As the double-digit growth of online spending has retailers and brands jostling for market share, companies are pouring money into improving the shopping experience to retain loyal customers while wooing new ones.
These investments include payment technologies as well as omnichannel solutions to support curbside pick-up. Here, John Pitts, head of policy for Plaid, a technology company that enables consumers to securely connect their financial accounts to innovative financial applications such as Venmo, Stripe, Affirm, Afterpay and Shopify among others, discusses what’s behind fintech investments in retail as well as some of the trends triggered by the COVID-19 outbreak.
WWD: What’s driving investments in fintech right now? And how is COVID-19 impacting investments?
John Pitts: The COVID-19 pandemic accelerated changes we were already seeing, but instead of happening over five years, they occurred in a matter of months. As stores and malls closed, paying with cash disappeared, and people generally felt uncomfortable leaving their homes, it became more important than ever to meet customers where they were. For the companies most successful at this, it often came down to adjusting the type of financial products used for payments in order to make people feel comfortable supporting the small businesses and brands they loved, in a safe way.
A recent survey commissioned by Plaid reported that 73 percent of people in the U.S. use fintech. Spurred in part by logistics of the epidemic (cashless payments, no bank branches open), the move to digital financial services has accelerated new ways that retailers and e-commerce players can reach consumers.
As more people spend time online, we’re seeing retailers invest in new ways to acquire customers specifically to make the checkout experience a lot easier. For brick-and-mortar retailers, we’re seeing investments in contactless payments and/or curbside pickup point-of-sale systems that allow consumers to make purchases without physical contact. For online commerce, we’re seeing retailers explore new ways to make the checkout experience a lot more delightful and fast.
Retailers are investing in fintech like buy-now-pay-later and/or split payments to improve customer experience. Several of our customers are doing this, most prominently Shopify.
WWD: What trends do you expect to see in fintech post-pandemic?
J.P.: In short, consumers who moved from traditional financial services to fintech aren’t going back. Our survey also revealed that, as a result of COVID-19, more Americans are using fintech apps and services to manage their money. For example, 69 percent of Americans view fintech as a financial lifeline during COVID-19. The survey also found that 80 percent of Americans say they can now manage their money entirely without a bank branch, instead favoring digital solutions, and more than half of Americans say they use fintech more now than before the pandemic.
These are all trends that are foundational to the growth in digital financial services over the next year and into the future, and we expect a boom of new technologies and companies that help small businesses grow and adopt to focus on providing a great experience for their customers.
WWD: What are some of the policy issues that need to be addressed as fintech investments grow, and these technologies get increasingly embedded in our lives?
J.P.: We need to prioritize open finance policies moving forward. People should be able to control and access their own data wherever it lives, and they should be able to choose the fintech apps they want to help their lives. For small businesses during the pandemic, access to all their data will facilitate the best digital management tools possible, beyond just payment accounts and transactional banking.
Regulators and policymakers can lead this charge today by establishing a data access right for individuals and small businesses.