Between the development of new technologies and the proliferation of providers, today’s fintech market is as competitive as it’s ever been. The industry is showing signs of an upswing, with Q1 M&A activity at its highest level in over two years—a sign that coffers are full and businesses are hungry to make strategic investments.

Fintech companies face a whole host of imperatives to succeed in an industry abuzz with excitement—enhance their value proposition, stand out from the crowd, grow profitable revenue, protect margins, and retain existing customers. How can they get it all done?

It all comes down to value-added services. Fintech firms should thoughtfully explore ways to introduce add-on offerings to existing accounts. At the same time, they must consider how sales, marketing, account management, and customer success come into play, as well as the resulting impact on sales compensation. In doing so, organizations can unlock cross- and upsell opportunities, provide superior customer experience, and drive enhanced productivity.

What Are Value-Added Services?

To put it plainly, value-added services are those that extend beyond the core offering to deliver additional value. For fintech organizations, these add-ons might include ecommerce support, loyalty programs, affiliate marketing, or cross-border payments.

Value-added services are key because they open the door for more business. Whether through upsell opportunities like user base expansions, increased consumption, and term extensions or through cross-sell plays like product launches, they can make all the difference for organizations hoping to build lasting success.

Sales teams have an instrumental role in a company’s strategy here. By showing customers all the capabilities their organization has to offer, sales reps can help evolve their firm’s positioning from a point solution—marked by singular or disparate services—to a platform play, featuring a comprehensive breadth of interconnected services. Platform structures help fintech leaders kill three birds with one stone: drive higher net recurring revenue (NRR), grow market share, and retain existing business.

As leaders look to offer value-added services, they need executive alignment on which specific services should be prioritized. Then, they must align go-to-market (GTM) execution based on the priority and development stage of each of the new offerings. Leaders might consider questions like the following:

• Which add-ons are more mature and will be core to our GTM strategy?
• Which offerings require building buyer awareness with a “first wave” of customers?
• What best aligns with our company’s growth plan?
• What will position us most advantageously?

Firms must assess the market readiness of any proposed value-added service before moving forward.

Once the specific value-adds have been selected, it’s time to integrate them into the GTM strategy. Next steps include documenting use cases, outlining the buyer journey, building an expansion pipeline, and integrating with formal customer success initiatives.

Coverage and Job Roles Must Be Tailored Accordingly

With a clear strategic priority and goals set for value added services, leaders must align the GTM coverage model and rules of engagement across roles to ensure successful execution of the strategy.

Fintech firms must determine who will serve as primary point person to drive the new services, both to existing clients and new logos: a core rep or a specialist rep.

• Core reps are responsible for winning the account and selling the flagship offering. They tend to know the client best and have a very strong rapport. They possess excellent generalist knowledge of the firm’s primary offerings, including up- and cross-sell opportunities.
• Specialist reps have—it might go without saying—specialized knowledge beyond the capacity of the core rep. They can dive into the weeds to serve as the expert on a specific value-added offering. They might have joined the firm during an acquisition, or they might have been engaged when the value-added service was first launched.

It’s imperative for fintech leaders to work with their teams to determine the best arrangement for each segment, region, or use cases to pursue as a priority. The GTM coverage model and buyer journey must be tailored carefully based on whether a core rep, specialist rep, or combination will be involved.

If both a core and a specialist rep are serving an account, they need a playbook and formal rules of engagement that specify respective responsibilities and customer touchpoints. Who handles pre- versus post-sales motions? Who handles day-to-day communication? Often, the core rep is well suited to serve as a quarterback in these arrangements, but this might not always be best. What’s most important is that the core and specialist reps are in symbiotic lockstep to keep the account running smoothly.

For these arrangements to be successful, compensation structures must also be proactively determined to maintain alignment with the team’s desired behavior.

Sales Compensation Drives Productivity

There are several ways to leverage compensation as an incentive to drive focus on value-added services. Answering some key questions at the onset can help steer organizations toward the compensation lever that will drive maximum productivity among their reps.

