By W.B. King
Among topics covered at the 2021 CUNA Operations & Member Experience Council and CUNA Technology Council Virtual Conference was the ever-changing payments landscape.
The purpose of the “Digital Payments Revolution” session centered on how credit unions can adapt and remain relevant, explained moderator Richard Head, vice president of IT for Linn Area Credit Union.
Featured speaker Mark Sievewright, founder and CEO of Sievewright & Associates, noted that global payments business generates approximately $2 trillion in revenues each year (with an 8% compound annual growth rate). Credit unions, he said, will be sharing slices of that proverbial pie with an increasing number of new competitors.
Sievewright has had a long history in the payments space. He held senior leadership positions at HSBC, MasterCard International, Payment Systems Inc., TowerGroup (where he served as CEO) and Fiserv where he served as president of the company’s Credit Union Solutions division.
During his presentation, he listed factors impacting payments today.These include: COVID-19, macro trends in financial services, shifts in consumer behavior and demographic change, digital transformation, competition in payments and the rise of digital currencies.
While he said the pandemic “accelerated” digital payments changes, he added that this aspect of the industry was fluctuating well before COVID-19 changed the world in 2020. And to this end, Sievewright focused, in part, on what the future of payments will look like. This process, he said, is best categorized as “disruptive change.”
The Fintech Partnership Solution
Once viewed as disruptors, progressive fintechs in the payments space offer “hugely collaborative” opportunities to forward-looking credit unions, Sievewright noted.
“We can’t afford to do what Chase [Bank] does and that is put hundreds of people focused on the fintech space to identify opportunities,” he said. “But we can use our existing partners, our national associations, leagues and other methods to find ways to collaborate with these fintechs.”
Building on Sievewright’s premise, Linn Area Credit Union’s Head asked how credit unions should be viewing fintechs and the impact these companies are having on the payments space.
“I really believe there are good fintechs and bad fintechs,” said Sievewright, who singled out Venmo as one of the latter because the company is “attacking our base.” He further explained that Venmo’s parent company, PayPal, is “evolving into a broader array of financial products.”
Good fintechs, he said, want to be a part of a credit union’s ecosystem. “They don’t want to have consumer or customer relationships — they want to exist through the credit union,” he continued. “And these are usually technology oriented fintechs that do not want credit, but want to share in the spoils of the success as a result of working together.”
When it comes to fintech and credit union partnerships, Sievewright said the leading issue is the ability for these two groups to connect while finding common ground. Fintechs, he noted, generally do not want to build relationships with credit unions one-by-one.
“They want to find a way where they can get mass distribution. I really love the fact that CUNA is doing a lot of work in digitization. CUNA Mutual Group has at least 28 fintech investments and not a lot of people realize that,” he said. “We ought to know who those 28 are and if we can leverage them.”
On a smaller scale, Sievewright added that some of his firm’s credit union clients have relationships in their respective region with as many as four or five fintechs that work together to build a robust digital banking platform.
“You have to go looking for those opportunities, but they are out there and they can be very compelling,” he said.
Payment Macro Trends
During his virtual presentation, Sievewright implored attendees to heed five macro payments trends: accelerating consolidation, digital transformation, demographic shifts, consumer attitude and expectations, and the changing nature of competition.
“I really believe these are the five things we need to focus on. These are things we know will change our business. These trends are factual. What we have to figure out is how to get from where we are today to a point that we are driving sustainable, strategic growth for our credit unions,” he said. “It comes down to being focused on digital, being uber focused on the member experience and finding ways to innovate.”
Toward the end of the presentation, Head questioned Sievewright about the future of cryptocurrencies in the U.S. noting there is a lot of “chatter” about the concept in the credit union industry.
Sievewright views the topical issue as a “tale of two cities.” On one side is the speculative Bitcoin-type currencies, he said, which are designed with a certain consumer base in mind.
“If Warren Buffett is scared of it, I probably should be, too,” he said.
Buffett and other industry leaders like JPMorgan Chase’s CEO Jamie Dimon, he noted, have been vocal about inherent dangers related to Bitcoin-type investments because of the value swings.
“The Federal Reserve views them as pretty dangerous because they are not regulated,” he said. “And part of the reason they are successful is because they are not regulated. They have formed an almost social following. This group will continue and have all the dynamics I described.”
On the other side of this “city” is what Sievewright said is the “good” digital currency where a “fixed value” can be issued – a dollar sent today is still worth a dollar when it's received in real time.
“I don’t have an inside track, but I fully expect that the Federal Reserve will think about ways where FedNow and digital currency can somehow converge at some point – where those railway tracks get used for both vehicles,” he said. “I’m a huge fan of turning cash and checks into digital currency. If it is regulated and controlled and managed in the right way, it could be hugely successful.”
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