CTV20081 Chase/Forbes Payment Insights Webcast

FINAL SCRIPT

WILL THOMPSON

Senior Vice President of Insights and Strategy

Forbes Media

I'm Will Thompson, senior vice president of Insights and Strategy at Forbes Media. And we're here to talk today about a study and a survey that we did together with JPMorgan of 300 global executives to look at the future of digital payments. Now, when you think about digital transformation, probably the first thing that comes to your mind is not payments, but it should be because payments are the essential underpinning of a truly cohesive digital customer experience.

WILL THOMPSON

And so when we surveyed 300 global executives, you know, we found that 45% of them saw frictionless, customer-centric payment experiences as being the top priority, you know, followed by, you know, 42% saying that we needed to really get this across multiple channels. And we'll dig into that more as we talk. But something's holding that back because while payments are a cornerstone of a digital customer experience, that ain't the only thing. There are so many different technologies that need to be integrated and cohere-- in a reasonable way, and be done in a compliant way.

And this creates a lot of difficulty-- in terms of actually operationalizing these insights. We also need to think about not just the-- the experience but what can transaction data do for our businesses. And so one of the top things that we found is it can reduce fraud, and you can actually, you know, maximize revenue-- by using this data to more smartly position yourself. There's also the ability to use this to lean into disruptive digital innovation. And we found that about a third of the executives we surveyed were planning to do-- scan and go business models from a retail standpoint within a couple of years.

And finally, this is about maintaining best in class digital capabilities-- because without this key building block-- you're gonna find your wall might collapse in an earthquake. So what I'd like to do today is to introduce our-- our speaker here. Ryan Sparks is the managing director and lead-- of Merchant Service's digital transformation-- and expansion at JPMorgan.

CHAPTER CARD GFX:

IMPACT OF COVID-19

WILL THOMPSON

So, Ryan, we did this study prior to the COVID pandemic and one of the things that we say here at Forbes Insights is that-- the pandemic hasn't necessarily changed anything so much as it has accelerated a lot of pre-existing trends. And I'm wondering if you can start by weighing in on what are some of the things that our survey found that you think, you know, this pandemic validated, and what are some of those things that are moving faster than they otherwise would have been?

RYAN SPARKS

Managing Director and Head of  Transformation and Expansion

J.P. Morgan Merchant Services

Thanks Will. Great to be here to speak with you today. I think you're right in the way that you describe-- COVID-19's impact in-- in this space. Certainly it's just accelerated secular trends around payment technology and transformation. There's different, you know-- different verticals across retail, and different business models that just their-- and their sales have changed, but I think that the trends that we're gonna talk about are consistent. One is the-- the almost explosion of ecommerce. It was a gaining trend, you know, double digits growth over the past decade, certainly. Now we've seen some-- some retailers experiencing greater than 100% growth in the last three months in ecommerce channels.

And so businesses that had been reluctant, or didn't necessarily need to open an ecommerce channel, that immediately changed overnight, and so it became existential for them. The second is at a point of sale the-- the rapid increase and adoption of contactless payments. It's something that's been around in-- in Europe for quite some time and just starting to get adoption in the US, but a tap and go model, or using a wallet, something where you're not actually physically contacting, or changing money over with-- the person at the point of sale, again-- very rapid uptick in the technology.

Third-- we've seen-- and this was, again, a secular trend that was really growing-- Australia with one of these models-- northern Europe and others-- but the buy now, pay later model, so Klarna, AfterPay-- Affirm. Some of these technologies are-- are taking off-- more rapidly, and-- and that's probably as a result of, you know, both less access to credit, and people wanting to save and use cash a little bit more.

And then finally more of an integrated omni-channel retail experience. So something you would experience as order online, pick up in the store, the curbside pickup models with retailers, many restaurants that probably didn't accept anything but cash or card at a point of sale before moving to more of an app or online based checkout experience prior to going into the store. So just a few of the trends that we've seen, but certainly those were all things that were underway already. So kind of a-- just a-- again, an acceleration of things that we're-- we were already seeing.

CHAPTER CARD:

FRICTIONLESS CUSTOMER EXPERIENCE

WILL THOMPSON

Right, and there's this-- there's a unique thing about payments in that-- people are going to use and accept a form of payment that other people use and accept. And so, you know, even though-- like, if you go to China it's practically impossible to pay with a credit card if you want to. They-- they don't even know what cash looks like anymore over there. But when it-- over here, we've taken so long to-- to ditch our-- our cards, or with their chip, or whether they don't have a chip, because they always sort of worked well enough up until now that we didn't need to kind of go through that mental anguish of try-- (LAUGH) of trying a new way to do things.