• Is there a clear consensus within the organization on the importance of selling and promoting value-added services?
• Where is the value-added service in the product lifecycle management process?
• Is it mandatory or optional for core reps to sell value-added services?
• Can the organization set an accurate quota for value-added services?
• How much is the organization willing to invest in compensation toward value-added services?

Firms that wish to offer even more incentives for selling value-added services can use a credit value adjustment, a rate value adjustment, or an add-on bonus—but they must be sure of the budget for doing so. Additionally, penalties such as hurdles may be put in place to further encourage meeting these quotas.

Fintech leaders must be sure their compensation plan changes will drive the desired behavior among sellers. Organizations must thread the needle so their compensation plans are sufficiently motivating while still falling within the guidelines of the company cost model.

AI Has a Role to Play, Too

Artificial intelligence (AI) and machine learning (ML) can help fintech firms get up and running with value-added services as well. AI/ML can comb through troves of data to help fintech firms identify priority expansion use cases and sales plays for value-added services. This analysis allows organizations to easily and effectively grow in the ways that make the most sense for themselves and their customers.

AI can also be used to optimize forecasting and quota setting, resulting in compensation plans that are more data-driven and successful.

Value-Added Services Are Key to Differentiation

Fintech companies that effectively incorporate value-added services into their GTM strategies will ultimately strengthen their relationship with clients, enjoy enhanced competitive differentiation, and achieve stronger profitable growth.

By focusing on applying the right coverage model and compensation plans, fintech firms can ensure any new or enhanced offerings are launched smoothly. Prioritizing value-added services as key components of sales teams will help organizations drive long-term success.

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A group of U.S. senators released a letter demanding that failed fintech company Synapse give its customers access to funds frozen since its mid-May bankruptcy.

Due to inaccurate record-keeping and noncompliance by Synapse, it’s estimated that consumers could be owed between $65 million and $96 million. The four senators placed nearly equal blame on Synapse’s partners and venture capital investors, saying they all misled customers into believing Synapse was a safe alternative to a bank.

The collapse of Synapse has raised substantial concerns because consumers increasingly rely on fintech solutions to bridge the gap between traditional and digital banking. Since fintechs aren’t regulated like banks, some critics argue that their security measures are a mirage.

“It’s a bit of an over-reach to paint fintech as an industry with the same brush,” said Don Apgar, Director of the Merchant Payments Practice at Javelin Strategy & Research. “In reality, there are many different business models of how new tech companies are making banking services easier to access by consumers.”

A Glaring Weakness

Banks must conform to strict FDIC guidelines, but the trade-off is that consumers’ money is protected in case of a bank failure. Even though banks have been partnering with fintechs for years, the FDIC places the onus on financial institutions to hold their partners accountable.

As the Banking-as-a-Service (BaaS) model has evolved, many banks have relied on fintech partners to share the compliance burden. According to the senators, that is a glaring weakness in the new model that, in this case, cost consumers dearly.

For Benefit Of

After Synapse lost its largest customer, Mercury, the company found itself in a cash crunch that ultimately led to its bankruptcy. However, since all customer funds were held in FDIC-insured banks, it shouldn’t have caused an issue for consumers.

Unfortunately, the company maintained customer funds across three banks, and funds were held in commingled For Benefit Of (FBO) accounts. The banks relied on Synapse to provide the accounting, or manage the subledgers, to know how much money belongs to each consumer.

“The core issue is that Synapse wasn’t maintaining accurate subledgers and Evolve failed to exert sufficient oversight over the process,” Apgar said. “Eventually a large discrepancy was uncovered where the FBO accounts at Synapse’s banks, primarily Evolve, held approximately $85 million less than what Synapse’s records showed. That led to accusations that Synapse was commingling consumer funds with operating funds and using the money to keep the company afloat after losing its top customer.”

Forensic Accounting

Since Synapse is now bankrupt, there is no money to hire a forensic accounting firm to reconstruct the subledgers and find out what happened. FDIC insurance won’t cover the shortfall because one of its requirements is customer funds must be held in an account under their name. Commingled funds in an FBO account are ineligible for insurance, and until more details are uncovered, the FDIC doesn’t know who to pay to cover the shortfall.

