more secure? How is it easier to use? 

Those are the things that are going to grab a consumer's attention. And then from there you build a story around the value adds. And you certainly can't overstate the importance of securing personal information as part of that messaging. It continues to be the number one adoption inhibitor for digital payments. It's largely an education issue and it's important to put technologies that we have in our industry, things like biometrics, like tokenization into language that the consumer is going to understand. And I think it also kind of needs to be an additive story. How are digital payment methods building on the preexisting protections that are available in the market? Things like zero fraud liability guarantees that we're already accessing through our existing payment credentials, and then layering on the additional security value ads on top of that through digital payments. What's great about the high levels of digital payment and fintech app adoption that we've seen in the survey here is that it really puts in place this foundation for our industry to go deeper and to add even more value.

And as consumers gain comfort with using basic digital payment capabilities like a wallet or a peer-to-peer payment app, they become more primed to adopt a range of different emerging use cases. And we're seeing a glimpse of some of that here in terms of what resonated with respondents in the survey. Real-time payments that's becoming prolific very quickly, especially as we've seen in markets like India with UPI. We're seeing it in Brazil with Pix. We're seeing it in dozens of markets around the world. And we saw strong interest here actually in the U.S. and we saw a very meaningful jump over our 2021 survey where more consumers are starting to get up to speed with the concept of real-time payments. And the pragmatic use cases in particular are the ones that are resonating. It's things like payouts, bill pay, account to account transfers.

Looking at open banking, again, it's also about the pragmatic use cases. Consumers want easier credit applications. They want a single view of all their accounts. They want to onboard into new experiences faster. As somebody that just bought a house, I can tell you that there would've been a whole lot of value in having open banking, right? Not having to take screenshots of my bank statements, not having to pull PDFs on a pretty much daily basis. Wouldn't it be great if I could securely give a third party access to my accounts to get the information that they need?
Biometrics, we saw some really compelling interest here actually in cards with embedded biometric readers. We've seen that rolled out in some markets for high net worth individuals, but it's a concept that seems to be resonating more broadly than just that audience. Also seeing in-store palm reader technology at checkout. We see that today with experiences like Amazon One, that's something that is top of mind for consumers. Looking at connected commerce, and again, kind of continuing that Amazon theme, just walk-out purchase experiences where there's no checkout process, you're not queuing up, something that consumers are seeing value in.

Automatic payments. You might see this today with a printer, for instance, that will auto-reorder toner when levels get to a certain point. Consumers are looking for these payment experiences that just sort of blend into the background that make their lives easier. We're seeing that around smart home purchases as well.

And then finally, we saw some really good interest in next-gen card experiences, specifically things like having loyalty credentials linked to a payment card. A lot of us might know that experience today with Square, where your card is actually the anchor for your loyalty credential, your loyalty account with a particular merchant. We're seeing interest in personalized offers based on spending patterns, cards that can perform multiple functions. Maybe it's your credit card that also serves as a transit card and the gym card. Use cases that I imagine are pretty relevant, especially for some of the key players in that ecosystem like a Gemalto or an IDEMIA.

So, point being, no shortage of interest from consumers around different types of future possibilities in our industry. And if we remember that digital payment adoption drivers chart, it's largely the use cases that are focused on fundamentals that are driving interest. It's making payments faster, making payments more secure, easier to use, more readily available.
And when we flip the coin and look at this from the fintech vendor standpoint. As this ecosystem is expanding, as it's diversifying, a big objective with our research was to really understand the emerging areas where fintechs are looking to target in the future, with the idea of trying to pinpoint specific use cases that show near-term potential as well as to see where some of that overlap is occurring with consumer interest. And we identified a fair number of interesting areas where there's actually quite a bit of appetite for fintechs to go a layer deeper. No surprise, embedded finance. And we're seeing this happen in both directions, by the way. It's fintechs using banking as a service or payments as a service partners to offer, let's say a payment processing capability or a card issuance capability.

