As one of the banking industry’s largest vendors, FIS says it might be well suited to help banks effectively navigate the world of fintech.
I recently caught up with Anthony Jabbour, the company's chief operating officer. The conversation turned to and stayed on fintech competition. As Jabbour sees it, the number of banks that use FIS puts it in a position to leverage that power in taking on changes in payments, lending and other parts of the banking ecosystem.
The following is an edited transcript of that conversation.
How concerned are your customers these days about fintech competition?
ANTHONY JABBOUR: Fintech is a top-five concern for our customers in all countries. When I was in Singapore, we were talking about disruption. There was a banker there who said, “The most disruptive thing about disruption is all the discussion about disruption.” Everyone has an opinion on it. Every board member has a smart phone and they’ve used Apple Pay with it. We’re trying to say, how do we look through the clutter and find opportunities that make sense for everyone? There’s a whole grouping of fintechs that are beneficial to both the banks and the fintech companies, and then there’s a whole other group of them that are competitively positioned to banks.
Everyone is worried about what happens in three years. Will the rules change, will revenue drop? My brand is prominent right now with this fintech. In three years, will my brand get dropped off? The banks want to move forward, but they’re all afraid if they do, are they helping create their demise? What’s the longer-term impact if I work with them, and how can I trust that they’ll continue to do what they said they were going to do?
When Apple Pay came out, banks weren’t running to Apple Pay because they thought it would drive new streams of revenue for them. A lot of them did it because they were afraid the bank across the street would offer it and they would suffer by not offering it.
One thing we’re trying to do that’s a little different is, if we believe there’s value for our customers, we want to have the disruptor connect to the FIS network and have our banks connect to it from the FIS network, so we can leverage our banks’ negotiating power with the fintech.
We want to be in a position to enable our banks to say, "If you change the rules we’re going to disconnect you, fintech, from the FIS network." Which will disconnect you from thousands of banks. Then the banks wouldn’t worry about, the bank across the street may have it, if I don’t, will I be in the newspaper?
Are there fintechs with whom you have established this kind of relationship already?
There are some we’re having discussions with right now, I can’t share their names.
Is this model a little like working with a data aggregator where there’s a connection whereby the banks share data with fintechs?
That could be a candidate. That one has been out there for a long time. We have a number of clients that use Intuit, we’ve got a broad partnership, they use us for bill pay. This is more focused on the new wave of tech companies that’s coming that can drive new revenue streams. Then you’re going to help that fintech grow its customer base by enabling it to partner with the bank and that’s where we want to make sure their success doesn’t come at the expense of our banks’ success.
What are some of the types of companies you’re thinking of—alternative lenders, PFM app providers, billing companies?
Payments would be one. The banks that I speak to look at lending and they say banks lost the lending franchise and exclusivity and other companies popped up over the years and took a major portion of that. And they look at payments right now and they feel strongly they can’t lose the payments franchise.
Are you thinking of companies like Amazon and Facebook that have been inching their way into payments, or brand-new startups that have something different to bring to the table?
It’s a combination of both. I was speaking to a super-regional bank’s board of directors. And they had just signed on for Apple Pay and they were complaining how it was a one-pager with no negotiating, they seemed upset that they did it. I asked them, why did you do it? And they said didn’t want to be the bank that didn’t offer it. It hit me in that meeting how it played out with Apple Pay. So had this been in place, for example, and we connected Apple Pay to the FIS network then to all of our banks and Apple Pay changed in three years’ time, we’re a large company, we have a large population of bank customers where we have deep partnerships, and we also have large banks as part of that. How do we leverage all of this bulk for our clients, to help them stay relevant, compete and grow? Because our business model is predicated on their success.
Have you spoken to Apple?
No. We’ve connected many banks to Apple Pay. We created special programs to say if your bank wants to come on at the end of June, last week of July, we gave them a simple, one-page online think, click and accept. But we didn’t have this formalized, in a way. It was what I’m thinking we need to do for the next one. And Apple is a fintech disruptor, but they’re different than the others, they’ve got a compelling pull, unlike a lot of other fintech companies. It’s on the phone, they control it.
Banks felt railroaded by Apple to accept Apple Pay quickly and they felt they had no control. A group of banks in Australia tried to push Apple to give them access to its hardware and let them build their own wallets. They took this to a regulator who sided with Apple. So it seems like it’s a great idea to take the dominant position over a company like that, but in reality, it’s pretty hard. Are you confident that if it had been you in a situation like that, you would have prevailed?
No. Apple would be a bad example. To their credit, they have all the consumers already. That’s what you’re starting with. If you look at Australia, there are only four major banks there that cover the vast majority of the population. I would have gone down a path of saying I choose not to integrate with Apple Pay. I would have turned to a QR-based mobile wallet that works at these merchants so all customers can use a mobile wallet if they want, versus trying to get access to the Apple hardware devices. I’m not surprised they lost that battle in court. I would have fought a different fight.
Do you think that banks can take back market share in U.S. person-to-person payments with Zelle?
We think that has a lot of potential. We offer Zelle to our clients. I believe we can create a capability for P-to-P for our banks that would be better than any fintech’s because we could make it real-time and it would be accessible from an ATM. I could send you money and you can go to an ATM with your mobile phone and withdraw the cash without having a bank account. We could also tie it with prepaid cards, so instead of me sending you $500, I could send you a $500 Home Depot gift card as a housewarming gift. It’s P-to-P, but it’s more thoughtful because we’re integrating it with prepaid.
What does it take for a payment platform to work? It takes brand recognition so people know it exists, and it needs ubiquity, it needs to work in every place you would want it to work. It’s never about the technology. I like with Zelle that banks said look we have to find a way to solve the brand issue, and if we all use the brand Zelle, that’s going to help. And I think it will.
Generally, can banks stay relevant in the face of fintech competition?
When you look at companies that have been disrupted, it’s rare to see them strike back. The record labels never struck back at Apple when it came out with iTunes. The book stores never struck back at Amazon when they started selling books online. Even now you look at Apple with Spotify music streaming, Apple’s been so late to the party on music streaming and they’re so far behind. You look at banks and with a lot of the surveys we do with clients and customer video testimonials, one of the common things we hear from them is, “If my bank offered this, I would use it.” Banks can’t rest on their laurels and think this will last forever. It’s highly unusual to have clients who will wait for you to get it and come back to you.
I could see that argument, but you could argue that banks are late to this P-to-P payment party and that PayPal’s Venmo is the clear leader. Do you think the Zelle brand can win hearts and minds?
Without question, banks are late to a number of capabilities. When you look at P-to-P, Venmo is the brand, it’s a verb. Whether or not banks can catch up with Venmo comes down to how compelling they make the offer, what else they can wrap around it, how much do they ultimately invest in it. What I know is, if they hadn’t pursued Zelle, they would have fallen further behind.
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