While Synapse’s failure should be a cautionary tale for all parties in the nascent BaaS model, it doesn’t mean the model is broken. Fintechs play a critical part in digitizing and democratizing banking services and as the world becomes more cashless, fintech services are sometimes the only way for customers to buy groceries, pay for parking, or order a ride-share.

“In summary, while the banking-as-a-service and fintech business models are new, they are not necessarily risky on their own,” Apgar said. “Ultimately, Synapse didn’t do what they were supposed to do, and Evolve was not exerting sufficient oversight to catch it.”

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Organizations turn to fintechs for payment solutions that are as efficient and seamless as the transactions they facilitate. However, behind these smooth interfaces lies a labyrinth of challenges. Security concerns, regulatory compliance, and constant technological upgrades are just a few of the hurdles fintechs must navigate to provide what appear to be simple solutions. For clients, the expectation is straightforward: a payment solution that works flawlessly. The intricate complexity involved in meeting this expectation, though, often goes unnoticed.

It’s easy to make something simple complicated. But it’s difficult to make something complicated simple. In a recent PaymentsJournal podcast, Kieran Draper and Tom Jennings, the U.S. and EU/UK CEOs of B4B Payments, and Brian Riley, Co-Head of Payments at Javelin Strategy & Research, spoke about the strategies fintechs employ to ensure their solutions remain both effective and invisible to the user. Highlighted is the delicate balance between simplicity and complexity, especially in the world of international embedded payments.

Fintechs Deal With a World of Complexity

Ideally, payments get processed with the press of a button, no different from dialing a number and knowing, without having to think about it, that the right person will answer. Customers making payments expect something simple and effective.

But it’s a challenging environment for fintechs right now as they try to deliver that experience, with their funding drying up and regulators coming down on them. On the upside, it’s also a vibrant market. Demand is expanding, as more and more businesses seek to make payments across geographic boundaries and across platforms.

“For a fintech like us, there are a tremendous number of things that we need to take into consideration,” Draper said. “The transactions need to be secure, we have to be compliant in multiple jurisdictions, and the solution needs to be auditable. The trick is to try and figure out how to present a solution to these businesses that shields them from all of this complexity.”

One area with great complexity for companies is offering services across borders and the need to juggle varying regulations and payment methods. To take one example, B4B works with maritime businesses that make and receive payments in multiple currencies, preferably on local rails to keep the costs down.

“Sometimes a ship won’t be allowed to leave port, for example, until they’ve made a payment,” Jennings said. “They need to provide the proof of payment. Traditional banks don’t provide you that information in an easy way, but with our platform, you can just download proof of payment and show it to the port authorities, and the ship can leave the harbor.”

This is the essence of “embedded finance”. When they subscribe to a payment solution, they can embed it into their experience to the point that it becomes transparent to anybody who has to interact with it.   

Keeping Up With Regulations

Another layer of complexity comes from the increasingly stringent anti-money laundering (AML) laws, consumer protection regulations, and information risk management requirements. Navigating these regulations is a daunting task for clients. In the U.S., multiple layers of federal and state AML laws create a challenging compliance landscape, while globally, each country has its own specific AML requirements that continuously evolve. Managing these diverse and ever-changing regulations is an overwhelming burden that clients cannot be expected to handle on their own.

“The market is moving so quickly that you can’t even imagine where we’ll be six years from now, let alone six months,” Riley said. “Regulators have to be more conservative, because they don’t know where the markets are actually going. And then you have business risks that move quicker. Fraud increases when criminals can move quicker than large institutions. Just being able to keep the pace becomes essential.”

“The bar is so high now,” Jennings said. “It’s not just what’s current, but it’s also the horizon planning. You’ve got Dora in Europe, you’ve got PSD 3 coming up, and we’ve got no doubt new AML directives around the corner. It’s constant.”

To help address this, B4B has built a single global platform that is common across all territories of the world, with a single global data processor and a single set of APIs. That allows customers to subscribe to one solution, one set of services that gives them access to tremendous capabilities in the background.

