Credit Programs vs. Mobile Banking: A Win-Win Scenario

According to i2c CEO Amir Wain, “The stars of financial services in 2021 will have something to do with credit.” Why? The global pandemic has fundamentally shifted the payments space forever. Whether it’s increased demand for debit, installment plans or buy now, pay later arrangements, consumers today need options to choose from.

In the world of credit, many businesses focused on prepaid processing think they can also do credit. However, according to Mr. Wain, when you dig deeper into the requirements of a credit-processing system and associated regulations, it’s a very different product than prepaid or debit.

Mobile-First

When it comes to innovation in the credit space, mobile technology is a game-changer.

“If I were to issue a million [physical] cards or provision a million cards on a phone, my cost structure is very different. My time to fulfill is very different and that also leads to activation rates, engagement, usage, and so many other things,” Wain said. “So mobile is an extremely important aspect that one has to consider as the new norm.”

An example of this can be seen in credit unions. Pre-pandemic, credit unions took a lot of pride in building relationships with each of their members, who used to physically walk into a branch and talk to someone who already knew their name and information. COVID put a stop to this and people are now realizing the importance of digital options. This shift in consumer behavior is an opportunity for financial service providers, not just from a profitability perspective, but also from a product competitiveness one.

“Mobile isn‘t a U.S. phenomenon. Mobile isn‘t a developed market phenomenon. Social media and getting comfortable with [digital interactions] are not developed world phenomena,” Wain said. “The underlying trends that we‘re talking about are so global and so pervasive that we are seeing the same thing across the globe.”

Opportunities for Smaller Players

One of the biggest concerns for smaller FIs is the difficulties they face competing against the more established, larger players who have bigger budgets and access to tech. However, according to Wain, “this is a technology-driven business where innovation matters more than the size of your branch network.”

“With mobile as your branch and ‘the branch‘ in the hand of every one of your customers and prospects, you are very well positioned to really expand the size and scope of your customer base,” Wain said. He added that outsourcing payments technology to someone with an agile platform is one way to equalize the playing field and beat the big guys at their game.

Where’s the Growth?

According to Wain, we will see continued innovation in the credit space on the consumer side of the business but even stronger growth in the commercial side.

“I think there is even a bigger opportunity [on the business side] in the sense that that market is so underserved and there are very few solutions.”

Even though the pandemic has rapidly accelerated the shift towards a digital-first payments ecosystem, the underlying demographic changes are just as much of a driver. If you step back and look at how the younger generation operate today, with thousands of friends on social media and instantaneous texting, it’s evident that this is a completely new generation.

“So for us to think that the same old financial services, infrastructure, products, and way of service delivery is going to work, is just misguided,” he said. “So it’s not just pandemic. It’s just a whole different way of doing things.”

The above is just a portion of the interview between Amir Wain and Karen Webster, CEO of PYMNTS, to discuss how mobile banking and credit drive opportunities beyond the DDA. The Masterclass video can be viewed in its entirety below: