Money 20/20 - Transformation in Fintech Landscape - Sulabh Agarwal (Accenture)

In the coming years, the landscape of fintech is set to undergo significant transformations. In this episode, we'll give you the most important changes you can expect. Welcome to Open Banking Today and Tomorrow, a podcast powered by Rabobank. My name is Jeroen Broekuma, I'm your host today.

And today is joining us Salab Agarwal, the Global Head of Payments at Accenture. Welcome Salab. Thank you so much Jeroen. Great to have you.

Pleasure to be here. Yeah, great to have you here and thanks for taking the time. You've been walking around at the Money 2020 conference where this is recorded. Are there things that stood out for you?

Are there particular impressions you have or anything you'd like to share about the conference? Yeah, I think Money 2020 this year is a lot bigger than last year. I think about 8,000 people around. The buzz is a lot more in general, which means that the change in money or payments and other things is not stopping.

And the other thing I would say is in terms of topics, there's a lot more conversations about open banking, open finance. There's quite a few conversations on AI and Gen AI. There's mention of wallets and in some cases, blockchain and metaverse and various other things as well. So it's all happening and really good to meet lots of colleagues and friends and clients here at Money 2020.

That's great. That's great. And I saw you were invited to a panel on the war of wallets. What exactly is that?

So essentially everyone would like all the organizations, whether they are financial services organizations, whether they are telecom providers, whether they are retailers. Everyone wants to control the consumers. And essentially, who should control the wallet is the consumer themselves. Like, if I have a physical wallet, I control it, right?

I think this is where the war is on in terms of who's going to win, whether it is the various providers, whether it is the owner of the wallet, and who will have the control. What we discussed was there's likely to be a lot of standardization at certain parts of the wallet, including ID, like the EIDS initiative in Europe and various other identity initiatives. Open Wallet Foundation is another initiative where, you know, people are looking to come up with at least common design principles, in some cases common standards, just like what has happened in the Internet and other places or web browser industry.

So in order to standardize, but also then there's space to compete and create new experiences on top of it. And I think that is where in certain markets in, say, Southeast Asia or Asia in general, China, India, we've seen emergence of super apps where you kind of get all the experiences in certain apps and certain wallets, which are powered by wallets. in Europe what we are seeing more is there is you know super apps in categories I would say which are coming up powered by digital wallets as well so there would be when you think about travel you go to one app when you think about mobility you go to another app when you think about home buying you go to another app and I think it's all about joining end-to-end experiences powered by wallets is probably where it will go So who will win is an interesting question.

I think what we all agreed collectively is that at the end, it is a consumer that's going to win. So all of us will win. Right. You say a lot of interesting things, but let's take two things out of it.

One is the word control. That's what you stressed a lot, right, in the beginning of your answer. So who are the players that could control, potentially? There's quite a few, right?

So the device providers have clearly got, if they have, like most people use their mobile wallets to make the digital wallet connection and the app connection. So they are definitely the ones who have got significant power. you've got certain wallets on the internet. Again, I'm not going to name them, but essentially you know the one wallet, which is most popular, and we probably all use it for checkout.

And then you've got the retailers, especially the big e-commerce providers and others. Again, there's only a few. And again, they are the ones who could own it. So there's lots of organizations, but at the same time, in certain geographies, like in India for example there is Aadhaar or UPI which is like government powered wallets like Bmap and others So like it really depends on the geography and who are the key players I mean to me there certain critical aspects of a wallet One is the identity the trust with the brand so that I am willing to give my information into the wallet and I think that is quite important.

Clearly, if it is government-issued, then they can own it. But if it is not, then commercial entities. But, I mean, of course, the next generation or Gen Z is more comfortable giving the information to certain organizations than some of the people who have lived a little longer like me. So I think there's the trust bit, and then there is the usability bit.

Because unless you've got all payment types in it, where, you know, in Netherlands, you can use it to pay by deal or if it is SEPA instant or it is whatever different types of cards and alternate payment methods and buy now, pay later and the whole lot. And maybe digital currencies and CBDCs in future. And unless all of it is enabled and usable at various places, it's not usable and the experience has to be friction free. free and then the experiences on top of it.

