Perspectives on Payments

by Austin Mills

These are exciting times in the payments industry. It seems like more innovation is occurring and more participants are joining the space than ever before. Emerging financial technology providers are increasingly playing a role in the payments ecosystem.

I recently attended a multi-day payments event broadly covering the payments industry. Below are a few of the insights and takeaways I gained that may be beneficial to FinTech and payments entrepreneurs, investors and other professionals.

  • Technology is Displacing Banks – From prepaid to Bitcoin to alternative lenders, non-bank financial service providers are becoming more prevalent than ever. These new entrants often have the advantage of being able to focus on one particular area and provide more innovative solutions than have traditionally been available. Together with the displacement of banks in certain financial sectors comes the risk of the reduced regulatory oversight of these non-bank financial service providers. Accordingly, regulators are taking a closer look at many of these industries, and, in addition to those that currently exist, we are likely to see new or broadened state, federal and international regulations in the future.
  • The United States Trails . . . – Many countries around the world have faster, more up-to-date payments systems than the U.S., including countries you would not expect (e.g. Mexico). However, The Clearing House (which represents 24 of the largest banks in U.S.) is currently working toward a new ubiquitous, national, real-time payments system in the U.S., which should arrive in the next few years.
  • . . . And that Presents Opportunity – The fact that the U.S. has become a follower in a sense with respect to its payments systems provides the opportunity to learn from examples, successes, and failures in other countries, both with respect to the payments system itself and the industry participants that interact with it. When the U.S. does roll out a new real-time payments system, there will likely be widespread opportunities for existing and new participants.
  • Sales Over Costs – While this might not be a particularly novel observation, it does seem important to keep in mind: increased sales drive adoption to a greater extent than reduced costs. For example, while merchants may not like paying the costs of credit card acceptance, almost all merchants accept credit cards. This is because card acceptance drives sales. Similarly, although Bitcoin is often credited for its reduced costs, many early adopters likely were trying to take advantage of the increased exposure they may have received by accepting bitcoin. Accordingly, if you can provide a new product or service that drives sales, you are likely to face less pricing pressure.
  • Security Not a Significant Driver of Adoption, but Necessary – We’re all aware of recent news around major retailer data breaches, and financial executives are focused on identifying, managing, and mitigating these risks.   While offering a more secure product or service may reduce legal risk, the consensus of the attendees was such offerings have not been as significant a driver of consumer adoption of payments products and services as other criteria, such as cost and convenience. That being said, a focus on security is both important and necessary. Not only does the nature of the existing payments systems and the related governing bodies frequently require a significant investment in security, but many companies are unable to survive a significant security incident. In summary, a commitment to security in the payments space is necessary to effectively enter and survive, but security alone has not been as significant of a selling point to consumers as many might expect.

Austin Mills ( is an attorney in the Fintech/Payments Group at the Atlanta law firm of Morris, Manning & Martin, LLP. This article is presented for educational and informational purposes and is not intended to constitute legal advice.