Putting Payments in Context
FinTech Welcoming the setup of The Fintech and Payments Association of Ireland, Paul Rodgers asks the question, "What should be learnt from the collision between the payments industry and the FinTech world?"
The great debate!
I've just come from a roundtable breakfast meeting on the convergence of payments and FinTech which took the form of a debate centred on the question: "Is Payments FinTech?" This is an important and timely debate because we are at a crucial junction on the route map of the future payment sector where the choices made and the route(s) taken will determine how citizens and consumers transact for many years to come. The simple reality is the payments is not FinTech and FinTech is not payments - but there are significant and important areas of overlap where is the protagonists from each area have much to learn from each other.
Payments: The quoin of FinTech
I might be biased, but ‘payments’ - the ability to transact - whether as businesses, merchants, governments, or citizen-consumers, gives FinTech its rationale. FinTech, whilst sexy, current and progressive, much to the envy of the historically dull and boring payments sector, in and of itself, lacks intrinsic value. Until, that is, it is applied to something useful and market relevant when it has the power to transform everything in its path. Payments, perhaps because it has held on to so many if its historic roots, makes it an ideal outlet for FinTech to display its transformative power.
Payments is not always about technology
Despite what might be an obvious synergy between payments and FinTech, an important lesson to learn from the all too frequent lack of adoption of new payment technologies is that unless they have practical application and real value to the people that will use them, they are simply not going to find the levels of market penetration to make them viable. Having said that, it may not be down to impractical FinTech that leads to low levels of market adoption but more that the inertia in payments world caused by capital costs, legacy systems, consumer familiarity conspire to slow the progress on novel, generally more technologically based approaches. In such cases, as with the near 20 year adoption timescale for Chip & PIN, there’s no substitute for a little bit of patience. How comfortable the FinTech world is with that concept remains to be seen!
There is an expectation in the FinTech world, by both investors and innovators, that speed to market will be rapid. While this is often the case when entirely novel technologies are offered to consumers, when technologies are introduced to replace existing legacy processes, particularly where these impact every day consumer behaviour and experience, innovators have a mountain to climb in persuading the market that a new solution is worth adopting. This has never been truer than in the field of payments and payment systems where, for the vast majority of both merchants and consumers, the existing mechanisms are so embedded and largely deliver against expectations that purely throwing a 'tech' solution at existing problems is not sufficiently persuasive.
A positive future
There’s much more to be seen as to how FinTech transforms payments and overcomes the legacy mentality of both solutions providers and users of payment systems. One thing is certain: in the next few years it will be essential to have organisations like The FinTech and Payments Association of Ireland and its international counterparts showing the way and promoting a healthy, well informed debate.