But like you point out, like, health and safety circumstances have forced a shift to what is actually a more frictionless and easy way, that we probably should have been doing to begin with, and so I'm wondering if you can speak to, like, how is it that we cannot just have this be, like, a blip, but something of a fundamental reimagining of the way that payments should work in a frictionless way within these-- the broader digital customer experiences and real world customer experiences?

RYAN SPARKS

It's a great question. And it's interesting you bring up China. I think there's interesting models all over the world with different forms of payment-- and then the different consumer experience that has just been-- you know, habituated into what payments look like in different cultures, and then in ecommerce. And so you've seen this disruption just rapidly change that. And so generally these things don't change unless there's an-- there's a-- marked improvement in the consumer/customer user experience. So, for instance-- you bring up China. China did not have a credit card based-- point of sale service and it wasn't really embedded in the culture pre-- you know, kind of the explosion of mobile.

WILL THOMPSON

Totally.

RYAN SPARKS

And so when payments took off, the first form factor that made sense was a digital wallet, especially f-- because there's a lower capex up front and it just became the user experience. And so the-- the economy has gone that way. There's other places around the world, in Germany, for example, where bank transfer is kind of the-- the key user experience that consumers are re-- are used to. And then in the US certainly the card is. But these things didn't change before because there was nothing broken with the swipe. Consumer fraud wasn't necessarily bad enough that it forced consumer change.

You know, American economy loves using credit cards both on the consumer and on the business side, and then you have kind of the introduction of EMV that was largely seen as a negative user experience because it increased the time. You-- enter COVID-- along with new technologies and all of this changes. It's just kind of-- you know, it's in-- you know, the-- the-- the-- the need because of a health concern to the force the consumer experience to change-- you know, kind of became the catalyst. And it's been a long enough period of time now and people have seen benefits of these new technologies-- that these things will stick around.

WILL THOMPSON

Yeah, and-- and it might even be that as experiences evolve, you know, whether it's at a restaurant or-- or wherever you're-- you're going to be, you know, the-- the whole experience may start happening in the background of payments. It will become invisible to you-- and-- and-- and require a lot less mental labor. But in order to get that kind of, you know, thought free, you know, frictionless payment experience, you need to do a lot of actual work of connecting a lot of different technologies. And I'm wondering if you can give some advice to-- those who might be listening and thinking about how can they do this, talk about what JPMorgan has done-- in-- in terms of your-- your micro services ecosystem.

CHAPTER CARD:

API ENABLEMENT

RYAN SPARKS

So there's a few things. I think it all starts with the understanding of-- what it is to have an API driven interface for our technology.

WILL THOMPSON

And-- and why don't you just step back and explain what an API is in case some don't get it.

RYAN SPARKS

So-- API is an application programming interface. Essentially it is a simple way-- you know, with a-- with a light set of software that you can integrate into another set of services, into your services. Anecdotally think it of-- think of it as plugging in a USB or HDMI cable from one service to another so that it's connecting two different platform services. It's the way two different-- you know, s-- computer ecosystems talk to each other.

WILL THOMPSON

Got it.

RYAN SPARKS

And so by doing it that way-- there's flexibility. Think about just with your USB cables, or you can plug it into this device, or that device, and you can create a network yourself. And so the simpler way to integrate payments-- or integrate any ecosystem from our end allows you to take one service such as-- accept a credit card payment, void a credit card payment, change my user profile, just that one service, and plug it into your application stack in a way that's flexible, and it gives you the creativity on your side to build the experience that you want either yourself or using a set of third parties.

And so this creates a very flexible ecosystem. And so you imagine ride sharing apps-- or-- or kind of the sharing economy in general, and what the payment experience feels like on those different types of platforms, and they've integrated those APIs in different ways. And so you're going through the user experience on one end and the payment might be invisible. It might be just when you update your card. It might be an e-mail later, or a notification on your phone. But it allows the business to make those decisions. So that's one of the things that we're doing. You mentioned micro services based architecture. It's-- you know, it's kind of becoming the standard in cloud commute-- computing and other places, but it's a collection of, you know, a couple hundred different small applications that each do one thing very, very well.

And so if you think about it almost like Lego blocks, you can assemble them in, you know, almost an infinite number of ways, but each one of those things by itself is very good at performing that one task, and then when we make changes it's just updating that one small piece. So it allows us to be more adaptable. It allows us to, you know, update the system faster. It allows us to make local customizations while having kind of a global consistent customer experience.

CHAPTER CARD:

J.P. MORGAN DIGITAL INNOVATION

WILL THOMPSON

And how does that make your customers move faster?

RYAN SPARKS

Well, it allows us to do a little bit more customization faster on their end. It allows us to make changes and roll changes out without them having to update their system as robust. And so a lot of it is just about adaptable-- adaptability and flexibility on our side. But it-- it kind of translates to them as well. And so they see better reliability, better up time, better resiliency in the platform-- and it just kind of comes through in a smoother experience.

