- Seamless digital payments and new fintech technologies are emerging as the foundational infrastructure for future business success.
- The pandemic has made it clear that the ability to quickly disperse funds and accept any form of payment is a critical path to economic recovery.
- Innovation in fintech and payments can help narrow a widening inequity gap accelerated by the pandemic, reducing costs and expanding access to financial services.
Any keen observer of Silicon Valley can tell you that the future of the fintech sector is bright, even if the future of the economy remains uncertain.
But what if fintech can play a role in helping to fix the woes facing the economy? What if new financial services could help reduce the gap between the haves and have-nots which has been exacerbated by the COVID-19 pandemic? And what if fintech can become a fundamental building block of our technology infrastructure, unleashing a new wave of innovation, much like cloud, mobile, and the web itself have done before?
Those are some of the fascinating questions that Richie Serna, CEO of payments up-and-comer Finix, and Penny Pritzker, the former U.S. Secretary of Commerce and co-founder of early stage fund Inspired Capital, tackled during this year’s Commerce Summit, presented by Silicon Valley Bank and Commerce Ventures.
It wasn’t your typical Q&A, but rather a wide-ranging, back-and-forth conversation between two leaders who know and admire each other; Pritzker sits on Finix’s board of directors. It also touched on many other topics, including the state of the economy and digital transformation.
We’ve edited excerpts of it for length and clarity below.
Serna: As the former secretary of commerce, what are the biggest trends you see in the U.S. economy today?
Pritzker: Some people are asking, is this a V shape recovery or a U shape recovery, and I'm going to pick the letter K. Those of us in the tech community, those of us in certain industries are thriving right now. You have this fabulous adoption of digital tools. But on the other hand, there's a massive amount of our country that's still hurting very badly. We have about 30 million people who are on unemployment, and the pace of jobs recovery is slowing.
Economists will tell you that they think that 8 million U.S. jobs will be lost during COVID permanently, and then about 4 million businesses will go out of business. We're in uncharted territory.
Serna: Those are some very sobering statistics. What I hear you saying though, is that the U.S. economy is changed forever. Can you get a little bit more specific about the digital acceleration that you've seen?
Pritzker: I haven't talked to a business leader, whether they're in liquor distribution, car manufacturing, hospitality or technology, that isn't adopting more technology tools faster than they ever anticipated. In fact, McKinsey tells us that we vaulted five years forward in consumer and business digital adoption in the first eight weeks of the COVID pandemic.
Digital technology is more and more being treated like critical infrastructure. I would say the issues of trust, of privacy, of digital security, of digital safety, of responsible AI are really coming to the forefront, and all of us as business leaders are going to have to grapple with that.
Pritzker: Let me turn the tables and ask you a question. What trends are you seeing across fintech companies right now?
Serna: First, like you said, there's been an enormous acceleration in terms of digital transformation across all industries. Digital payments have absolutely skyrocketed. Consumers have really started to move towards digital purchases, contactless payments, QR codes, voice payments in gas stations. The pandemic has really made clear that seamless digital payments are more critical than ever to the success of businesses.
Fintech is now the fourth platform. The internet, mobile and cloud are now so ubiquitous that we take them for granted. Financial services, especially payments, is going to be that next ubiquitous infrastructure. We’re going to see the vast majority of SaaS companies make the majority of their revenue from payments and other types of financial services. It's this concept that you keep hearing about, embedded fintech.
Pritzker: How has COVID accelerated digital transformation in payments?
Serna: Before COVID, companies already recognized the power of embedding payments into their software. COVID just accelerated that trend.
Prior to COVID, I did not care about contactless payments. Now, we're starting to see that we not only fully expect this functionality, but we're proactively seeking out stores that have it because of the pandemic. People are making purchasing decisions based on how payments are now accepted. That's incredibly exciting.
Serna: You're dedicated to this idea of inclusive prosperity and creating opportunities for more Americans. Can you talk about why inclusive prosperity is so important to you?
Pritzker: We have a massive challenge with inequality in this country, and it's only become more and more obvious. As we're experiencing this pandemic, you're seeing the weakness of our social safety net. Even before COVID, 40% of Americans basically had no savings.
We've got to do more to help more Americans thrive. The Latinx and African-American residents in this country are three times as likely to get infected as a white person, and two times as likely to die from the virus. They have suffered greater income loss and greater job loss. We have to address these inequities.
The fintech sector has a huge role to play here, and not only in terms of employment, but in terms of making things less expensive for those communities, so that they can have access to goods and services in a more affordable fashion.
Serna: I completely agree, and it's part of the reason why I started Finix. Historically, it's been incredibly expensive to be poor. I remember my grandmother, who was undocumented, couldn't afford to have a bank account because of how high the monthly fees were. Now you’re seeing companies that make it easy and efficient for people to get accounts because they're built on top of very innovative infrastructure companies. Vertical SaaS providers are offering SMBs and gig economy workers better products and services, things like faster funding so they can disperse funds out to a worker’s debit card in a matter of minutes, as opposed to two to three days. It has a huge impact on liquidity.
When I first pitched the idea of real time payments to move money faster than ACH, investors looked at me like I was crazy. But anybody who's working at a blue collar job or working in the gig economy, the timing of your paycheck matters a lot. Many can't afford to wait two to three days for checks to clear so they go to these really predatory cash-to-check services. There’s no doubt that the faster and more reliable financial infrastructure is going to continue to play a huge role in reinvigorating the economy.
Serna: I think that brings us to a great point, which is talking about the economy going forward. Things seem incredibly bleak, but you're an optimist. Can you tell us a little bit about how you see the economy heading in the next few years?
Pritzker: I'm definitely an optimist, and I'm a believer in the ingenuity of our country and of our citizens. I think that 2021 will be rocky, and we're just going to have to live with that kind of ups and downs. That's easy for me to say, because I have food on my table and I have a shelter and a place to live. For some people, as we've talked about, that's not so easy, and we've got to take care of those folks. But I'm a believer that there are leaders who recognize that and who will take care of that. I think that everybody on this call has a role to play. In your business, you can affect the lives of the people who work for you.
I'll just close with something that was really optimistic. We formed the Illinois COVID Response Fund literally in seven days. My brother, who happens to be governor, asked me if I would do this. I reached out to people I didn’t know. We had no infrastructure, we had no name, we had no capability, and in seven days, we had websites, we had ability to take in money, we had people who volunteered to be on grant-making committees, we had people who volunteered to do strategy. We had $30 million. Nobody said no.
It gives me faith in the humanity of the average citizen and the leaders in our communities, that we have capacity to come together. That's why I'm optimistic.