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Some of these solutions will be more successful than Co. said the tech giants are set to grab up to 40 percent of
others. For example, universal digital wallets, such as the $1.35 trillion in U.S. financial services revenue from
Google, Samsung Pay, and Apple Pay, haven't yet achieved incumbent banks.
meaningful adoption among consumers. Despite their
added security features, they don't really add value in the Apple could issue a debit card or personal finance
consumer's mind, an important factor Teixeira mentioned. management app. Google's money movement and
commerce services form a payments hub with unmatched
Consumers find it easier to insert a chip card in a reader. global reach. Amazon could quickly undercut legacy
Psychologists call this consumer behavior "muscle players. All of this could significantly erode the revenue,
memory." Meanwhile, merchants are developing their profitability and even viability of the 4,600 commercial
own proprietary apps for consumers to use, and since banks in the country. That would not be a good thing.
consumers will only use a handful of those, universal
wallets may ultimately miss the boat. Staunch regulators
My sense is that this will not happen. To put things in
Today mobile devices are used for half of all ecommerce perspective: in the United States, there are eight national
transactions in the United States. Some observers have banking supervisory entities. Furthermore, each of the
predicted that at some point a multitude of devices, 50 states has its own legal regulatory structure. A critical
including phones, cars, watches and browsers, will factor to the growth of fintech solutions is the ability and
connect to the Internet of Things. willingness of the regulators to move away from a strictly
rules-based model and to understand new products
To make this work, the requisite security and identity that might somehow "override" traditional regulatory
verification must be in place. Payment processors will strictures.
have to know their customers and their devices, probably
through tokenization, either at the consumer level or where Regulators have a fundamental goal that fintechs do
the merchant or supplier holds the token. New technology not share: to track and eliminate money laundering and
is involved here, but I wouldn't call it revolutionary, more terrorist-financing activity, and ensure that the banks
like evolutionary. they regulate meet generally accepted norms for capital,
Existing tech, new uses liquidity, asset quality, reserves, underwriting and
profitability. A related concern is cybersecurity and the
Banking expert Chris Skinner, whom I interviewed in a protection of the integrity of the nation's financial system.
recent column, said that this is really just about finance
delivered by technology in a new way, but not new To complicate matters, when it comes to cross-border
technology. That new way encompasses these features, all transactions, coordination is required between
of which reflect Teixeira's criteria. It will be: governments, banking and financial regulators, and
• Real time (not available in specific time increments, standard-setting bodies. I don't see bank regulators
like monthly or annually). changing their focus or methodology anytime soon.
• Available all the time and everywhere (no Again, the focus is not on technology per se, but on
downtime). the value the user gets from it. I doubt regulators will
• Invisible, frictionless and seamless. let fintechs and nonbanks take on traditional banking
• Personalized to the consumer. functions without holding the new entrants to the same
exacting standards demanded of banks.
• Predictive for the consumer.
There is a lot of activity in the fintech space, but the next
When consumers receive this information, they will be time you look at a new entrant, remember to use the three
able to share it in real time, thanks to platforms such as criteria suggested by Teixeira, and start with the basics,
Snapchat, Instagram and Twitter, because consumers because 90 percent of new fintechs will not be around in
have come to expect a seamless flow of information all another five years. Look for opportunities to decouple an
the time. And the corporate banking users (enterprises existing provider in the cost, effort and time it takes to buy
and their business clients) will want the enhanced flow of something. You will be on the right track, and you will not
information and data to support their business activities, likely have to invent new technology to succeed.
the obvious example being capabilities for cross-border Brandes Elitch, director of partner acquisition for CrossCheck Inc., has
settlement.
been a cash management practitioner for several Fortune 500 compa-
We tend to be focused on fintechs, but there is a large nies, sold cash management services for major banks and served as a
existing banking and payments world composed of consultant to bankcard acquirers. A certified cash manager and accred-
highly regulated and monitored platforms, marketplaces ited ACH professional, Brandes has a Master's in Business Administration
and ecosystems. Some observers have suggested banks from New York University and a Juris Doctor from Santa Clara University.
will soon no longer monopolize payments. McKinsey & He can be reached at brandese@cross-check.com.

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