The Innovations That Hit, Missed and Need to Hit Reset
April 4, 2022
For so many cutting-edge financial innovations like buy now, pay later (BNPL) and crypto, the jury is still out. It can sometimes take years to understand what has staying power and whether it is truly delivering impact for consumers or businesses.
But modern digital account issuing stands out for its quick uptake and deployment; its success is easy to see all around us. Nearly any consumer-facing app can now create an account capable of taking a deposit or making a payment. Seemingly overnight, it has made every company into a FinTech company, with insurers, challenger banks, retailers and others offering online wallets, cards and more.
The unintended consequence of this “hit” is that it has also made evident the need for a “reset” in traditional money movement technology. Each of these news issuers is now realizing that if they want these newly created accounts to become primary accounts for a consumer or small and medium-sized business (SMB), they need to solve for money flows — both in and out — in a digital world.
The ability to easily fund an account from any form factor, including checks, cash and digital transfers, is table stakes. They must also enable the ability to move, send or spend that money — instantly and securely — beyond just a card swipe through features such as pay anyone P2P, disbursements, bill pay or me2me transfers.
Without these capabilities and the ability to control the fraud associated with money movement, all managed in a way consistent with consumer expectations for convenience and confidence, a new account is simply another login that will fade away over time.
For many of these new account issuers, their short-term answer is to embed a company like Mitek for check deposits, do a deal with a free ATM network and then connect directly to one of the card networks’ push payment APIs. But this limited functionality runs the risk of disappointing consumers, especially when bad actors take advantage of the situation, and the issuer is forced to restrict the availability of services to a small percentage of their customer base.
Today’s consumer is conditioned to expect choice in all things, and issuers must allow for that by including ubiquity and choice in money movement along with speed and safety. On the inbound side that might mean instant access options for funds received on checks or the ability to instantly transfer money in from another account. On the outbound side, it should include the ability to move funds to another app or to originate payments digitally from within the app without requiring a new sign up.
To effectively serve these very modern consumers, the reset for issuers is to embrace the modern concept of money mobility: the ability to move money in or out, from and to all form factors, simply, safely, and with choice.
But this reset comes with some big risks. Companies that attempt to build it themselves or stitch together one-off service providers or capabilities limit their ability to control bad experiences and fraud because they lack market-wide visibility and a cross-functional network effect. Using multiple APIs and developers to achieve connectivity to accounts sounds easy, but once the money starts flowing, the red lights begin flashing.
That’s because without the proper controls in place or visibility across today’s vast ecosystem of endpoints, it’s easy to fall victim to fraudsters. Offering instant inbound funds from any modality can be risky and when money is being instantly disbursed, there is often no way to claw back fraudulent funds or payouts.
For new issuers, the next year is going to be a critical one as they come to understand the need created by their newfound capability, and then determine the best path and partner to manage the risk, fraud and operational support required for money mobility.
Companies that do this right stand to benefit in a big way. Proper money mobility capabilities will result in highly engaged and loyal customers, earning issuers top of wallet status. For 2022 and beyond, money mobility will be the new “sticky.”
CEO at Ingo Money
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