Payments From Every Direction

B4B’s channel partners are typically very well established in their own industries and have tremendous experience, but they are also busy and expanding. They are typically good at managing their core business and managing their own customers. But they’re not adept at managing the payments or banking functions that they need to operate smoothly.

Universities are a great example. The payment functions that go with a university’s basic functions are incredibly complicated. Tuition is coming in directly as well as through multiple government sources and scholarships. There’s a whole infrastructure for things like tickets to football games or baseball games, with maybe a different one for the arts department. The best strategy, and the best use of resources, is to let the university target what it needs to do and let the back-office functions get optimized.

“They can very easily find justification for working with a fintech like us,” Jennings said. “Both the students and the administration can see exactly in real time how their money is being spent. It’s convenient for the students, because they’re not very good at handling physical cash and loose cards and that kind of stuff. And we can manage all of that.”

Simplifying financial services is vital to retaining customers. Organizations of all sizes and services must make the complexities of payments invisible for their clients—no matter how complex those things are for the back office.

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Digital banking has become an expectation for consumers, prompting banks to partner with fintech companies to meet this growing demand. In the race to stay competitive, however, some banks forged relationships that left them vulnerable to security and compliance risks.

This was evidenced by recent consent orders the FDIC entered against Ohio-based Sutton Bank and Piermont Bank, which is headquartered in New York. The FDIC’s concerns center around the possibility of illegal or illicit financial activity arising from third-party relationships.

Both banks were asked to revise their anti-money laundering/countering the financing of terrorism (AML/CFT) programs. They will have to conduct thorough risk assessments to ensure their fintech partners adhere to security and compliance requirements.

Sutton and Pierman are just two banks among many who offer Banking-as-a-Service (BaaS) in collaboration with fintech companies. The FDIC’s findings are alarming because banks and credit unions doubled their investment in digital transformation from 2021 to 2022. It’s estimated that banks had an average of 2.5 fintech partnerships in 2021, and credit unions had 1.5.

Unsafe and Unsound

The consent order against Sutton Bank cited unsafe and unsound banking practices and “violations of law or regulation alleged to have been committed by the Bank, including those related to the Bank Secrecy Act.” Sutton Bank leadership didn’t confirm or deny the allegations.

The Piermont consent order accused the bank of failing “to have internal controls and information systems appropriate for the size of the Bank and the nature, scope, and complexity of its Third-Party Relationships.”

While there’s no doubt that fintechs offer banks the ability to rapidly meet the growing digital demand, the challenges the partnerships pose have been well-documented. By their nature, fintech companies are prime targets for cyberattacks, and since they aren’t banks, they aren’t required to meet stringent regulatory requirements.

Reevaluating Risk

The soaring proliferation of partnerships between banks and fintech companies isn’t likely to stall based on the FDIC’s actions. Banks will continue to look for ways to navigate the ever-changing waters of digital transformation.

The consent orders will shed light, however, on substantial risks that can arise from banks’ partnerships with fintech players. Because fintech companies have their own initiatives and incentives, their actions may not always align with the bank’s best interest.

Regulatory agencies have long been concerned about the relationships, and they are increasingly under the microscope.

As Comptroller of the Currency Michael Hsu recently stated, “We will not… lower our standards, create a special regime, or take an overly expansive view of banking to entice new entrants or in the hope of bringing a particular activity into the bank regulatory perimeter.”

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ExxonMobil Corp. has expanded its contactless fueling options by joining the Car IQ Inc. payment network for fleet vehicles. Car IQ allows fleet companies to use its mobile payment platform to more efficiently buy fuel and other services.

Car IQ Pay, which works with Visa Fleet, is accepted at more than 12,000 Exxon and Mobil stations. Its services focus on fueling large and small truck fleets, available at more than 8,200 locations with retail diesel pumps and another 800 with commercial truck diesel pumps.

ExxonMobil has been growing within this space for some time now. In 2020, the company announced that it had introduced a dual function pay option via NFC (near field communication) or a QR code. That technology allows a driver to transact fuel payments through a smartphone.

