FinTech as a whole, and especially the payments sector, has been disrupted this year – but in the view of Paymentology CEO Shane O’Hara, 2020 has simply accelerated a change that was a long time coming.
O’Hara founded Paymentology in 2015, following experience in the payments landscape most notably at GPS, which was set up in 2007 to cater for a growing number of non-bank card issuers such as travel agents and shopping malls offering customers prepaid cards.
By 2014, this market had changed substantially, and O’Hara felt it was time for a new platform to cater for new complexities. “We set about building a more secure, flexible solution that was capable of dealing with the multitude of products the card issuing community was asking for,” he explains. Paymentology was developed to provide processing solutions for that are not just seamless, but scalable too.
The FinTech soon landed several, mainly non-bank clients across the globe, but it’s big breakthrough came with Revolut in 2017. O’Hara had supported Revolut in his GPS days when it was, as he puts it, “just two guys”. “They were perceived to be this tiny company that may or may not have a chance, but they put huge energy and intelligence into it and have become a huge success,” says O’Hara.
The challenger challenge
Paymentology partnered with Revolut for the more flexible product it needed – and there followed a shift in focus to clients in the banking world. “Banks started to realise they had to follow the Revolut journey, to some degree, and digitise. To do that, they needed a processor to sit behind them,” says O’Hara. Since getting Revolut onboard, the FinTech has supported Standard Chartered in building its virtual bank, Mox, in Hong Kong, and is working with a number of other Tier one and two banks around the globe.
For banks, 2020 brought with it an increased sense of urgency to transform, which has in turn kicked Paymentology’s growth into high gear. “We’re small, lightweight and dynamic so we could react immediately to the pressures that have come to bear in the last year,” says O’Hara, noting that the business was already cloud based.
“Banks are still feeling the pressure to digitalise, and if anything the sense of panic and urgency has increased,” he notes. “Covid will naturally give you a sense of panic to some degree! That’s compounded with the pressure they were already seeing from the challengers.”
A seat at the table
As banks move to digitise, their attention is finally beginning to turn to younger, more agile players like Paymentology. “We’ve got a seat at the table now,” says O’Hara. “A few years ago there was no chance; banks didn’t want to talk to us.”
As if a global pandemic and the rise of the challengers wasn’t enough, banks are dealing with a more complex challenge. “They’re generally connected to old third party infrastructure and it can be very difficult to extract themselves,” says O’Hara. “It’s no good making their own entity dynamic if they’re plugged into other slow-moving entities. They’ve got to do a journey of agility somehow over the coming years to be able to move in a more dynamic way.”
The shift to digital has made good partnership crucial for the big banks and while they might appear to be slow-moving on the surface, there’s certainly a lot of activity taking place behind the scenes. “They’ve been looking at the landscape for a while. They are good at observing and trying to cherry pick what works. They’ve been doing that since 2016 and in 2019 they started to really move – but going forward they will have to adopt new agile mindsets.”
As banks gradually disentangle from legacy partners and re-engage with new, agile FinTechs, the question of resilience and robustness will come into play. “With a FinTech they may love the dynamic but they’re asking ‘can you process a million pound spend in a day?’ They’re approaching with caution, especially as everything banks do is volume based.”
A secure future
Conscious to maintain the trust they have built over decades, banks will always have security at the top of the agenda, which can be an issue when partnering with a new player. Nevertheless, O’Hara says, utilising FinTechs will be a move to better security overall in the long term. “Many banks have sat in a world of perceived security,” he explains. “They sometimes confuse robustness with security… a perception that because they’re connected to a legacy system that’s been robust for 10 years, it must be secure.
“They’re realising that’s not necessarily the case. We’ve seen significant fraud and intrusions in banks around the world over the past three years. That’s because while they had resilient systems, they weren’t secure,” O’Hara adds. “So we’re seeing this transition as banks engage with FinTechs but immediately put them under pressure with respect to security.”
The advantage FinTechs have, says O’Hara, is that they are continually building. “They’re able to build new security processes into their systems from the outset, whereas with a legacy operator it’s really a patchwork – bolting on security to old systems. It doesn’t really work very well in the long term.”
David and Goliath
As much as banks are beginning to recognise the dynamic of smaller FinTech players, there will still be apprehension as we head into 2021. “When you’re a small FinTech, trying to persuade a bank to trust one of its core business elements with you can be a challenge.”
It is a challenge Paymentology will need to face head on, although with every new bank onboarded it does get easier. “We’ve certainly had banks at the table where they don’t really question the volume handling capacity of our systems, but they are concerned with the pure people count. It makes them nervous – will we have people that will deal with their regulatory requirements, daily operational requirements, and so on?”
While Paymentology sometimes still feels the “David and Goliath” aspect of dealing with banks, its journey with banks round the world over the past three years means that is it possibly the one FinTech processor, globally, with the most exposure to retail banking compliance and regulatory pressures. “We’re always mindful of keeping an eye on what’s happening around the world economically. But focusing in on Paymentology as a business, the biggest challenge is being able to give the banks confidence that we are at the right stature for them. We are in a strong position now.”
As we move into the “new normal”, it is clear banks will need FinTech partners as much as FinTechs need investment if they are to provide the seamless payment experience of the future.