Evolutions in payments systems, and the structure of banking itself, have fueled transformation in finance

  • Financial services are in a dynamic period of transformation, due in large part to innovations in the digital payments sector.
  • The continued push to digital banking has accelerated change at companies like Goldman Sachs, even as structural challenges remain. 
  • Meanwhile, banks are still figuring out how to keep workers and customers safe in reopening phases of the global pandemic. 
  • 100 People Transforming Business is an annual list and series highlighting those across industries who are changing the way the world does business. Check out the full list for 2020.

2020 has been a year full of upheaval and new opportunities for financial services. During the peak of the pandemic, we heard from executives at financial firms around the world about how lessons learned locally could help different offices prepare for the spread of the virus. For Wall Street traders, that took the form of understanding how market volatility and remote work affected activities in areas first hit by the pandemic's spread and applying those lessons in other offices.

The same dynamic is likely to prove critical as the world looks to move past the pandemic. The earliest regions to return to some semblance of normality will have lessons to pass on to executives in other offices. 

Regions that have been leaders in financial-industry transformation are now set to reap the rewards, but will also serve as key benchmarks for how things could play out for younger companies — and how incumbents can jump on the bandwagon. 

Ant Group is gearing up for what could reportedly be the biggest initial public offering ever and has revealed its built a highly profitable company along the way. The planned IPO looks set to make Ant Group the world's most valuable fintech.

Mastercard, under the leadership of Mastercard's Asia Pacific copresident Ari Sarker, has been embracing partnerships with fintechs to help them build out their offerings with a program launched in Asia at the end of 2019. 

A payments revolution

The payments space, particularly the intersection of payments tech and e-commerce, has been red hot in 2020.

That comes as consumers had to quickly rewire their day-to-day shopping habits. And huge waves of unemployment also meant that buy now, pay later options that help people spread big purchases out in installment payments enjoyed a surge.

You'll hear from PayPal's chief product officer, Mark Britto, who helped oversee the launch of new products for the company like QR codes to pay and spearheaded PayPal's facilitation of PPP loans for small businesses.

PayPal is also at a key point in its history that ensures more transformation to come. It's been an independent company for five years since it was spun off from eBay, which had acquired the company in 2002. With the recent expiration of that agreement, PayPal is now eyeing growth through partnerships with global e-commerce platforms like Alibaba and Shopify. And last December, PayPal acquired Chinese payments platform GoPay, making it the first foreign player with a license to provide digital payments in China. (You'll learn more about GoPay's CEO on our Transformers list.) 

When it comes to "buy now, pay later," the transformation is not just about customer convenience; it's also about how merchants think about marketing and selling their products in a digital world. Startups like Klarna boast that having a buy now, pay later option helps boost cart-conversion rates — the percentage of stuff you put in your online shopping cart that translates into an actual purchase — as well as average value per order.

Klarna's CEO told Business Insider in April that the Sweden-based fintech was seeing a surge in merchant interest in the startup's platform, given a new focus on online shopping. And in June, Klarna became the first buy now, pay later startup to launch a loyalty program.

And many of the "buy now, pay later" players say that they drive sales for merchants not only at checkout but on their own websites. Their store directories, which list all the retailers that accept the buy now, pay later option, is a key way the startup funnels shoppers to its merchant partners.

Digital banks and structures of innovation 

A push toward digital banking has only accelerated in recent months. Fintechs who were quick to lean into new shopping and banking habits that were forced by stay-at-home orders and social distancing requirements suddenly saw a huge opportunity set.

London-based challenger bank Starling Bank said in early August that it had gained half a million customers in the past eight months and was expecting to break even by the end of 2020 — even as a drop in overall consumer spending has weighed on interchange fees, a key revenue driver for many fintechs.

"During lockdown, people needed a full-service bank, not just a prepaid card, and we are ideal for businesses who couldn't get to the high street. They wanted a full replacement, not just an additional service," Starling Bank CEO Anne Boden told Business Insider in August. 

Goldman Sachs has been carrying out its own transformation over recent years to embrace digital consumer banking. Carey Halio is the CEO of Goldman Sachs' banking subsidiary, a fledgling unit inside the 150-year old firm that's played a hand in creating some of the bank's most innovative products. The Apple Card, Goldman's Marcus digital bank, and a partnership with JetBlue on buy now, pay later, all showcase the bank's massive transformation.

Halio took the CEO's job two years ago after four years as CFO, and has been a key source of institutional knowledge for the firm's recent efforts. She was a member of a credit team overseeing the firm's relationship with clients like Lehman Brothers and Washington Mutual in 2008. And when Goldman converted itself into a bank holding company over a frantic weekend that year, she was one of the few who knew what a commercial bank did.

And even more transformation may be in store behind the scenes at Goldman, showing how a shift in the consumer-facing side can drive changes down the line at the bank more broadly. Halio is now focused on helping Goldman transform in ways that may not capture headlines but are no less important, such as operational and structural improvements. She declined to offer specifics but suggested that more activities will eventually be housed in her subsidiary.

"How you're organized matters," Halio told Business Insider. "The bank can only use the deposits to fund the stuff in the bank, right? So our organizational structure doesn't really match with our bank transformation. So we're really thinking long and hard about that."

The intersection of structure and function can also be seen playing out at UBS. 

UBS Investment Bank's COO told Business Insider late last year that the bank spent 2019 transforming the way it organizes teams to foster more collaboration and efficiency when developing and updating tech. 

The bank had created over 200 small multidisciplinary teams — "hybrid pods" — that encompass 1,300 employees spread across the bank focusing on specific goals. People from technology and operations teams work directly with those on the business side. 

"Our hybrid pods have proven during the recent pandemic that the model is working well," said Zoë Evans, head of investment bank technology and Head of UK Technology, UBS. "[They] were formed to build solutions for traders to work from home, delivering a solution within days."

One theme that came up in talking with many of these transformers — even those at incumbent firms — is the need to move fast and respond quickly. And with big opportunities and high expectations, people driving transformations like digital banking and rethinking consumer lending have the opportunity to prove their theses in the coming months.

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