So I think if you think about all those ingredients, there's clearly lots of organizations who can look to provide the services, but at the end, it should be the consumer to control it. Yeah, that's your key takeaway. It's very important. And given that we're talking about control and a war, that means there's a lot to win, right?

Yeah. Do you have any numbers or any general statements on how big this is? I mean, it is. I actually can't remember the numbers at the top of my head, but we are clearly talking about billions of dollars here in terms of the market size.

And yeah, that's why, I mean, there is the direct numbers and then there are the indirect numbers. I think this is the most important thing, right? So if you're a social platform, you don't want the eyeballs to go away from your platform, right? whichever social platform you're on.

And the point is that for you to keep the attention on your own platform, you do not want any of the transactional activities, the buying, selling, and the payments associated with it, the commerce and others, to go away from your platform. So to enable experiences, you need the full wallet and the various capabilities. And this is where you think about it as not just the direct revenue, which you get from the wallet or the transactions itself, but the various other indirect revenue benefits, whether it is the advertising or whether it is the other services you can potentially solve for wider problems for the consumer.

So there's a lot at stake. Very, very clear. The other thing I wanted to pick on is you said super apps and you started talking about Europe and Asia, and in Asia you clearly have these real super apps, right? And then you said something along those lines.

In Europe it's a bit more in different pockets. Will we not see a super app here, you think? I think it has been a constant journey in Europe where we have seen innovation come through every few years and we have matured as a customer proposition already. Whereas in Asia, where it was predominantly cash dominated and then these large apps came in, whether it is Paytm, Google Pay, Ali Pay, WeChat Pay or Grab Pay or whoever, like there's so many of these where they've come in and essentially created a big jump in terms of customer experiences and established themselves in those spaces.

and I think that's been a key driver. Also, some of the local nuances like in India, the UPI, the Aadhaar, which is the identity, has just enabled it to happen in a certain way, whereas in the West, we already have kind of decent customer experience when you come to like, we can all tap our phone and make the transaction. So the QR code kind of never came in in that big way. like also the way the whole economy is organized is different.

So I think it'll come, but it'll come in different shape is what I believe. Because there's still, I mean, even as in Europe, you still have the same life challenges. Like okay if I want to buy a home I need to connect and go to the search site to find the home the prices the mortgage the closing of the exchange of the house the moving the setup the buying The whole experience, if you think about it, there's just so many places I need to go to. If someone were to bring it together, it's really a super app in the context of home buying experience.

And you can see that coming together in any case. I think where it may not go is it's home buying, plus you want to go on a holiday, plus you want to go... Because there are enough players that are big enough who may have the brand recognition and the ability to stitch together in those areas, whereas the brands are not across all aspects of our life. We need a term for this, right?

Maybe super category apps or something? Oh, that's a good one. I don't know, we're just making this up. So let's talk about the changing landscape of payments.

We've seen a significant shift from cash to digital payments, right? Yeah, yeah. And even from traditional payment cards to mobile payment solutions, with 70% of youngsters now using their phones on smart devices to pay, what do you think is the next big trend here? You already alluded a little bit to it, but what do you think?

I think there's, I mean, clearly, the trend towards having experience, and your key term around, you said super category apps. Yeah, don't start it pointing, but I just made it up during this podcast. But super category apps is definitely one trend, right? Which we will see more of because I think that's definitely one of the things we're seeing.

Like there's a large European conglomerate that has got airlines, it's got a kind of a bank, it's got health clubs and various other things. And they're thinking about how they become the destination for their consumers across the conglomerate or the group. And we would see a lot more of those types of wallets powering up those super category apps in those areas for sure. Then there is the technology is changing significantly, right?

So the core of the payments, like we're talking about ISO 2022 and real-time payments. So essentially, they're big terms, but what it means is there'll be richer data flowing through payments and payments will be instant as well. So what that does is that the experiences that we will see coming at the end of this are going to be a lot more frictionless, slick and quick. And then what the data will enable.

I mean, there's a lot of talk around using AI with the data and how and what it'll enable is, again, there's lots of possibilities, starting with fraud and financial crime prevention, but then going into more exotic use cases. Sounds like we're just getting started. It is. It is.

I mean, there's a long way to go. And I haven't even touched on all the technological changes like the CBDCs. Oh, you may. Please go.