You're seeing that today with Square using somebody like a Marqeta for card issuance. But we're also seeing some players like Stripe or Monzo saying, “Hey, we built something really great here, let's offer it on an as-a- service basis.” And what's interesting about embedded finance is we used to traditionally think of fintech as somewhat of a vertical opportunity. And fintech companies, by our definition at that time were sort of these dedicated providers of financial services. Maybe they were offering a P2P app or a digital wallet. Today, fintech has become much more horizontal and you're really starting to see companies across verticals, both B2B and B2C, embedding fintech into the software, into the applications, into the experiences that they're already serving up to their customers. And when we look at embedded finance, we saw use cases like payment processing, offering bank accounts, even offering payroll services as ones that were particularly top of mind for fintechs.

On the topic of connected commerce, really the idea here is around the internet of things and using connected devices to expand the acceptance network. You're seeing interest in both use cases like bringing payments to appliances, but also interest in the underlying infrastructure that's needed in IT. Things like touchless authentication, blockchain-based data sharing. Open banking, very similar to the consumer survey. Lots of interest here around payments use cases like account-based payments. But also a number of connectivity use cases, things like account linking and performing credit risk assessments.

And finally, on the topic of crypto, notably less interest in some of the other areas in the survey, but still three in five fintechs stating that they see relevance to their business, especially around use cases like potentially processing crypto transactions, issuing a card that's tied to let's say, a crypto exchange, crypto trading, bringing in more capabilities into their existing suite of services.
The consistent message that we saw throughout the survey was really an appetite to partner. And I think that's probably more important than ever given the current macroeconomic environment. And what we saw in the survey, 98% of fintechs identified areas where they believe their business could benefit from the support of a partner. So, it isn't this “us versus them” mentality that we so often see gets painted around this space. There's a recognition for the value of partners, and we're seeing that in a really big way in the research. And in particular, partnerships that provide access to customers that provide access to capital, which is certainly top of mind right now in partnerships that provide access to marketing support. Those are areas that are definitely resonating for incumbents, areas that certainly they can lend a hand and play up in their partner outreach efforts.
And there's also a clear emphasis on technology-centric partnerships, things like core infrastructure development, things like technology enablement, fintechs largely looking for partners that can equip them with some of the core technologies that perhaps it wouldn't make sense to build in-house.

As part of our research, we conducted about a dozen in-depth interviews with fintechs of different stages across different segments, different countries, and these are some of the consistent themes that we heard from fintechs about what they're looking for in a partner. And I won't go through these in laborious detail, but just to kind of give you the flyby, speed and urgency. We talked to a large digital bank over in the UK that alluded to the fact that they're very fast-paced. They're looking for a partner that also has that fast-pace mentality that has speed and urgency to get something to market. Ease of integration. We were talking to a payment processor also in the UK that is built using modern product development techniques and they're looking for partners that are using modern architecture that can work with them and sort of collaborate in a similar environment.
Commitment to the partnership. We saw this over and over again where many times there are partnerships that are announced in the market that don't make it beyond the press release, right? Really a need for partners that have that long-term mentality that are looking to bring something into the marketplace that is actually going to be tangible, actually adds value. Scalability was another big theme that we heard time and time again. They certainly are open to doing an MVP type of model, but they want a roadmap to expand that, right? They want to see how they can move this beyond just one country into multiple markets. Move it beyond one customer segment into their broader business.

And approachability and navigability. This was an interesting one that we especially heard from some of the smaller fintechs where they just have a challenging time finding the front door when it comes to partnering with larger financial services providers and really looking to better understand what is the entry point, right? How do we have that initial conversation? Who do we talk to? Where do we turn?

And then finally, as we move down the home stretch here. And again, this message continues to pop up, but it isn't that disintermediation story when it comes to the card payments ecosystem. The overarching message is that most fintechs see payment networks as partners, they have a deep reliance on them for their strategy and operation. Certainly some fintechs do have aspirations to become alternatives to the networks. That's not a secret to anybody. But what we saw is that 66% tell us they view the networks as partners. There's a deep appreciation for their central role in the value chain. 97% say they're either reliant on the networks today or they expect to be in the future. So clearly a very pervasive role in this ecosystem.

