Global Processing Services EVP Suresh Vaghjiani examines how prepaid innovation challenges traditional banking with PaymentEye editor Sarah Gill in our Finetics™ Studio, live from the exhibition floor at Money 20/20.
Sarah Gill, Reporter: I'm joined by Suresh Vaghjani. What kind of trends are you specifically most excited about?
Suresh Vaghjani: I think the two areas is--I mean, when you look at prepaid, prepaid's been around a long time. I would say it's almost been the best-kept secret in the industry, because people that know about prepaid understand what it can do and what it can't do, and it's a great problem-solver as a product.
Now, what's happening now is actually that message has gone somewhat mainstream. You know, we're talking about thin tech, we're talking about challenger banks, we're talking about a prepaid card solution that is actually working like a bank. And you know, the environment in Europe is there is a lot of distrust of banks at the moment. I'm talking about the main banks.
So actually, it's the perfect time for end customers to say, "I'm looking for an alternative." And these challenger banks, you know, which we provide a lot of technology behind the scenes for, are actually the rock-and-roll guys, the rock-and-roll stars, of the payment space, and it's becoming mainstream. So the difference is it's matured; it's become mainstream.
Sarah Gill, Reporter: And a big part of their value proposition is that they kind of speak directly to customers. You know, you got a bad deal in the past, and what they kind of base their campaigns on is better transparency and that sort of thing, that you feel that people are kind of ready for new brands to enter into finance.
Suresh Vaghjani: I would say that there is--there's a lot of distrust of the banks. People are looking for ethical and transparent alternatives. People don't mind paying fees as long as they know what they're paying for. Historically, banks have hidden fees, and there is a conception in the UK, particularly, that bank accounts are free. However, there are so many hidden charges in the way that it operates that people are actually saying, "This is not a good solution."
So, you know, I would say it's the perfect time to actually disrupt the banking sector. And I would say that the banks are scared. The banks are scared. They're operating on legacy systems. Even the way they operate, you know, they're a massive juggernaut. If they see something changing in the market, it takes them a long time to change. These new small operators, they don't need big offices; they don't need thousands of staff. They can specialize in a service, offer a mobile banking solution, and actually compete with the banks toe-to-toe. So I would say that a lot of main High Street banks are concerned. And they're looking at this thin tech space, you know, and almost saying, "Well, what are they doing?" And the question is, are they going to buy out any of them?
Sarah Gill, Reporter: Right. So I mean, there's obviously quite a lot of hype at the moment about these very good challenger banks. Do you think that's justified? Do you think right now where they're about to take over--
Suresh Vaghjani: So if I talk mass market, it is justified, because challenger banks, it's quite a sexy product. It's kind of--yes. You talk about prepaid, it's a bit like, "Why would I need a prepaid product? It's for the unbanks, it's subprime," going back historically, how prepaid was perceived.
Within the market you could argue that a prepaid card that has a banking feature could call themselves a challenger bank or a banking solution. And people within the industry would say, "Yes, that's been around for some time," possibly. But these challenger banks are actually taking the message to the mass market, so it's a double-edged sword. Is it worth the hype? No, because the technology has been there some time. There are some access issues regarding access to Bank of England clearinghouse, and there are some schemes that are not easy to access. But there have been workarounds for that--not ideal, but the customer perspective, it looks very, you know, very connected. But the message is right now, going to the mass market, it is worth the hype.
Sarah Gill, Reporter: Okay, sure. I mean, on the flip side, though, is there anything we should be kind of concerned about, people kind of using prepaid as a sort of vehicle for less good purposes?
Suresh Vaghjani: I think there was a time when prepaid was the dirty word of the banking industry. It was, you know, this is how you do money laundering, this is how you transfer money across different countries. I would say that the sector has grown up, the sector has evolved. And actually, we are being respected as an equal when you look at debit, credit, you know, fully-fledged banking. So I would say that it's become a sector that has matured, and it's actually in a much stronger position than it ever has been.
Sarah Gill, Reporter: What's your advice for an entrepreneur just starting out in this space?
Suresh Vaghjani: Okay, my advice is to not try to fix a problem that doesn't exist, right?
Sarah Gill, Reporter: Right.
Suresh Vaghjani: There's a lot of people with some very clever ideas, and they're solving a problem that doesn't exist. So my advice is, is it needed? Does it solve a problem? If it doesn't, it's not needed, firstly. Secondly is innovation is needed, but it's more about how they engage with the customer.
Let's talk about Apple Pay, for example. You know, Apple Pay, could you argue that it's the first mobile phone payment solution? The answer is no. You know, there's been mobile payment solutions around for some time in one form or another. What Apple have done have almost what they did with the iPod when MP3 players were around for a long time.
Okay, so what I believe Apple did was actually bought something that was already in the market, they bought a seamless onboarding process so the customer journey was seamless. It was so easy to do, to actually open an account and use it, that actually, it was people--you know, they've been doing more in terms of customer acquisition. Customer usage is another story. But the answer is they should be innovating in the way that they interact with the customer and the services they provide the end customer.
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