By Viveca Y. Ware
As we move full throttle into the first quarter of 2020, evidence abounds that payments will be a prominent topic of discussion in Washington. From concerns about Libra to the development of the Federal Reserve’s FedNow real-time payments settlement service, policymakers are poised for action on behalf of their government, business and consumer constituents.
With that in mind, ICBA has staffed up our payments prowess, with the announcement that Deborah Matthews Phillips, has joined as senior vice president of payments and technology policy. Deborah brings breadth and depth of experience in payments strategy, market intelligence and product development, as ICBA works to advance key policy priorities in Washington and help our members navigate this fast-paced environment.
I recently sat down with Deborah to get her take on this dynamic industry and areas to watch. What follows is an excerpt from our conversation.
What do you feel is the primary payments priority for community banks in 2020?
Every bank needs to develop and deploy a digital payments strategy this year if one isn’t already in place. It sets guideposts for how to address competition, innovation and a host of critical issues by providing a framework to prioritize payments decisions, among other business objectives. Having a strategy in place also ensures that a bank’s payments business remains relevant as a continued source of revenue.
What, if any, do you see as new payments opportunities?
The rich data that comes with a payment provides a personalized picture of customers’ spending habits, pay periods, preferred merchants and much more. Leveraging contextual information to customize offerings—specialized rewards, personalized programs and new product development—sets a bank apart and positions the bank to grow organizational revenue through deeper relationships with existing customers.
As payments continue to evolve, what fraud prevention approaches should community banks look to deploy?
In today’s threat environment, community banks must ensure that they’re monitoring transactions across channels, business lines and organizational areas to catch an early glimpse of an anomaly. Community banks should also consider investing in enterprise risk management systems for a more holistic approach to combatting increasingly sophisticated attacks.
Customer education continues to be critical as well as customers represent the first line of defense against any attack. Arming customers with the latest technological tools, such as cardholder controls and alerts, also helps bolster banks’ ability to fight fraud.
How do you see payments playing into the bank strategies of the future?
When thinking of the future, the needs of the emerging customers must also be considered. Research reports that by this year, Gen Z—or the Centennials as they’re now being called—will make up 40 percent of all U.S. consumers, with $44 billion in annual purchasing power. What’s more, within the next five years, they will be the fastest growing generation in the workplace and marketplace.
They expect a digital-first, relationship-centric banking experience. While they are digital natives seeking the ease and simplicity of mobile interfaces, digital money management, conversational banking and cardholder controls, they also want the ability to come into the branch. In fact, 20 percent report that they visit branches weekly—more often than their Baby Boomer counterparts.
Fortunately for community banks, this combination of high tech and high touch falls directly into their value proposition. So, leveraging that unique differentiator and marketing to this audience today will bring in new, important relationships that will serve community banks well into the future.
There’s no doubt that payments will have a profound impact have this year. With so much happening, Deborah will be providing additional insights as the industry speeds ahead. In the meantime, buckle up. We’re in for an exciting ride.
Viveca Y. Ware is group executive vice president, regulatory policy at ICBA.