And so I think the message is this. For any company that plays an enablement role in the card payments ecosystem today, whether you're a network or you're a partner that's connected into the networks, there's an opportunity to collaborate with fintechs. There's an opportunity to more deeply connect them with different types of card payments use cases. And as we saw earlier, fintechs are really after partners that can bring them customers. Let's face it, no shortage of customers that are plugged into the card payments ecosystem today. So just to distill what we've covered, we're seeing consumers gravitate towards fintech towards digital payments in a very big way to streamline their digital journeys. And as more of their interactions are going digital, they're looking for trusted experiences, they're looking for experiences that remove friction, that create different types of value. When we talk to fintechs, they want partners. They want partners that can help them deliver and consume different types of embedded financial experiences.

And really the trend that we're seeing is that fintech is becoming embedded in every company and fintech vendors need partners to drive that opportunity forward. And then finally, at the end of the day, fundamentals are really at the heart of success in fintech. It's things like collaboration, it's things like security. It's things like user experience, things that have always been important in payments and banking, right? These are critical focal points for any fintech initiative in the market.

So, with that, we will move here into our panel discussion and we'll reintroduce our panelists, Tribh, Greg and Joanna. Guys, thanks again for joining us. So, let's kick things off here. As you saw across a number of slides, collaboration was a very important message that emanated from the research, sort of this better together mentality that we saw over and over again. It'd be great to hear from each of you how networks like Discover, Discover Global Network, and fintechs can work together to deliver on some of these evolving consumer demands and different emerging trends that I discussed previously. Joanna, maybe if we could start with you.

JH:
Yeah, thank you. Great question. So, with a lot of what you just went through and talked about, things like the acceleration of digital payments and the rapid pace of change we're seeing in our industry, I think it's really almost impossible for us as a bank, an issuer and a network to build everything that we need internally. So, for us, partnerships are a critical way that we can bring these emerging capabilities to our issuers, our merchants, our acquirers, and our customers. I also think on that note that Discover is a great partner for fintechs to work with. I think that our unique business model that we are a global card network as well as one of the largest U.S. card issuers, but we are evolving as a digital bank and offering more digital banking solutions to customers. And that unique business model makes us a really exciting company for fintechs to partner with.

JM:
That's well said. Tribh, what's your perspective?

TG:
I agree with what Joanna just said. Everybody's aware that the pace of change over the last few years especially has been absolutely huge. And especially we're seeing a lot of convergence of the technology. And that's enabling new use cases. And the focus these days is about customer experience and the customer journey, is how we take the customer from, as you said, from getting or thinking about a financial product to actually going into and getting it. And this is where we are a bank, we provide solutions, but not everybody can do everything themselves. So, this is where partnerships become very, very important for us, especially with the fintechs who are developing new solutions to solve problems or create new use cases. So, our approach from an international perspective is not only to be able to provide the global reach of our network, but also to look at what new models that are emerging and how we explore these solutions for those models from our existing products or create new products and services for those segments.

I've talked before in previous webinars about our approach, which is we not only look at payments, but it's not just... let me just go back. It's not just fintechs, it's existing card schemes, existing domestic schemes, et cetera, that require those partnerships as well. So, I've talked previously about network alliance approach that we have where we enable domestic card schemes with operating regulations and be able to expand their cards across borders.

Then we look at now the alternative issuing models that we have where we're working with fintechs to provide solutions for their existing clients or for the new use cases. Then there's a whole third area where we differentiate from other schemes is where we leverage our technology. So, we license our technology. So, Jordan, you talked about the whole multi-use cards. We have our EMB technology, which is called D-Pass Connect. We can license them to partners where they provide the business case and everything stacks up. But the idea is that they could use that to not only create a credit card, but link in loyalty, link in transit, link in your insurance, your rewards, all those things could be in one place.

So, there's a number of areas that we can partner in and support fintechs. Another example I can talk through is we talk about BNPL, it's how we take a BNPL product and combine with the benefits of a credit card. So, you take a credit card, but instead for revolving credit, it becomes an installment-type payment. It's how we take B2B use cases. So, I can go on about this all day long, but I think in the interest of time, I'll stop there.

JM:
Yeah, those are great examples, Tribh. And particularly like that one around that technology licensing capability. I think that ties into the theme of embedded finance really well. Greg, let's wrap up with you on your take here.

