In an interview with PYMNTS CEO Karen Webster, Jim McCarthy, President of i2c, said “It’s good to be the king, until it’s not, like when the coup is around the corner,” McCarthy said.
This is the problem that card issuers find themselves in today. Mainstream banks have traditionally been the kings of financial services and payments, but the coup is here. They’re under pressure and not because they have bad ideas but because the fundamentals of their business is challenged by the fact that their clients need to move faster than ever before.
While banking and payments hasn’t changed, the experiences that go along with both have. The people presenting these new and improved experiences to consumers are the ones who are not beholden to legacy COBOL stacks, who are trying to maintain more than 50 years of legacy code in their mainframe. After many years of merger and acquisition (M&A) activity, traditional legacy issuers aren’t really one stack so much as they are a lot of acquired stacks that never fully integrated into a single unit.
That fragmentation has become an increasing problem in a marketplace that has shifted tremendously over the last few decades. For example, the development of smartphones and apps in 2007, McCarthy noted, has altered the entire landscape. It isn’t the eCommerce version 1.0 that he started working on 30 years ago, but the one built for consumers who carry purpose-built devices that were created to give them greater access to connected opportunities across the entire economy – from banking to shopping services and more. These are ultimately opportunities for increased connectivity powered by payments.
“Payments is at the heart of commerce, and historically, we’ve been constrained primarily because technology wasn’t available,” he said. “Now when we think about the opportunity, it’s so much broader than the classic kind of four-party model of classic card issuing. It really is about payments. And payments as defined by folks like Stripe don’t fit neatly into a box because they are pushing payments. They’re issuing cards. They’re doing acceptance. It’s a little bit of everything because you’re focused on payments, not the role as defined in 1950 or 1960.”
The Great Leaps Forward
The reshaped economy and the new pressures that incumbent issuers face are illustrated by Marqeta’s massive initial public offering (IPO), Jim said. The Marqeta team saw a developing need in the market and capitalized on it. They saw what Square and Stripe were doing and recognized financial services are a “broader opportunity in the space” as the size and scope reflected a great need in the market.
Because firms like Marqeta (and i2c) enable innovation in payroll, benefits distributions and access to earned wages, there is a ‘truly gigantic’ scope of unmet needs.
“At i2c, we’re enablers for the creativity of innovators around the globe,” he said. “What we do for these companies is giving them the ability to bring these ideas to life. And so, when I think about the opportunity, it’s a global one.”
The future is, as always, difficult to predict because the evolution and advancement is an ongoing process. The world has changed dramatically over the last 15 years, and the future is going to change in different ways than one can expect.
That’s a positive because it means consumers and businesses alike can do more with less and control their finances better to access the full benefit of the connected economy.
“The world is completely changed, and this is not unique to developed markets … the progress is everywhere,” he said. “I still think there’s tremendous innovation in front of us as the world continues to evolve.”