CHAPTER CARD:

GLOBAL E-COMMERCE BEST PRACTICES

WILL THOMPSON

And so one of the things that we were talking about a little bit obliquely before was this idea of the global customer experience. If you're an international company-- you-- you-- when you operate in these different jurisdictions not only are there different payment preferences, and culturally accepted norms, there's also different desires when it comes to messaging and other parts of the experience. But at the same time we've got to find a way to create some coherent, global view of the brand-- experience that a customer has with us. And so maybe can-- can you talk a little bit about how to think about creating an approach to payments that preserves a unified customer experience, but that-- that nevertheless is differentiated for regional needs and desires?

RYAN SPARKS

That's a great question. I-- and-- and it is about the balance. And so I mentioned a couple of the-- you know, I've mentioned Klarna, Konbini is an interesting example in Japan-- there are real time payments examples emerging in Europe, and in Brazil, and in Australia. And really what you said is the key. It's how you create a global consistent brand experience. Again, ride sharing apps are-- are a great place to take a look at this where somebody that's traveling, or even somebody that's local, they-- they show up and they understand how to use the application. It feels like the same product. But you're not selling to the local market if you don't accept their normal-- their-- their local norms, and their customs, and then the r-- and the means of payment.

So Konbini in Japan is about 30% of all sales are Konbini which is a digital application where you use something in ecommerce or another methodology and then you go to your local convenience store and pay in cash based on a receipt. And that model exists in a few markets around the world and it's just critical in order to understand how that works so that you think about it both on the fraud and risk side on the front end of your application, and make sure that you're-- you have the consumer experience all the way through the backend. Real time payments and bank transfers in Europe are another one. It's just expected that if you wanna do business this is how we exchange stored value on one side for a good or serve on the other.

But at the same time that same ride sharing app wants to maintain that same consumer experience. So, again, the things that we just talk about with the micro service based architecture which allows us to do those local customizations at a relatively low cost with an API integration, allows a customer or one of our clients to access those micro services globally to do business in that local market. So those are s-- just some key pieces of the functionality.

CHAPTER CARD:

VALUE OF TRANSACTION DATA INSIGHT

WILL THOMPSON

One of the things I'd like to speak about is you-- you have this really great insight-- that payments are the one aspect of customer experience that are consistent across every interaction between customers and companies, at least those interactions that result in revenue. And so wherever you are, whatever is going on in the world, that is the one commonality. And I'm wondering if you-- if you can speak to-- if you can s-- if you can expound a little bit more on that because I-- I-- I think people in the C-suite tend to have this idea that payments are something that can kind of be delegated off to think a-- there's somebody else to think about. And-- and especially, like, in the context of that, talk about how the data from that one centralized, you know, touchpoint is so essential for actually, you know, being more efficient and creating competitive advantage.

RYAN SPARKS

So it's-- it's a great point, Will. I think if you step back and take-- and-- and just look at it for a minute you'll see probably the most basic, certainly one of the three most basic financial insti-- like, instruments as a payment. The idea that you can store-- value on one side, and then exchange it for a good or service on the other, every single merchant that's doing business today with any consumer, every single time that you exchange that value for something that you've created, or a service you're gonna provide, there's a payment involved. And so as a CEO, CFO, you know, head of customer success, whichever the title is, you should be intensely aware, and-- infatuated with that experiences. Because it's the last moment in which a consumer or customer-- is going to make a decision about your good or service and whether it's worth the money that they've saved. And that happens every single time.

And so there's a lot of business models that are evolving around that interaction. And so-- you see a rise of kind of subscription based models, or a card on file model. And those things, to make that experience delightful-- and-- and something that isn't part of-- associated with the good or service. So just as an anecdote around that-- all of us kind of have this experience, so certainly in the-- in kind of the American market of having a great meal, and we get to the end, and there's this awkward time where you don't know when to ask for a check, how long it's going to be for that person to come back, like, that's the payments experience of that-- of that meal, and that's the last impression you're gonna have with that restaurant before you leave. And so-- and think about all the different models that go around that. But let me get to your other point around data.

Again, this happens every single time that you transact with one of your customers. And so there's data in a bunch of different vectors that are important, so certainly the consumer experience itself. Did the ch-- did the cus-- did the customer choose this, did they choose that, especially on an ecommerce platform when you can start playing around with your own-- checkout experience itself and do kind of A/B testing. Did they like this, did they like that, which one had greater throughput, which had, you know, better-- results around card abandonment, those sorts of things.