GR:
Yeah, thank you. I think Joanne and Tribh have said it really well. Being able to partner, we realize it's critical. So, there's been a lot of fragmentation and there's specialization in the ecosystem. So, emerging players are really strong or most times best in class on the part of the consumer journey or value chain that they're focused on. So, whether that's something like doing fraud or loyalty or insights. Being able to take those best in class experiences in those pieces, being able to partner with those players while still rendering a seamless experience to the end user is going to be more key than ever.

JM:
Thanks, Greg. And just a reminder to our audience, please feel free to submit questions throughout. We can tackle those towards the latter half of the panel discussion here. So, moving on though, one of the most important drivers of innovation from my perspective is information exchange. And it's one of the reasons why we go to conferences like Money 2020. And I know most of us on the line here right now were at that event. It's the ability to share perspectives across different sets of stakeholders that maybe have a different vantage point than you that can be hugely impactful for driving progress and really for understanding how a particular trend or technology is going to play out across the ecosystem more broadly. And I guess what I'd be curious to hear more about is how networks can help fintechs better understand emerging trends given that centralized role that you have in the value chain. And I imagine that's probably a two-way street as well, right? Fintechs also have a role to play in helping networks like Discover understand how the space is evolving.
Tribh, maybe we can start with you and you can share some thoughts there.

TG:
Jordan, I completely agree with you. The learning has to be both ways, right? Nobody's an expert. So, we need to learn from the trends that because of fintechs are in that space, they're doing that every day. They're looking at some of the new items and use cases. So, we need to learn from them and then we can provide our expertise to them. If I think about the challenges that face a lot of the fintechs, in fact, I was having a conversation with a company earlier today, and they're saying that when they work with their fintech partners, the biggest challenge is regulation. It's understanding regulations in various markets. They had to start at that level with the change in regulations, how regulations impact the product or service that the fintech partners are wanting to launch. What do they need to be aware of, how do they meet the compliance requirements.

So that's just at the starting point for launching any product or service. And then you already talked about when you said what a fintechs looking for, scale was one of the things. It's the brand awareness, it's how do the networks help them scale their product or service, take it across borders and make it international. It's how that brand awareness builds.

So, those are some of the areas where networks can be pretty active and pretty supportive. And then the whole area around the financing. Everybody needs money to grow to launch. That's where networks can help as well in terms of investment, in terms of incentivization, in terms of launch support. So, there's various things that the networks can help support fintech partners, and it depends on motivation as well as to what is the requirements for the partners. What are they looking for? I just talked about all the things we typically see, but is their motivation for the partnership and what they're looking for. But as we said at the beginning, learning what works both ways, but there's a lot of opportunities for us to do that together.

JM:
Well said. Greg, your perspective?

GR:
Yeah, definitely a two-way street. It would be disingenuous to say that any one party or even we have all the answers. From the network side, I'll state the obvious. We play obviously a central role. We're a connector and facilitator. We're having a lot of discussions that Tribh mentioned.

We also have a lot of data flowing through the network. So, while it's not the same as maybe what a merchant and an issuer see at that granular level, at a macro lens, we're able to see different trends as they start to arise. So, I think, Jordan, you mentioned some of the trends we saw at the beginning of the pandemic as an example. Kind of extrapolate that out, just maybe more broadly, we can see different trends through the data that we have. From a fintech perspective, I've mentioned the specialization that's out there. So, really fintechs that are focused on solving a particular consumer pain point and they can have a really deep understanding of that pain point. If you take those things together, the deep understanding of the consumer-particular issue that they're solving with a more macro view and the data products and services that a network has, such as Discover Global Network, end users stand to benefit from the continued innovation that takes place.

TG:
Sorry. Just to interrupt. But one of the things that you had mentioned when you were speaking was the whole connected commerce and IoT. And this is where our experience from the network perspective comes in very useful because we provide the card rails that can help all those type of transactions and make that pretty invisible to the end consumer, make the consumer experience much better, make the whole payment invisible using the card rails, and make it more secure. So that's what the networks can provide for those type of solutions.

