In this episode, Clayton sits down with Lisa Shields, FISPAN’s Founder and Chief Executive Officer, to discuss the one thing she would go all-in on if she ran the bank. With a focus on the customer experience, Lisa dives into the ways in which a bank can remain at the center of the trust relationship, while still providing customers with an enhanced, embedded banking experience by utilizing other third-party apps. She gets into what is possible when looking at a contextualized banking future, and what needs to be done in order to get there. Don’t miss this episode with Lisa Shields, listen below.
What led you to this journey?
I started my financial services career about 21 years ago in payments, helping an early online merchant process credit cards as an engineer. I fell in love with payments mainly because I saw a problem with it, and went on to found my first company which was a global, low value payments B2C called Hyperwallet. It serviced the gig economy for large multinationals that was purchased by PayPal in 2018.
Over the course of running that business and talking to customers, I came to realize that bank products and services, their underlying payment rails, underlying cash management and loan services really are at a competitive advantage in terms of product capabilities in respect to what a full fintech might be able to offer. But with the same treasury services that these banks are able to offer their business customers are at a massive disadvantage with respect to the customer experience that they can support.
After my first exit from Hyperwallet, I took some time to think about the state of play between banks versus fintechs, APIs, and open banking, and thought there was a real opportunity in the market to take the underlying capabilities of the bank and enable it with new channels and new software experiences to add on those delightful user experiences and accessibility, and that's what we're aiming to do with FISPAN. As of October 2020, FISPAN is just over four years into a journey of helping treasury Banks enable ERP and accounting systems as a servicing channel.
What was different about how it felt then versus how it feels today?
There has been a complete 180-degree change. At the turn of the century, there were some fintechs starting to compete at B2C, and this has always been pretty competitive, but then there was a change where we started to see fintechs sitting on top of banks, and relying on banks for network access, yet competing with banks for the last mile (the customer-facing application).
In the year 2000, there was an antagonistic relationship between fintechs and banks, there were all sorts of security and other business model considerations that were behind that. But over the past decade, that's really changed, and what we see now is an absolutely collaborative attitude by both parties. What hasn't changed, is that there are still underlying market realities that make it difficult for banks and fintechs to partner. It's taking a while for the reality of this attitudinal change to manifest itself in any actual solutions for customers.
What do you believe is the largest headwind for that change?
I'll answer that in a different way, the biggest tailwind is customer expectation. Customers are demanding it, and so banks and third parties are really having to work hard to figure it out. That's what is driving the change. The headwind in my view is the existing infrastructure and modes of engagement between banks and vendors. There is an excruciating process for becoming onboarded and actually being able to touch bank systems and bank customers. At FISPAN, we power through all of that, but in a way, it’s still only for the funded and already successful. It still acts as an impediment for banks trying things out with smaller earlier stage fintech partners.
On that note, what would you do if you were sitting in the big chair, and took over a bank tomorrow?
If I ran the bank, the first thing I would do from the 30,000 feet view, is to double down and have everyone in the organization become aligned on the inevitability of embedding banking being the primary service channel for our customers. What I mean by that is banking as a part of another digital experience. Banking is part of buying a house, B2B transactions, having a new trade partner, etc. What I think is inevitable, is the primary point of service for banking and financial products won’t be a bank’s application or a banks’ branch or mobile app, I think that understanding that as a CEO of a bank that this is going to be the future and plotting about how I can actually still stay engaged with my customers and have them value my brand.
Innovation starts at retail, and demand stems from retail experiences, but the evolution of it is inevitable, and it’s coming faster than ever. We see examples of this with Amazon, starting to embed financial services within it’s services. Rather than this enhanced personalization being manifested itself through a bank trying to collect more and more data, it will arise through the delivery of financial services through a personalized set of applications and experiences, not through a broader initiative of the bank itself.
