The digital future is an exciting place, but often a confusing and at times slightly overwhelming one. We are all suffering from a version of the paradox of choice – when given too many options, it can be hard to make a choice, as the mind becomes overwhelmed with details that make it impossible to narrow them down to the best ones.
The trouble with too many choices – in how we pay, what we pay with, what we pay for and what firms we engage with – was the focus when Ingo Money CEO Drew Edwards dropped in for the latest edition of The Week in Payments.
“It’s confusing,” said Edwards. “Are we solving a problem that doesn’t exist, or are there already a bunch of solutions out there and eventually one’s got to win out?”
It’s confusing when it comes time to pay, confusing when forecasting the future of the business travel market and confusing when plotting the course of innovative offerings like cryptocurrency and InsurTech. What’s next is contingent on a lot of “ifs” across the board. But what we’re seeing now in a variety of places, Edwards noted, is at least offering up some clues.
The Many Divergent Payment Paths
With so many ways to pay – from the standard dipping of a chip card to exotic methods like Amazon’s palm-print – how to pay has become an increasingly complex experience, Edwards noted. Consumers come to the POS genuinely uncertain if they are supposed to dip, tap, wave, wink or give a touchscreen a high-five to complete their transaction.
Edwards believes we’ve created payment problems that never existed by making payment an overly complicated question at checkout. The interesting thing about the payment add-ons that seem to be working, he noted, is that they offer not just another choice, but some actual utility. He cited buy now, pay later (BNPL) offerings as an example of this. Though “not an expert” on the method and outside its target demographic, he can see why it is catching on with younger consumers, particularly gig workers. It’s not just adding another choice – it’s adding value to the payment process via payment installment options.
“I think it’s certainly fitting for the gig workers and those who are transactionally getting paid – it’s not just for the underbanked anymore,” Edwards explained. “It’s a much broader part of the population. So they can say, ‘to buy this piece of furniture, I’m going to need to do 12 Uber rides in this time period to pay for it.’ I get that.” Edwards noted that he can see how these brands create affinity and loyalty with their members, and then drive these growing client bases to merchants.
Business Travel’s Uncertain Flight Path Forward
But delivering value to a segment that needs it is difficult, particularly when those needs are difficult to pinpoint. Business travel is such a segment, as this week, various airlines came forward with earnings and indicated that the recovery path of T&E will likely be a long one. Delta’s CEO, for example, forecast that it would be 2023 before we see the segment show even three-quarters of its pre-pandemic numbers.
Edwards agrees that business travel won’t be the same segment it once was, and that things won’t simply return to the “old normal” once the pandemic is not actively weighing down workers’ will to travel. But that future path remains a big unknown.
In a world where remote work becomes the norm, Edwards noted, business travel may not be about moving employees from HQ to different parts of the country, but about bringing in remote workers from all over the country for quarterly meetings. It might mean that airlines are strategizing travel differently, and using more tele-networking tools for last-minute meetings instead of putting people on planes and paying last-minute travel premiums. Conversely, firms that are traveling less, on the whole, might end up reserving travel for last-minute emergencies (high-cost events) and use telework equipment for regularly scheduled meetings.
The options are many, said Edwards, because the fate of the working world is still taking shape. Whether people will be in the office, willing to travel or interested in going to large-scale events is still being worked out at corporations all over America.
“I still believe people want to get out, but I might not go to a 20,000-person conference as willingly as I once did,” he explained. “But I don’t think the days of going to New York and having dinner with six people in a private dining room are dead forever.”
But as for what exactly will be alive and well in the T&E sector, and how well that industry is going to recover? There are simply too many unknowns at this point to make a good prediction.
The Crypto Rollercoaster
Speaking of spaces where it is tough for anyone to make a good prediction: Once again, cryptocurrency was in the news this week, as bitcoin saw its price tumble past $50,000 after peaking last week at ~$63,000.
The crypto rollercoaster, Edwards noted, is remarkable when one considers how far crypto has come – from being regarded as something of a joke a few years ago in most financial segments to showing up in serious places like PayPal wallets. Crypto has come a long way.
That said, when we talk about things like bitcoin, ultimately we’re not looking at something that is a serious competitor to regular currency, Edwards stated. It’s getting easy enough to use in transactions, but as its recent price roller-coaster demonstrates, it’s just not stable enough to rest retirement accounts in.
“For me to use it for my savings account, it would have to be a lot more stable than it is right now,” Edwards said.
He noted that consumers don’t really care about the complicated background expenditures of things like bitcoin, whether they are really paying with bitcoin or if the firm they are paying is really converting their funds into fiat. But they do care that bitcoin is unstable and can lose $10,000 of its value in a week for no understandable reason, which means it will remain a speculative asset.
But Edwards believes stablecoins could be a very different story, particularly in economies where the local fiat is unstable.
The Cooperative Future of InsurTech
Finally, in stories from the changing economy this week, Webster and Edwards discussed claims by InsurTech firm Lemonade’s CEO that InsurTech startups are able to base their pricing directly on how much consumers actually drive, giving them an inherent advantage over legacy players that set pricing based on old models. He further noted that as autonomous vehicles integrate into the market, the future of auto insurance will be for fleets, not consumers – and that again, larger players are at a disadvantage with their older pricing models.
While Edwards doesn’t believe that the CEO of Lemonade is completely wrong, he said he is underestimating the ability of multi-billion-dollar legacy players to adapt their approach to the market in response to the pressure brought by InsurTech players.
“It’s not the norm that a disruptive concept actually disrupts an industry like insurance,” noted Edwards. “We’ve seen this in banking already. What happens all the time is that disruptors come along and force the industry to change how they price. My bet would be, unless it’s one of those outliers, the Lemonades of the world will end up being technology partners to the giant incumbents.”
The model is changing, he noted, as car ownership is changing and consumers should be paying insurance based on how much they drive – particularly now that it is easy for that data to be tracked over time. But Edwards believes that the player pushing to recreate insurance pricing and standards will be far more likely to sign on with the Geicos, Liberty Mutuals and Allstates of the world, rather than try to displace them entirely.
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