JM:
Yeah, it's actually a really nice transition, Tribh, into sort of my next line of questioning here. Because the theme that we continue to see over and over again is that when fintechs are partnering with trusted, established players in the space, it's sort of this “one plus one equals three” story where you can actually provide an even deeper level of value. And Greg, going back to some of the comments you made, I was wondering if we could maybe just double-click on that and you could share some of the thoughts on Discover's role to play in sparking further innovation with some of the fintechs and some of the partners that you have in the marketplace.

GR:
Yeah, sure. Actually, some of the things that you mentioned as you walked us through here at the beginning of the findings from the study that really resonated with me and would be a way to kind of look at this is around the need for flexibility and partners. So, fintechs have a need for flexibility. I think one thing that you would know in working with Discover Global Network, or our partners know, is that we are extremely flexible. Flexible and able. We're really quite literally willing to look at any and all of the assets that we have to help our partners solve their commerce challenges. So, if a partner has an opportunity where they feel that a network or even our issuing side or bank side of the business can help, we're more than open to co-creation. So, while we have products and services that are out there, that doesn't mean that's kind of the end of it. If there's something that can be solved by working with a partner such as DGN, we should have those conversations.

Another theme that arose in the study that really spoke to me was around fintechs needing the ease of integration. That's one, I would say historically, we've done a lot powering big tech partners behind the scenes on a lot of things that they do. But I think ease of integration and our journey there to continue to make it easier to work with us is an area that we have been and will continue to invest in. I think we have a big opportunity to work with even more fintech partners than we are today. So, I think if you couple the flexibility that we believe that we have as one of the strong suits that DGN has, with that ease of integration that we continue to work on, that is going to spark even more innovation with our partners. And again, will ultimately benefit consumers.

JM:
So Tribh, I want to go back to a theme that you had mentioned a little bit earlier around global reach, and that was definitely something that came up in our research where we saw that fintechs are looking for partners that can support them across multiple geographies, potentially using them as a partner to enter a new market. Let's say. Discover Global Network, headquartered here in the U.S. where I'm based, hopefully most on the line recognize that the network has a global reach. It's in the name, Discover Global Network. Tribh, maybe you could discuss a bit about how fintechs outside the U.S. are collaborating with DGN and the type of value that you can bring to them.

TG:
So as Greg said, when we partner, we are flexible in terms of how we operate, and this is the feedback we typically get from all the fintech partners that we're working with. It's our flexibility. And some of the things, Jordan, you mentioned, the ease of integration, commitment to partnership, scalability, approachability, and speed and urgency. All of the above is what the partners take us for as that's where we are good and work with them. And from the global, we have a dedicated team here in EMEA region, in London where I'm based and also in Asia-Pacific. But Discover Global Network, as it says, is global. And as I mentioned also earlier, we have our Diners Club network, which is global, but then we have network alliance partnerships across the world as well. We have about 29 network alliance partnership with domestic scheme. So, it is not just working with a number of banks that work directly with Discover. It's the domestic scheme, which means if there's a domestic scheme in India that's most of the Indian banks will be working with that domestic scheme.
So, we take our solutions not only within Discover, but also out to our network alliance partners. So that opens up a lot of the opportunities. Then we also help our partners grow with the geographic expansions. For example, I've had conversations with my counterparts in the U.S. who have partners who want to expand into Europe. It's how we help them expand into Europe. And same thing, European partners wanting to move into the U.S. market. So, we use our network, we use our partnerships on a case-by-case basis to see where the opportunities are, where we can make the introductions, where we can actually go in as joint partners.

I'll use one example. We launched a program earlier this year with a B2B company that provided software services in the travel industry. They were looking to launch a new payment product for distribution, fulfillment and payments in the travel business to bring in cost efficiencies to reduce the settlement times. So, they approached us and we then partnered with them. We had conversations, we brought in an issuing processor and an EMI BIN sponsor. Put the three together, plus us four companies together. We built the solution and launched that in February this year.
So those are the type of things we can do, whereas a company that is not in the payments business that's doing completely different things, but we help them enable and launch their payment product in the market. Similarly, if you look at BNPL-type opportunities or faster onboarding processes with our partner banks, we brought in partners who can help them fast-track the onboarding process. So, where they used to take 15 days from application to issuing a card, reducing down to two or three days. So again, a number of examples we can talk through, but it's utilizing the bandwidth and the size of the network and the partnerships we have, we can enable that. Sorry, a long answer to a short question, but...

