As global head of product at payment processor i2c, Seth Perlman has seen his share of headwinds and tailwinds in the banking business, including stints at Visa, Fiserv and PayPal. But the first quarter that just wrapped has been one for the books.
“Financial institutions know how to handle changing interest rates, inflation and some of these macro trends,” Perlman told PYMNTS as part of the “What’s Next in Payments” series.
“But what’s been very different recently has been the prolonged nature of inflation staying high and the yield curve staying inverted. So those trends have created a few challenges for financial institutions in terms of how to adapt to those circumstances that usually don’t last that long in the market,” he said. “In terms of what we’re seeing, issuers are certainly focused a lot more on risk management, proper product pricing and then trying to forecast when that will all need to change.”
Whether emphasizing certain payment products over others or adjusting pricing and promotional terms, Perlman emphasized the importance of supporting issuers as they navigate these changes. Those changes may spur FIs to focus on one particular payment product on the deposit side versus the lending side at any point in time, translating into changes to promotional terms for cardholders.
To meet these challenges, Perlman’s advice comes in three general categories: investing in technology, prioritizing security and risk management, and staying ahead of innovation.
Technology, Perlman said, is job one. He encouraged issuers to embrace AI and real-time payment systems as their top priority with the most fundamental evaluation criteria ranging from how money moves between banks to how to reimagine the customer experience. Digital wallets, he said, are part of that new technology set.
“That’s where we would like to see the focus from a product and technology point of view as an industry over the course of the year,” he said. “There’s plenty of other things for everyone to worry about, from regulation to various other trends on the macroeconomic side of things. But those are often outside of your control. What you do with the technologies on the horizon are going to determine your success this year and next with your customers in payments.”
With every new technology, the threat of fraud looms large. Perlman identified two primary areas of concern: account-opening fraud and transaction-related fraud.
To combat these risks, i2C has invested in advanced fraud detection algorithms and AI technology. By detecting and preventing fraud in real-time, financial institutions can mitigate potential losses and safeguard their customers’ assets.
The risk is especially acute with faster payments and with the rise of digital banking. The fraudsters will migrate to wherever the weakest link in the chain is, across the consumer lifecycle, Perlman said. He noted that his firm continues to integrate with the new interbank payment systems and real-time networks to boost the front lines of fraud screening before funds are transferred on behalf of an issuer, and even before accounts are set up.
“This is something that will evolve over time as the networks scale and grow,” Perlman said. “The best offense is a good defense. There’s certainly fraud around account opening, and the underwriting process that can trip up issuers and create credit risk. And then there’s transaction related fraud.”
Platforms such as i2c’s, he said, can harness data and analytics, and AI, too, to detect fraud in real time, before the bad actors are successful. New technologies, including virtual tokenized digital payments and wallets that abstract the payment credentials from the actual point of transaction are all “net positives” in terms of preventing transaction related fraud, Perlman said.
Finally, Perlman addressed the need to stay ahead of innovation. Looking ahead, he said, issuers have the opportunity to help their cardholders participate in those seamless digital experience, and to think about how credentials can be provisioned into digital wallets, including merchant-specific wallets. Connected devices offer particular greenfield opportunities for merchants and forward-thinking issuers to harness.
“We need to think more broadly about where payments innovation is happening,” he said. “For example, we know that [connected] devices are changing the car-charging environment, and how electric cars will drive complete changes to the payments ecosystem from a technology point of view. And then we will see some of the more on-device changes as sensors and biometric payments enhance all of these trends.
“All will have some impact on everyone in the payments ecosystem,” he added.
