Genpact’s Joe Nixon Talks Everything as a Service, BNPL and More
Part of Our Money20/20 Interview Series
By John San Filippo
Money20/20 USA, the fintech mega-conference, was once again held in Las Vegas, this year. And once again, Finopotamus was onsite talking with industry leaders about a wide range of topics. These interviews are captured in this series of articles.
Finopotamus spoke with Genpact’s Head of Fintech Strategy, Credit Cards & Unsecured Lending Joe Nixon about outsourcing various functions, buy now pay later (BNPL) and several other topics.
Finopotamus: Please describe Genpact for our audience.
Nixon: Genpact is an interesting place. Short of having a banking license, we basically operate as a bank, so we serve a lot of different industries. Banking and capital markets are about a third of our business. And we do anything all the way from product innovation and business strategy, all the way through supporting clients and how they target and acquire customers across many different product verticals. That could be automobiles, retail banking, wealth, commercial banking and lending, leasing – those types of things, all the way through providing customer service, collections, end-to-end fraud capabilities.
Finopotamus: How big is Genpact?
Nixon: We're about 120,000 employees around the world. About 25,000 to 30,000 of that is just banking and capital markets. North America, Europe, and Australia are our core markets. And we serve all the way from the biggest banks in the world down to the smaller banks and some credit unions, too.
Finopotamus: Do you consider Genpact a banking-as-a-service provider?
Nixon: Yes and no. If a company wants to outsource a call center or a process, for example, or let's say they're looking to automate or digitally transform anything, or they're looking for better support or help on analytics. We can measure things like marketing campaign successes, conversion rates and those types of things. We really are an extension of a financial institution’s operating model and their business.
It's not quite banking as a service, though in the realm of banking as a service, we are now creating solutions that tie into that. I think banking as a service from a technology standpoint allows any non-bank to be a bank. But to be able to offer a financial services business to the market, there are a lot of things that you need, including customer service infrastructure and if it's a lending business, a collections team, etc. We can offer plug-and-play solutions that bring people, processes and technology all under one roof.
Finopotamus: Do organizations usually seek Genpact because they’re trying to fix something they already have or because they’re trying to create something new?
Nixon: Both. Traditional financial institutions come to us because they’re trying to fix something. Fintech companies come to us because they're doing something new or they're growing very quickly and instead of throwing money at the problem or people at the problem, they're trying to be smarter and set themselves up to be able to enable that scale. But it’s always about putting the right technology and the rights processes in place. That includes people. A bank will come to us and say, ‘We need 500 people to do X, Y, and Z in three months,’ and we'll go out and make that happen.
Finopotamus: What are the most common things you find “broken” in financial institutions?
Nixon: Definitely the origination process, the overall application process. We operate in many different markets around the world and they all have different requirements. Australia is an example. It has much stricter requirements in terms of income and expense verification than they do in the U.S. There's a lot more effort that has to go into getting customers approved and getting them into the product or service. That process needs to be as frictionless as possible.
In terms of back-office operations, typically something is broken upstream in a process. It's really about fixing an end-to-end process. Thinking about automation, we have different AI tools that we can integrate to improve a process. In the lending business, collections right now is definitely a hot topic. As the credit cycle starts to normalize, lenders want to continue to spend as much as they do in terms of operating expense on collections. In other words, they don’t want to add more people, but they want to be able to collect from more people. We can introduce digital outreach capability – the ability to collect via texting or email or push notifications through mobile apps.
Finopotamus: Does Genpact provide these software products or does the company partner with other providers?
Nixon: For the most part, we have select technology partners. However, we do have some of our own proprietary, data analytics in the KYC (know your customer) and fraud space. We have some of our own proprietary technology platforms, but for the most part, we are not a technology product company. That said, we have enough experience to know what good looks like. We bring the right vendors together and implement the solution for our clients.
Finopotamus: Please describe the BNPL landscape and where credit unions might fit.
Nixon: There are two distinct buckets that BNPL providers fit. One is the pay-in-four model, such as AfterPay. They're really a payments platform. They're not even a lender. As far as the regulators are concerned, that's not a loan. The AfterPay payment plan is using a credit card that's not truly a loan; you're just passing the risk onto the credit card issuer.
Then you have companies like Affirm that hold the receivables on their balance sheets. Those are true purchase finance lenders. They're underwriting a real installment loan, holding that loan on their books, capitalizing it, selling it to the wholesale markets. There’s an opportunity for banks and credit unions to plug into these companies as the issuing sponsor.
Finopotamus: Are there other BNPL opportunities?
Nixon: A lot of financial institutions already have their own BNPL in what I call on-card BNPL. Let's say I have an existing credit card with a credit union. I make a purchase just as I typically do, but post-purchase, I go into my credit union’s mobile app, select that transaction and I can spread out the payments on that transaction over six, 12 months, 18 months. That's an on-card BNPL solution, but it's post-purchase.
Some institutions that have strong merchant relationships are currently integrating directly at point of sale. As an example, Citi as an integration with Amazon. If you save your Citi card to Amazon's wallet, when you go to check out on Amazon, there's an option called Citi Flex Pay. The loan is already underwritten; it's part of your credit line, and you can check out using Citi Flex Pay BNPL.
Finopotamus: Would it make sense for credit unions to collaborate – perhaps form a CUSO (credit union service organization) – to bring a point-of-sale BNPL solution to local merchants?
Nixon: Absolutely. To just their community? A hundred percent. The technology is available. For example, Zeta is a next-generation processor for both credit and for debit. If your credit card product is on their platform, you get everything they offer, including on-card BNPL. Their technology is much cheaper and more agile than some of the big processors.
Organizing a CUSO around this makes a lot of sense.