JM:
No, that's great, Tribh. Really nice examples there. And you both have talked quite a bit about Discover's value proposition for fintechs and really what you bring to the table around a partnership opportunity. Joanna, I'd be interested in the other direction. What does Discover Global Network look for and what types of qualities make a good partner in your eyes?

JH:
Yeah. So, I think you talked a little bit about in this study that fintechs were looking for partners that have a commitment to the partnership. And I think really similarly, we're looking for that as well. Interested in working with fintechs that want a true partnership with Discover and that are also looking for win-win relationships where there's commercial opportunities that benefit both organizations, and where both companies support each other's goals.

I think we're also interested in partnering with companies that share our values as an organization. Particularly with a strong focus on customer needs and delivering the right experience to our customers. I think we have a relentless focus on the customer at Discover. And so, partnering with companies that share that is really important.

We talk a lot internally about Discover behaviors and how we aspire to act as an organization. And one of the ones that we talk about is that we get better every day. So, we're really focused on continuous improvement and commitment to refining and optimizing what we do every day to make it better and better. And finding partners that are able to do that with us and help us do that and that we can help them do that within their organization as well. I think that's great.

And then the last thing I'd add there that we look for in a partner is someone who really understands what's happening in the market and is able to fill a unique customer need in the space. I think those are the big things that I would call out in terms of what we're seeking from a partnership.

JM:
Yeah, I really love your point on continuous improvement. This is a space that's just moving so quickly. You can't be stagnant, right? It's an ongoing exercise in optimization and finding partners that have that same vision around optimization and continuously improving is the way that you provide deeper value. I thought that was really well said.

So, as we wrap things up here, I thought it'd be great to finish with a bit of an outlook and sort of the ever important view into the future. Not going to force you guys to make a prediction. Instead, I'm just curious about the fintech trends that excite you as you think about the next few years. What is that trend that's top of mind for you and why are you thinking about it? Why do you think it's going to be impactful? So, Joanna, since you've got the mic here, I'll start off with you.

JH:
I'd say there's two kind of more general trends that really excite me. The first is kind of the convergence of the capabilities. I think we're seeing more and more capabilities that build on top of each other and have a snowball effect. And I think that's really exciting because I think it just creates infinite possibilities for ways that we can bring better experiences to the market and to customers. So, I think that's something that makes me really excited.

And then the second general trend that I'm excited about is the ability to create these really differentiated customer experiences. So, a lot of the things you talked about, about taking the friction out of the payment experience where it really kind of falls into the background and the customer is just doing the thing they want to do and making that as easy as possible. I think there's also places where we give better customer experiences through different integration with merchants, by creating better fraud experiences and even more personalized payment experiences in rewards experiences. All of those things I think can really shift the customer experience and drive a lot of loyalty and engagement from our customers, which really excites me.

JM:
Yeah. Plus one on the differentiated customer experiences. I think the more that you can do to add additional layers of value on top of the payment, the deeper level of engagement that you have with your customers. So, that's a great point. Greg, what are your thoughts?

GR:
I'm a big, big believer in the power of open banking, open finance. Both as a payments guy for a long time here, and then also as a consumer. So, the idea that a consumer owns their own data and can freely and securely access it and share it with a third party for value, for them, that's a powerful idea. And it's exciting to me, again, in both aspects. I think it kind of hits on what Joanna mentioned, it leads to better experiences. So, it leads to better experiences from a consumer perspective. It also has better experiences from a business perspective. So, on the consumer side, streamlined onboarding and account opening, revenue and affordability-based lending. You kind of mentioned, Jordan, buying a house, being able to share that data more seamlessly than the archaic way we tend to do it is a lot better. And then I think getting those customized and tailored offers for you specifically to the data that you have that isn't just sit with your FI is pretty cool.
From the business side, rapid business underwriting, embedded payments, you kind hear those terms, all drive off of open finance. I'm a big believer of it. I'm very excited about where we're headed here, both in the world as well as what continues to evolve here in the U.S.

JM:
And on the open banking front, it looks like at least here in the U.S., we are finally making some initial steps down that path based on some of the comments from the CFPB a few weeks ago. So, a few interesting years in store for us on that front. Tribh, I'll let you take us home.