ExxonMobil also teamed up with Fiserv to initiate gasoline payments through Alexa and Amazon Pay. For vehicles equipped with Alexa, drivers can give voice commands to select a gas station pump and authorize a payment. The “Alexa, pay for gas” program went live in September 2020. In addition, Android and iOS users can scan a QR code or tap their device to the Google Pay tag at ExxonMobil stations.

Challenges for Car IQ

The alliance with Car IQ Pay is a logical extension of this strategy. With Car IQ Pay, fleet members can connect their vehicle directly to the pump without needing a credit card, PIN number or vehicle odometer reading. As the Car IQ website describes, the payment app uses vehicle data to create a unique ID that connects directly to the merchant to initiate transactions. The Car IQ wallet adds vehicle data to the transaction, enabling merchants to provide real-time offers and personalized rewards for fleet operators and drivers.

Analysts say that while Car IQ has done a good job of expanding its network, it still has a long way to go to compete with major credit card issuers.

“In order to compete with the major providers, Car IQ will need to continue to expand its acceptance network,” said Ben Danner, Senior Analyst of Credit & Commercial at Javelin Strategy & Research. “Bringing on titans like ExxonMobil is a great addition and will give drivers the added flexibility of contactless payments with a big opportunity to reduce fraud and disputes. However, traditional fleet cards have significant rewards perks and rebates, which may be enough to keep fleets from ditching their plastic cards.” 

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HSBC’s announcement of Zing, a cross-border transfer app that will launch shortly in the UK, shows one of the world’s largest banks wielding its muscles once again. HSBC becomes the first major legacy bank to compete in the steep-trajectory consumer cross-border space.  

Zing will be available to UK consumers through Apple’s App Store and Alphabet’s Google Play, and is eventually expected to roll out to other countries. It is specifically designed for users who do not have an HSBC account.

Zing is licensed as an e-money institution by the UK’s Financial Conduct Authority. Therefore, Zing funds are not considered bank deposits and are not insured by the Financial Services Compensation Scheme, the UK’s version of the Federal Deposit Insurance Corp.

Making Payments Global

For users of the service, the primary question around Zing is how it might make their lives easier. “For consumers, Zing would offer an additional cross-border payment option for remittances and retail purchases,” said Elisa Tavilla, Director of Debit Payments at Javelin Strategy & Research. “Although P2P mobile payment apps are common in many global markets, most only support domestic payments. Super apps, such as AliPay+ and other mobile wallets, are also making it easier for tourists and local businesses to transact in foreign currencies.” 

There’s also the larger issue of what this means—not just for HSBC, but for all banks considering entry into this space. Zing puts HSBC in competition with fintechs like Revolut and Wise, in a market that banks have heretofore conceded to so-called super apps. Zing follows on the heels of the HSBC Global Wallet, which was announced in May 2021. HSBC’s Global Money, introduced in 2020, offers existing customers a fee-free currency service.

“This poses another interesting twist in the race for market leadership in cross-border services,” said Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research. “Correspondent banking is protecting its turf, but fintechs are nipping at their heels. Banks are sprouting up their own fintech divisions to remain relevant—and the card schemes are claiming that they already do this, they’ve done it for a long time, and they do it better than anyone.”

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Two major fintechs made moves towards initial public offerings this week, foreshadowing what may be a robust year ahead for the industry. Clearing firm Apex Fintech said on Tuesday it has confidentially filed for a U.S. IPO. Meanwhile, Danish fintech Pleo has appointed a new chief financial officer, in a signal the company is readying itself for its own IPO.

Founded in 2012, Apex offers digital clearing, custody, execution, and routing solutions to financial institutions. This would be the second time that it has embarked on the IPO process. The firm had hoped to go public in 2021 via a merger with the special purpose acquisition company (SPAC) Northern Star Investment Corp II, but the deal fell through.

Apex CEO Bill Capuzzi had said at a conference last September that the fintech firm might consider an IPO if the markets improved. “The path for us, if the markets come back around over the course of the next 24 months, maybe we’ll take another run at going public,” he said. Apparently, he’s seen enough strength to warrant an offering.

