If you’ve attended any payments event in the last year, chances are you’ve come across Suresh Vaghjiani. Suresh has over a decade of experience in the payment space and is currently Managing Director at global issuer processor Global Processing Services (GPS). He was recently named a ‘Payments Hero’ by the EPA, recognized for his contribution to the industry by receiving both the ‘2017 Industry Achievement Award’ in the annual Pay Awards, ranked in the ‘Payments Power 10 List 2017’, and was voted No.1 in the recent 2017 Prepaid Power 10, a top 10 list of key influencers in the payment industry.
Most recently, Suresh has been selected to join the Lord Mayor’s business delegation to the Southern Hemisphere in February 2018. The Rt. Hon. Lord Mayor of the City of London is the international ambassador for the UK’s financial and professional services sector whose overseas visits offer a unique opportunity to gain access to key international decision-makers in government and business.
Suresh’s recent speaker engagements have sung the praises of prepaid cards and the ‘Paytech of Things’ space. I was keen to get a sense from Suresh of what value he perceives in these more-maligned areas of the payments industry. It seems that, for Suresh, rather than niche or novelty solutions, these are the areas we should be looking to for the future of payments.
How do prepaid cards provide solutions for the unbanked? Is this an issue in our part of the world?
It’s very easy to get hung up on terms and perceptions of prepaid. Most people tend to think of prepaid as some kind of sub-prime product for people who are unable to obtain a credit card. But let’s face it, with a ‘credit card’ you are spending borrowed money that you may not have or will need to pay off later, with a ‘debit card’ you are paying at that moment, whereas with a ‘prepaid card’ you have already paid in advance onto the card. It turns perceptions on its head!
There is a very good reason that prepaid card can service and help the unbanked but not necessarily for the one you may be thinking of! When you apply for a bank account or a credit card almost all banks in the UK will do a credit check to see if you present any risks and are deemed worthy to receive their services.
In comparison, to apply for a prepaid card there is no credit check run on you. They will however, verify your identity and your residential address to ensure that you are ‘who you say you are’ and reside ‘where you say you live’. They will validate this information using the latest technology available to provide customers with speed, convenience and a seamless customer experience.
Some may have misconceptions towards the prepaid card and think it falls short when compared to the services that the incumbents provide. In reality, prepaid cards provide more added advantages than one may think and could compete toe to toe with banks in terms of the services they provide including fully functioning bank accounts, direct debits, etc.
For example, you can’t become overdrawn or go into negative balance with a prepaid card. This is not a technological limitation but more to do with the fact that the issuing banks that provide the card may not have the relevant licenses required to be able to offer loans nor lines of credit. Rather than a hindrance, this has been one of the main reasons that have pushed so many cardholders to prefer using prepaid cards which gives them more control on their spending and not allowing them to get into debt.
With prepaid comes more security; if you lose your card, the risks are reduced compared to that of your traditional bank card. Fraudsters can only try and access funds available on your prepaid card, not a penny more. However, even this type of incident is unlikely to happen as the technology behind most prepaid cards would allow the cardholder to instantly freeze the card protecting all the funds on the card.
In parts of the world such as in Africa or Asia, there are populations that are not eligible to have a bank account; however, these regions experience the strongest growth in mobile adoption, and above all will gladly invest in a smartphone. In this case prepaid then becomes the easiest way for them to have a payment solution that gives them access to alternative-like banking solutions like a normal bank account.
Addressing the issue of the unbanked is not only in developing countries. In the UK, we have close to 1.5 million people who do not have a bank account. Prepaid is also emerging as the solution to financial inclusion.
Do you think there is still a stigma attached to prepaid cards? If so, how is this being addressed?
Prepaid continues not to be perceived by many as a main stream financial product, but in reality, data from card schemes are showing the rapid adoption of prepaid is outstripping both that of debit and credit – and has been doing so for the past five years.
It does not help either when new policies are released, such as the European regulator deciding that all cards need to clearly state if it’s a debit card, credit card or a prepaid card, so that merchants can identify cards.
This is an example of regulators making decisions without using common sense. When was the last time you handed your card to a cashier and they actually examined the card to determine which type of card it was? Merchants are not concerned about whether it’s a prepaid card or not, and the only types of merchants to whom it does matter are those that need to ensure they have access to funds higher than the balance, like car hire companies, or even hotels as they don’t have the ability to access more funds than the available balance with prepaid cards.
Some people may decide not to apply for a prepaid card due to the stigma attached to them, but when you have the opportunity to have a card that hands you the solution to many of your problems – from helping you save money, giving you ease of transfers and purchases in multi-currencies and reduces lost time in managing company expenses – I’d say it’s a no brainer! Accept it, take it, embrace it and use it!
The prepaid technology is behind most of today’s well-known innovative Fintechs out there… Maybe it’s time to change the perceptions towards prepaid and give it the merit it deserves!
Do you see much opportunity in the ‘PayTech of Things’ market, beyond novelty?
People need to understand what we mean by the term, the ‘Paytech of Things’. It’s simply the ability to make any object into a payment device, from a reusable coffee cup to your key ring. Transforming an object that is part of your daily lifestyle and providing added convenience by giving that object the possibility to make payments! You would not consider them wearables so the term is to encapsulate that anything could become a payment device.
We have already seen examples of this with Transport for London last year when contactless Lucozade bottles were given out to commuters going home. It was a seamless marketing promotion in which payments technology was used to cross boundaries.
How will banks seamlessly integrate with the everyday life of consumers in the future?
The banks of tomorrow will be those that have realised the importance to stay relevant by either evolving or collaborating to become a true service provider in a way that millennials are expecting, and those that will anticipate the banking needs and wants of the rising Gen Z.
Let me explain – we are going through a phase where information is available at our fingertips and this information is constantly changing in a way that we use services to inform us of things. Tomorrow’s bank will be a learning bank.
This has increased the competitive playing field and the banks that will survive this era are the ones who will fully embrace the new emerging technologies to use these to their advantage. For example, by creating personalised services for their customers through chatbots or using AI to create a personal financial advisor. In addition using machine learning to assess a person’s spending and recommend saving tips or budgeting advice based on personal financial data.
Banks that will make it through will be the first to understand what we are still all waiting for today – ‘a financial friend’. Someone to help us save money and budget, warning us when we are over spending, or when we may run out of money before payday, informing us that we are paying too much for our insurance or utility bills and most of all advising us as a ‘friend’ by providing us with alternatives. The bank of the future is my friend who I trust to save me money and that’s a bold statement based on what people think of banks at the moment.
Post-Open Banking, do you think the fintechs or the banks will come out on top in the long run?
It’s an interesting question, because historically banks had never felt threatened by the Fintechs. They would consider them insignificant to what the big banks represented, even to the point of being slightly arrogant or complacent towards them – but this was the very catalyst that made the Fintechs thrive.
This has definitely changed today, I would love to say that the Fintechs will come up on top but the reality is that both the banks and Fintechs need one another. They represent a symbiosis of very different types of organisations but with complementary strengths. They will only be able to win if they truly collaborate.
The banks have the industry reach and customer base to scale, whereas the Fintechs are agile innovators and tech disruptors providing amazing user experiences that customers love. If they work together they will both succeed.
If they do not collaborate, especially now with the open banking framework coming into force earlier this year, we will see a shift, in which the traditional banks will lose direct access to the end customers and will become wholesale banks providing services in the background. It will be the Fintechs with whom the end customers will interact with as they will be plugging into the open banking interfaces of the traditional banks. The traditional banks will hate this as they will lose the ability to upsell services. Collaborate and innovate to evolve, do nothing and they will become a commodity.
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