In this installment of the Challengers series, Rodolfo Passeri spoke with Todd Clyde, the CEO of Token, an open banking payments platform driving the shift from card to bank payments with best-in-class, Pan-European bank connectivity, data and compliance capabilities. Todd and Rodolfo touched various topics, including the development of Token, Open Banking in Europe, payments, the trends in the FinTech market and much more!
Todd, you’ve had a spectacular career working at multiple SaaS and FinTech organizations. What made you join Token?
Having spent 35 years in the enterprise and financial software industry (twelve years at Accenture, followed by over twenty years at four successful startups, including e-learning, internet banking, mobile banking, and now API banking), I joined Token in 2016 to drive a shift from traditional payment methods to open banking payments.
Where do you see Token going into the future? And how does it stand out from its competitors?
Given the current complexities and fragmentation of open banking in Europe, having the right solution and partner is critical to gaining a strategic advantage in open banking opportunities, the most promising of which I believe is open banking payments. That is why, while other service providers solely aggregate data access to banks, Token provides third parties with a single API for the broadest payments connectivity for banks in Europe.
As we drive the shift from traditional payment methods to A2A payments, Token’s focus has enabled us to develop deep functionality that makes accepting bank-direct payments elegant and straightforward. In addition, we can white-label our entire solution to allow other players in the existing payment value chain to bring bank-direct payments to their customers. To that end, Token also has sophisticated, reseller-friendly features baked-in, including merchant management, customer billing, hierarchical configuration management, certificate management, and programmable authorizations.
Token has been a leader in Open Banking enabled payments. How do you plan on tackling the problem of capturing card and contactless payments?
A2A payments are becoming mainstream and will threaten both credit and debit cards because the costs, cash flow, and security benefits of A2A are so compelling for merchants, and the user experience is so good for consumers.
The Worldpay Global Payments Report 2020 predicts that account-to-account payments will account for 20% of all e-commerce payments in Europe, surpassing credit and debit cards by 2023. McKinsey & Co’s Global Payments Report 2019 also predicted that account-to-account payments will eventually “threaten cards’ position as the main source of non-cash retail payments.”
In the UK, the Open Banking Implementation Entity (OBIE) ’s recent decision to mandate sweeping through Variable Recurring Payments (VRPs) marks a massive milestone for A2A payments. It paves the way for recurring bank transfers to capture a significant share of card-on-file and direct debit payments for subscriptions, utility bills, and e-Commerce payments. One can also see use cases for VRPs in contactless or “invisible” payment settings. As the OBIE’s Trustee Imran Gulamhuseinwala said, “sweeping will provide a way for customers to stay in control in a future world of embedded smart payments. Imagine, if you will, washing machines that automatically reorder detergent or electric cars that charge when the price is low.”
What is your take on the state of Open Banking in Europe? Where is the future, in your opinion?
Open Banking has come a long way in Europe, though a few key barriers remain. Given the complexities and fragmentation of Open Banking APIs in Europe, having the right solution and partner in place is critical to reaping open banking payments and data benefits. API aggregators like Token have solved the fragmented nature of Open Banking APIs in Europe. SCA friction has also improved significantly. However, Europe needs to continue its trajectory towards improving API stability, user experience and success rates.
Considering Open Banking payments specifically, the pervasive adoption of SEPA Instant by EU banks would not only enhance the end user’s experience, but ultimately, the ubiquity of instant settlement for A2A payments in Europe would further fuel Open Banking’s adoption and growth.
What are some of the trends you are following in the FinTech market? What most excites you?
There are three trends that I’m following and which excite me because I believe they will change the payments landscape: 1. There is embedded finance powering the new fintech layer. 2. There is open banking funding that new fintech layer. 3. There is a disaggregation of services around credit cards. With embedded finance and within the new fintech layer, banks have the opportunity to meet consumers where they are. At Token, we focus on helping banks compete in this new layer and reaggregate services around payments that create new revenue streams (with higher margins). For example, what is a credit card payment but a 30-day loan, a loyalty program, and consumer protection services combined with a payment? As open banking payments move from the alternative to mainstream, we’ll see a disaggregation of credit card services and recombining them around A2A payments. Open Banking is an opportunity for banks to go beyond data access and reclaim their position as the center of the payments universe.
Any parting words of advice for any aspiring Fintech entrepreneur out there?
Most fintech entrepreneurs, particularly those working with banks, don’t know what is involved from a security infrastructure standpoint. They also need to realize that fintechs and banks move at different paces. So it’s a long game for fintechs, and that takes grit.
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