Pleo, which has been called Europe’s premier spend management platform, recently achieved unicorn status, reaching a $1 billion valuation in just over six years. While the company says it is not in a rush to go public, a new CFO often indicates that its accounting and compliance teams are also ramping up in preparation for a stock offering.

Jeppe Rindom, Pleo’s CEO, told CNBC that “no definitive plans have been set in motion.” But he added that it’s “only prudent” to start thinking about the question of an eventual IPO, which could be happening by 2025.

Other IPOs in the Offing

Digital payment processing company Stripe has also filed paperwork showing its intent to make a public offering, with a valuation hovering around $50 billion. No IPO date has been set yet, but the offering has been hotly anticipated for several years now.

Waiting on deck are Klarna, the Swedish online payment services firm, and Chime, a banking platform targeted to younger people. In November, Klarna started the process of setting up a holding company in the UK, which many see as a precursor to an IPO. Chime explored an IPO in 2022 before pulling back, but many stock watchers expect a stock offering in the coming months.

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In this era of digital transformation, the fintech sector has emerged as a pivotal player, redefining the traditional financial services landscape and introducing innovative solutions that address the evolving needs of consumers and businesses alike. The payments segment, in particular, has experienced a surge in demand for digital payment solutions, driven by a combination of factors including technological advancements, changing consumer preferences, and a global shift towards a cashless society.

As a result, fintech companies operating in the payments space have witnessed unprecedented growth, attracting significant interest from investors seeking to capitalize on this upward trend. While the opportunities for investment are abundant, they are accompanied by a set of unique challenges and risks that necessitate a thorough understanding of the fintech ecosystem and a strategic approach to investment.

Payments Opportunities

Let’s dive into a comprehensive overview of the current landscape, highlighting the key opportunities and challenges that investors must consider when venturing into the fintech payments industry.

Growing Adoption of Digital Payments
The COVID-19 pandemic has served as a catalyst for the accelerated adoption of digital payments. With social distancing measures in place and a global shift towards online shopping, consumers and businesses have increasingly turned to digital payments as a safer, more convenient, and efficient alternative to cash. According to a report by McKinsey, the global digital payments market is expected to grow at a CAGR of 12.8% from 2020 to 2025. This surge in demand for digital payment solutions presents a significant opportunity for investors to tap into a market that is poised for substantial growth in the coming years.

Emerging Markets
Developing countries represent a vast and largely untapped opportunity for investment in the payments industry. A significant portion of the population in these regions remains unbanked or underbanked, lacking access to traditional banking services.

Fintech companies are bridging this gap by offering digital payment solutions that do not require a bank account, enabling financial inclusion for millions of people. Moreover, the rapid proliferation of smartphones and internet connectivity in these regions is facilitating the adoption of digital payment solutions, creating a ripe environment for investment.

Regulatory Support
Governments and regulatory bodies around the world are increasingly recognizing the importance of digital payments and are implementing policies to support their growth. For example, the European Union has introduced the Payment Services Directive 2 (PSD2) to foster innovation and competition in the payments industry. This regulatory support is crucial for the development and adoption of digital payment solutions, creating a favorable environment for investment in the sector.

Collaborations and Partnerships
There is a growing trend of collaborations and partnerships between fintech companies, traditional financial institutions, and technology firms. These partnerships enable fintechs to leverage the existing infrastructure and customer base of traditional financial institutions while providing them with innovative payment solutions. This symbiotic relationship creates a win-win situation for all parties involved and presents an opportunity for investors to invest in companies that are well-positioned to benefit from these partnerships.

The opportunities for investment in the fintech payments industry are vast and multifaceted. The growing adoption of digital payments, emerging markets, technological advancements, regulatory support, and collaborations and partnerships are all key drivers of growth in the sector. Investors who recognize these opportunities and strategically position themselves to capitalize on them stand to reap significant rewards.

