Banking relationships are the critical underpinning of any payments transaction, especially for those payments that move cross-border. For global payments platforms, like Flywire, global banking relationships are an integral part of its work facilitating the payments of Global Citizens, those individuals who are taking money from one country and moving it to institutions located all over the world.
In the final installment of Flywire’s podcast series on meeting the payment needs of Global Citizens, Flywire CEO Mike Massaro shared his perspective on the banking industry itself, its impact on cross-border businesses and where he believes digital banking evolution is headed next.
The banking industry is at an interesting crossroads.
With advancing technologies and rapidly changing consumer behaviors, banks are facing a serious ultimatum — adapt or get left behind.
New players in the industry are delivering on the convenient and digitally powered experiences that consumers are looking for when it comes to their finances, forcing banks to push the innovation envelope themselves or to find the right partnerships to help them get there.
Either way, it’s a transformation that will take time.
“I don’t think banking is going to change overnight,” Massaro said. “I think the banks have established a level of trust, and consumers are pushing them to innovate when maybe they weren’t innovating fast enough or aggressively enough before.”
Despite the availability of the digital devices and capabilities revolutionizing the way consumers bank, there’s still a surprising demand for banking branches.
The fact that a physical presence is still important to some customers can make the digital push a bit more complicated.
Massaro agreed that there will always be certain scenarios in which consumers want to interact with a person, whether that be via phone or in-person at a branch location.
It’s a similar situation that’s been seen in retail — while there’s the option for shoppers to not have to ever step foot in a store to complete a purchase, many still have that desire to go in-store for certain things or services.
“There’s a combination of purchasing — people are doing online and offline in a hybrid way, and they look to that for banking, too,” Massaro said.
As consumer behavior continues to change, he explained, banks are faced with the challenge of “trying to understand that customer and [figuring] out if their footprint is too big [or] not big enough in certain areas and [making] those smart investments.”
The rapid growth of globalization and the resulting increases in international payments have caused many banks to take a closer look at the payments systems they are using to move money across borders.
Massaro explained that the greater attention to global payments has shed light on the fact that many systems banks have used in the past just aren’t working.
The international wire system is a great example. It’s been plagued with issues for a long time and hasn’t been a great experience for those sending or receiving payments. These insights, Massaro said, have caused many banks to look at these types of systems and determine how they can be better.
Now that banks are jumping on the innovation bandwagon, many are looking to players in the cross-border space that are innovating on existing payment rails in an effort to improve the payment experience for all stakeholders.
The result is that partnerships are becoming more commonplace.
Massaro noted that, in some cases, banks are looking to innovators, like Flywire, to pull them along, whether it’s through deeper integration into some of their systems, better pricing or just establishing strategic partnerships.
Not too long ago, the industry was buzzing about the introduction of digital currency and its potential to flip the financial industry on its head.
Though digital currencies haven’t quite been the overnight sensation they were predicted to be, Massaro said many venture capitalist and industry players are realizing there is interesting technology there. While technologies like blockchain and shared ledgers can be used in banking and financial transactional systems, it’s unlikely that these will cause a huge shake-up to the industry like people initially expected.
But he did point out that private implementations of these capabilities will take some of the banking systems to the next level.
“I still think it’s going to be a lot of time and hard work to go from initial concept to actually driving markets,” Massaro explained.
“There’s a lot of interesting things being done out there, but it’s still a technology looking for some business applicability.”