Think about walking into a bank branch, you would normally only have to do this when you can’t accomplish something online. The online bank branch will eventually be the equivalent of that in the future (whereby if the customer cannot accomplish a banking activity through the connected app, that would be the time they have to log into their bank portal). The challenge is to figure out how to accept this embedded service delivery through applications and properties and experiences that I as the bank don’t directly control, but still imbue my brand, and my brand promise. That is where I would focus my research dollars and partnership considerations.
Do you think I lose my share of margin? What is the dark side for the bank?
I’m not speaking for all banks, but for the ‘bank I’m running’. I don’t think it’s always true that by embedding, I’ve lost my relationship with my customer outside of the embedded touchpoint. Using Amazon as an example again, as the dominant financial service, it’s the trust relationship that’s going to be stronger than my bank than any one service I choose to use for convenience. By accepting and embracing personalized delivery through apps, and looking at it as an opportunity to engage with my customers, but still be in that position of trust, is what’s going to anchor that customer to my bank in the long term. My people and my digital assets don’t become lost or subordinated in my world, they become more important.
I would use this COVID interlude to repurpose my customer facing assets (my people) and digitize them in their role to act as product and service stewards. I would embed my people inside those experiences. For example, think of an embedded loan offer, I would make it easy to conjure up a bank representative, or invite them in near real-time to engage with the bank separately, or as a companion. The challenge is to figure out how to quickly convert people from being served through face to face interactions to digital interactions.
How would you prioritize what a bank would need to do?
I would embrace openness and let the market expose itself. I would double down on only owning the user experience in one place. Owning that user experience when it comes to authorization, authentication, and control of the places my customer wants to make my service available. My approach would be to aim my resources at how I could allow any or all of the channels to be chosen by my customers while I still provided the management and control to my customers. In other words, an API programme, that was underpinned by a rock-solid application that I control that let’s my customers pick and choose where they want it to be available.
What would a bank do to be a central trusted arbiter of data?
I don’t think it’s the job or role of the bank to be the arbiter of where the data should be. Their role should be to let the customer decide where it should be. But, as a customer, I should always feel that the bank has my back. What I mean by this is for the bank to manage risk, but proactively put me in a position of control over my own data and any transactions that I undertake. I would put my engineering and product dollars around building a model that was distributable.
Can you differentiate between embedded banking and open banking?
Embedded banking is made better by open banking, but is not reliant on it. A bank can make many relationships with embedded banking like the kind that FISPAN supports, without necessarily having a true open banking programme. I define open banking as- anybody can come and join the developer program at the bank and get access to meaningful financial services and offer them up to customers without a bank explicitly ticking the box saying yes or no.
Where we are today at FISPAN is explicit integrations with explicit platforms, ie, accounting systems and ERPs. If open banking was mandated, anybody could develop an app. Embedded banking is made more fulsome through open banking, but isn’t reliant upon it.
What was your first job?
Scooping ice cream at Baskin and Robbins.
What was the moment you knew you were all in on payments?
Once you’ve founded a company and take ppl’s money. When I was all in on payments was well before I started any company. Most people understand payments from a basic perspective, but when I saw the payments value chain laid out in front of me, I was hooked. I found the interplay between players very fascinating.
I just couldn't believe it was that complicated, and I felt I could make it better. But one thing I will say is that I didn’t let ignorance stand in the way of enthusiasm at that point!
What was the dumbest thing you’ve ever done that turned out to be a great idea?
Re-using the existing payment rail for something that it had never been intended to do. Using it for person to person transactions, turned out to be a very dumb idea because it created antagonism between my fintech and the banks- they ended up turning us off! Why it turned out to be the greatest thing I did, is because it forced me to understand the underlying risk models of the bank, and actually design a process that was mindful of them. Building on top of existing capabilities in a way that was never anticipated by the architects of those systems. It might seem dumb at the time, but down the line, it leads the way on what is possible.
Listen to the full episode on Apple Podcasts, Spotify or by visiting the If I Ran the Bank website.