Payments Challenges

With opportunities, there are challenges to consider as well:

Competition
There are several well-established businesses and recent newcomers competing for market share in the extremely competitive payments industry. In addition to traditional financial institutions and technology behemoths entering the payments market, fintechs are competing with each other in this market. Due to the fierce competition, it can be difficult for investors to choose the best businesses to invest in because doing so necessitates an in-depth knowledge of the market and the distinctive value propositions of each competitor.

Regulatory Risks
Regulatory assistance, while necessary for the expansion of the payments sector, carries a certain amount of risk. Regulations are subject to quick change and regional variation, and businesses may find it difficult to follow new laws. Additionally, there is always a chance that stricter restrictions will be enacted, which could have an effect on the profitability and business operations of organizations in the payments sector. Investors must therefore keep up with the regulatory landscape in the areas where they are investing and take into account the potential effects of regulatory changes on their investments.

Cybersecurity Risks
Due to the payments industry’s growing digitization, cybersecurity risks are increasing. Payments companies are frequent targets of cyberattacks, and any security lapse can have serious repercussions for the business and its shareholders. There is a danger of reputational harm and a loss of customer trust, and responding to cybersecurity breaches can be expensive. Because of this, it is essential for investors to evaluate the cybersecurity policies in place at the businesses they are investing in and to take into account the potential effects of cybersecurity risks on their investments.

Technological Risks
To remain competitive, businesses must constantly innovate due to the quick rate of technological innovation. There is a chance that a corporation will lose money if the technology it invests in becomes outdated. Furthermore, putting new technology into practice might be difficult and not necessarily produce the expected benefits. As a result, it’s critical for investors to evaluate the technological prowess of the businesses they invest in and take into account the potential effects of technology risks on their investments.

Market Adoption Risks
Despite the growing demand for digital payment solutions, there is always a risk that a new technology or product may not gain widespread adoption. Factors such as user-friendliness, security, and interoperability with existing systems play a crucial role in the adoption of new payment solutions. Therefore, it is important for investors to assess the market adoption potential of the payment solutions offered by the companies they are investing in.

Future Perspectives of the Payment Industry

The payment industry is on the cusp of a new era, driven by technological advancements, changing consumer preferences, and evolving regulatory landscapes. Here are some perspectives on the future of the payment industry:

• Cryptocurrency and Blockchain: Cryptocurrencies, led by Bitcoin and Ethereum, have already made a significant impact on the payment industry. Blockchain technology, which underpins cryptocurrencies, is expected to play a crucial role in the future of payments by enabling secure, transparent, and efficient transactions. Central Bank Digital Currencies (CBDCs) are also being explored by various countries as a digital form of their national currency, which could revolutionize the way payments are made.
• Artificial Intelligence and Machine Learning: These technologies are anticipated to revolutionize the payment sector by offering more secure and individualized payment experiences. AI, for instance, can be used to identify fraudulent transactions in real-time, and machine learning algorithms can evaluate client data to present tailored payment options and offers.
• Contactless Payments: Due to the COVID-19 epidemic, contactless payments have become increasingly popular. This pattern is anticipated to last in the next years. More people are anticipated to use mobile wallets, contactless cards, and wearables, enabling quicker and more practical payment methods.
• Cross-Border Payments: The globalization of commerce has led to an increased demand for efficient and cost-effective cross-border payment solutions. Blockchain technology and digital currencies are expected to play a key role in enabling seamless cross-border transactions.

In conclusion, the future of the payment industry is bright, with numerous opportunities for growth and innovation. Technological advancements such as cryptocurrency, blockchain, AI, and ML, coupled with changing consumer preferences and regulatory support, will drive the evolution of the payment industry. However, it is important for investors and stakeholders to stay abreast of these changes and adapt their strategies accordingly to capitalize on the opportunities and mitigate the associated risks.

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Salt Lake City is making moves to establish itself as a fintech hub with the opening of the Stena Center for Financial Technology at the University of Utah, according to the WSJ. The multimillion-dollar education center aims to produce a new wave of employees equipped to work in the rapidly expanding fintech industry.