TG:
I agree with both Joanna and Greg. I think open banking, embedded finance, those were the things that we've been talking about for the last couple of years. But I think moving forward, it goes back to the theme of the customer journey and the whole overall experience and making the payments invisible. So, that will come through when we get from open banking to open finance, and once we get from open finance to open data. That's when the whole control of data ownership by me or you for your own data that adds value. And that can bring in a lot of different services.
And then how the banks and the fintechs collaborate, whether that's banking as a service or platform banking. So, who provides a service, who owns the customer, that's something that can be worked out. But I think those are the areas that will drive what we see in the market over the next few years.

But let's not forget, amongst all this new stuff that is still your traditional payments stuff that still needs to be done. So, I think there's still some of the trends that will be there, especially in the commercial and B2B space, would be how you simplify the payments, the B2B payments. How do we take what was in the consumer space, the recurring payments, how do we make the variable recurring payments help businesses to settle the payments? So how we take virtual card numbers, et cetera. So, those are the things I think still will be there for the next few years. And I think that's where we'll see more value added on the commercial and business to business payments through the existing stuff. But to me, let's see what open finance and open data bring to us in the new years.

JM:
Yeah, I'd echo all of your comments. Those are definitely top-of-mind trends, I imagine for just about everybody up and down the payments value chain. And for me, I guess the one that is most impactful, or at least has the potential to be the most impactful, is this concept of embedded finance. Really, what we're seeing is sort of this evolution of the distribution model for financial services, where increasingly it's third parties. It's non-banks that are looking to embed different types of financial capabilities into their software, into their applications to better engage with their customers, to drive revenue, to create a stickier experience. And as those companies increasingly head down the path of embedded finance, they need partners, right? It is continuing to bring to life the importance of partnerships. They need entities that can provide the underlying infrastructure, that can provide the experience around how to operate a financial product.

And so as that trend unfolds, I think, one, it increases the overall size of the fintech market and opportunity. But two, it creates just so many new opportunities for existing players to offer up their expertise, their services, their capabilities to bring all that to life. So, interesting times ahead here.
So, we do have a bit of time for Q&A. I do see one that has come in, so I will jump on that. And this is actually pretty well aligned with a point that I had brought up on the slide where I featured some of those quotes from our in-depth interviews. And this particular person is asking, how can emerging fintech companies get on Discover's radar to explore collaboration opportunities? Where is the front door and how do they reach you all? Joanna, maybe if we could ask you to start off on that one.

JH:
Yeah. So great question. I love that that came in because we really, truly are really interested in hearing from new partners. So, definitely want to connect with all of you. Discover attends a lot of industry events and conferences. Those are always a great place to reach us. If you see a Discover booth at an event, definitely stop by and chat with us. And then more directly, for our corporate strategy team at Discover, you can also email us directly at investorrelations@discover.com. And that's a great way to get in touch with my team.

JM:
That's great. Tribh, anything you'd add there?

TG:
No, Joanna said it all. We participate in a number of events. So, we are sponsors of Money 2020 U.S., Money 2020 Europe, a number of other industry conferences and events. So that's a place to connect with us. But also we have our email on Discover Global Network website. So just ping us an email and we'll be in touch.

JM:
That's great. So, it looks like we're pretty much out of time here, so probably best to close things out, give folks back a minute or two. Joanna, Tribh, Greg, a big thanks to all of you for your perspectives. You've shared some really nice examples of how Discover's participating in the ecosystem, the value you're providing, what you're looking for in terms of partners. Big thanks to your company, Discover Global Network, for collaborating with us on this annual research effort. And of course, thanks everybody on the webinar today for joining us. Stay well. We'll look forward to sharing more with you soon on the fintech ecosystem as well as some of the findings from the study.
So, at this point, Malik, I'll bring it over to you to close us out.

MA:
Thanks, Jordan. That concludes our webinar for today. Thank you, Jordan, Greg, Joanna, and Tribh. As a reminder, the on-demand version of this event will be available shortly on behalf of Discover Financial Services and 451 Research, thank you for attending and have a great day.

TG:
Thank you. Bye-bye.

JM:
Thanks all.