And then there's cu-- then there's customer retention. And so, again, for those subscription-based models, authorization rates, and, like, having high authorization rates are kind of-- kinda the key metric for them. Did-- did this card go through at this certain period of time? Why did it fail? Was it fraud? Was it just-- did we add a piece of data that was wrong? And being able to kind of break all of those different pieces down and understand exactly what's critical there.

I think-- you mentioned fraud and that's kind of a-- an obvious use case but there's also friendly fraud and p-- can-- you know, did things go through that, you know, my nine year old, you know, bought too many online game add-ons, those sorts of things where it's a good card, but it was a bad experience, like, how can you-- how can you understand that data? And certainly-- every business is concerned about lower costs. And so payments are expensive and how can I do this at a lower cost way-- whether it's routing to debit or whatever.

CHAPTER CARD:

MAINTAINING AND SERVICING THE PRODUCT

WILL THOMPSON

Is that really the way though that businesses should be thinking about it? Should-- should it really be, like, payments should be the low cost provider or-- or, like, talk about that.

RYAN SPARKS

Well, I think it's end to end. And so the low cost provider might not be the best financial option for the company. And so the lowest cost provider might have higher authorized-- authorization rates, or the lowest fraud, or whatever. But it's when you look at all of that data end to end, do I have the consumer insights, am I getting the best authorization rates, are those balanced against the fraud rates? And then can I manage costs? What's-- what's good or bad? And it's not just cost of payment itself but it's cost of maintaining your connection to the ecosystem, and costs with the card brands, and so it's an end to end piece.

And that's one of the things, you know, certainly we pride ourselves in, in being able to see the whole ecosystem data.

WILL THOMPSON

Yeah, and one thing that I'll point out is that one of the things that we see at Forbes Insights is business for so long has been transactional, you know? And-- and even when you talked about a customer relationship you didn't view it as a contiguous relationship, you viewed it as a series of transactions over a point in time that were somehow connected because they were from the same person. You know, but as we shift to, you know, subscription models, where someone has to agree, you know, without thinking to-- to let you, you know, take money out of their card every week, every month, whatever it is, it's about building trust, you know? It's about building a genuine sort of relationship. And the kind of data that helped you understand the inventory that you needed to build-- is not the kind of data that's going to help you understand the relationships that you need to build. And those are going to be the key to actually moving your business forward and adopting some of these new-- disruptive business models.

WILL THOMPSON

So, Ryan, before we wrap up, I just wanna see if you can give us one parting word of wisdom for all of those CEOs out there who may be saying, "Look, I'm underwater here. I need to get up for air before I can think about innovation, and transformation, and, like, I-- I just need to get on dry land." Talk-- give them some advice for how they should move forward.

RYAN SPARKS

You know, it's a big question Will. I think as far as payments go-- just going back to what we were talking about, that this is a critical interaction with you and your-- and your customer base, continuously, as you pointed out, whether it's a relationship you're building through a subscription model, or that time-- you know, when you're exchanging at each different point, that transaction for stored value for a payment. So my advice is that you're underwater, and you're following the same methodologies that you have been, it might be an innovation in one of these areas, whether it's trying a new method of payment, trying a new business model that connects to a subscription service, moving from transaction to a relationship based model with your clients, it could be one of those things, that not just gets you back to where you were but pushes you forward.

Because this is going to be, you know, what we talked about in the study, an evolutionary bottleneck. I was talking about payments at the time, I think that that applies to kind of broader models, especially in kind of the mid-market, small business space, as we kind of adjust to whatever will look-- the world will look like after this. So this is the time for innovation because there is no going back. And so I think look at these technologies to see how you can help move forward.

WILL THOMPSON

And not only is it the time for innovation because there's no going back, it's the time for innovation because people are finally open to change. When we are stuck in our patterns, when we are, you know, going through our day to day, we are neurologically not open to new ideas, new ways of doing things. But when our pattern gets disrupted, either because we move to a new state, we start a new job, or there's a global pandemic, you know, (LAUGH) all of a sudden, you know, we are far more primed from-- from a neurological standpoint to modify our behavior and to change. So if you are trying to meet your customers at a point where they're ready for change, where they're ready to be worked with in a different way, then we ought to be, in the business community, ready to change, and ready to work with them, and to meet their needs.

WILL THOMPSON

GRAPHIC: Forbes.com/insights

So thank you so much for your time, Ryan. Now, if any of you out there would like to learn about the study that we did together please visit Forbes.com/insights for more information, and Ryan, if they want to learn more about JPMorgan, what do they do?

RYAN SPARKS

GRAPHIC: JPMorgan.com/merchantservices

Thanks, Will, it was a great conversation. For more information about JPMorgan and our offerings they can go to JPMorgan.com/merchantservices, and they can also see the insight study and client-- testimonials there.

WILL THOMPSON

Perfect. Thank you so much Ryan.

END CARD