The Stena Center offers a range of courses, including a minor in fintech. Students also can learn from industry experts through company visits to the campus. Starting January, the center will further support aspiring fintech entrepreneurs by providing venture capital, office space, and valuable advice from seasoned fintech executives—essentially functioning as an incubator for students and recent graduates seeking to launch their own fintech companies. The end goal is to make Salt Lake City a fintech hub—similar to how Boston is a biotech hub and how San Francisco has become the epicenter of the tech industry.  

Building a Base

A growing number of fintech companies have put down roots in Salt Lake City, including Brex, Plaid, and SoFi. These companies join well-established financial institutions such as Goldman Sachs and Visa. While cities like Atlanta and Charlotte are already regional financial centers with fintech ambitions, Salt Lake City’s appeal lies in its lower costs and a burgeoning talent pool, fueled by graduates from nearby universities.

Through the investment of the Stena Center, Salt Lake City is encouraging not only the launch of new fintech startup firms to help position the city as a hub for innovation and technology, but it’s also signaling its position to established companies who may be looking to expand their locations and establish a physical footing elsewhere. Salt Lake City Mayor Erin Mendenhall has been actively working on creating an innovation district downtown that will attract both biotech and fintech companies and has changed land-use laws to facilitate the establishment of R&D centers and lab spaces, according to the WSJ.

As competition among cities and states to become fintech hubs intensifies, Salt Lake City’s investment in fintech education, coupled with its favorable business environment and growing talent pool, positions it as a formidable contender. The Stena Center’s multifaceted approach, combining education, industry collaboration, and incubation, promises to produce a new generation of fintech professionals ready to lead the sector’s growth in Utah.

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Technological advances in the payments industry enable convenient, quick, and seamless transactions. Consumers can view balances, manage transactions, and receive alerts in real time on their banking apps, allowing them to have more control over their finances. But what happens and who do you contact when there’s a problem? Many Cash App users faced this exact question when they discovered duplicate charges on their Cash Card on June 26, 2023. To make the matter worse, Cash App’s in-app and phone support systems were also down on the same day, leaving startled customers unsure where to seek help. 

Historically, most customers have checking accounts and debit cards with their local banks. They could easily visit a branch or call customer service 24/7 for immediate assistance with any account issues, such as a duplicate charge. Today, more fintechs offer similar banking products but without the same level of customer service. Fintechs do not have physical branches and often do not provide 24/7 customer support via phone or chat. This poses a growing problem, considering fintechs are flourishing in the post-pandemic world.

Fintechs must prioritize customer service for their innovative digital banking apps. With over 44 million verified monthly users, Cash App started as a P2P payment app and later added “Cash Card”—a debit card tied to a Cash App account balance. They also rolled out an investment feature for stocks and Bitcoin. While fintechs like Cash App offer a lot of unique and convenient features, they can lack some of the valuable services that traditional banks provide, including human on-demand customer support.  

After an uproar on Twitter from frustrated Cash Card users, Cash App posted a tweet a day later, explaining they had discovered a technical glitch causing duplicate charges. Impacted customers would be notified and refunded. But some damage had already been done in the past 24 hours. Cash Card holders instinctively went directly to the merchants and blamed them for the duplicate charges. The merchants were left with no recourse as their customer complaints soared. One tweet from an employee of a hotel stated, “I have had two guests call because the charge they show withdrawn from their account is double what I charged them. I have confirmed thru CC Processor that I charge the correct amount. Please assist.” Although Cash App later took accountability for the duplicate charges, they did not provide any damage control directly to the merchants with angry customers. Any negative customer experience, especially for merchants, could lead to losing a customer forever.

A Cash Card holder tweeted, “The merchant said that Cash App is to blame, and also that you’ve put out a notice to customers, but I don’t have any such communication.” Cash App left a lot of their users in the dark for an extended period. Customers prefer quick, detailed information when they are experiencing an issue with their account.

There is a lot of room for improvement around customer service provided by fintechs. Cash App failed this week, but this can be taken as a learning lesson for fellow fintechs. Customer service must be improved and prioritized as fintechs continue to roll out new flashy features.

Overview by Sophia Gonzalez, Research Analyst, Debit Advisory Service at Javelin Strategy & Research.

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