It's interesting. With the whole CBDCs. The central bank digital currencies. Sorry, central bank digital currencies.

And digital euro in Europe is big and coming. And it's, of course, EPI is another one. And then you've got the metaverse and the NFTs and various other things. Yeah, knocking right there, which will all mean that we will do commerce in different ways, which will mean that we'll have more opportunities to do payments in different ways.

I want to switch gears to fintech investments. A bit different topic, but also very interesting because we've seen massive amounts of money going into fintechs. This seems to be slowing down now. Is that what you're witnessing as well?

I mean, if Money 2020 is one barometer, clearly there's so many more fintechs out there. And the money is still there in the market. It is just that you have to make it worthwhile a little bit more. You can't just get free capital on empty promises of future revenue.

So I think it's all a function of increasing interest rates and other opportunities to invest capital and still get gains. So I think these economic cycles will go up and down. But I think for good payment companies, there's still, I mean, there's just so many areas of growth. I mean, one area I just didn't even mention, open finance and open banking and open finance as well.

Like, I think there's just so many areas of growth where we will continue to see a lot of investment. in fact the evening last evening and the evening before I was on two drinks and it was all about like so many fintechs out there and investors actually looking for places to invest capital while there is a lot of financial institutions are also looking with their venture arms to invest the large fintechs themselves have venture arms so like you know large fintechs have now become larger than large largest banks these days and they all have got significant venture arms and they're looking to take stake in them.

And so I think for good fintechs, for good ideas, for good promises to make a difference in the society, there's money out there. Right. So, I mean, it's probably, it sounds like a healthy development where you have, you know, as you said, not only free capital and empty promises or something like that, if I'm quoting you correctly. So it seems to be a healthy development.

And on that note, I also, it seems to be more moving from, I would say, you know, disrupting, disruptive fintech to more enabling, right? If you walk around here on Money2020, you see a lot more players that want to work together with the existing financial institutions. Is that also your view on this? Yeah, I think it's an and.

I mean, there's still space for fintech to develop on its own. But yeah, I mean, there was a point in time when we spoke about, you know, of course, this early 2010, 2011, when all of these Stripe, Adyen, Square, all of these large payment fintechs came about. and then we saw the wave in 2015, 16, when we had the N26 and Starling Monzo Revolut come about. And then clearly now we've got a lot more platform providers and cloud enablers and technology providers, but then open banking fintechs are out there.

Gen AI fintechs are out there, if we call them fintechs, but Gen AI providers are out there. There is a lot more metaverse players out there. So there is, I think they will change shape and form. They will be enablers as well as giving competition wherever there's spaces.

Right. So, you know, working towards the end of this episode, could you maybe mention a couple of, for you, key takeaways for this episode? That's one. And maybe, I'm asking you two questions, you're a consultant, you can deal with many questions at the same time.

The other one would maybe be, have you particular tips for financial institutions in your space, in this payment space? So key takeaways as well as tips for FIs. So my key takeaway is this is a fast changing space and we have to be on top of it to keep going. And Money 2020 is clearly a demonstration that we are not slowing down anytime soon.

So keep your eyes and ears open, continue to develop propositions and look at what's developing because disruption can happen anytime. And I'm saying that with finger pointing towards myself, even consulting may get disrupted with Gen AI, for example. But having said that, we've also got the key thoughts I would leave the financial institutions with is that, you know, like the key is how you invest your CapEx. So if you look at most financial institutions, CapEx budget, a lot of the money is going into mandatory and regulatory changes.

and a very left is left for propositional development and various other activities. And I think it's about how you do the mandatory change in such a way that it enables the consumers. I think getting that lens into how you look at changing things whether it is bringing in more cloud native technologies, whether it is thinking about end to end customer journeys and how it will enable the customer journeys is going to be quite important as you define your journeys to get to the next phase of development.

That's a great one to end on. Thank you so much, Shalab Agarwal, the Global Head of Payments at Accenture, for taking the time here live from Money 2020. Thank you, Jerome. It was a pleasure.

Yeah, it was a pleasure. Thank you very much. And thank you for tuning in to this episode of Open Banking Today and Tomorrow. Remember, you can continue the conversation by subscribing to our podcast on all major podcast platforms, including Apple Podcasts, Google Podcasts and Spotify.

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