You can’t miss Sofia Freyder. She’s currently Executive Director at JPMorgan Chase for digital payments. Iron straight platinum blond hair, red lipstick, and poise that contrasts the sea of men in what often feels like a ratio of 10 to 1 at a money transfer conference. I hesitate to do the cliche thing of focusing on a woman’s appearance when I have not bothered with the men, but I do to make a point about her bold attitude, which is through in through this payments innovation power player. As you’ll read in our conversation with her, she highlights boldness as critical to success in driving new ideas. And there is not a subject I’ve ever discussed with Sofia whether that be blockchain, management, or the selection at the buffet that she does not hold a clear point of view. Without further ado, please enjoy our fourth RemTECH chat with our judge this week.
Olivia Chow: You’ve driven and are driving payments innovation for some major companies, including JPMorgan Chase, The Western Union Company is a US financial services company with headquarters in Englewood, Colorado with offices and agents all over the world offering services such as money transfers (P2P, P2B and B2B, money orders, and other business & commercial services. With close to 12,000 employees, more than 500,000 agent locations in over 200 countries and territories, Western Union is... want more?, and Earthport. What can our audience learn about the challenges and involved and what it takes to succeed with such tasks?
Sofia Freyder: On my opinion the key challenges for innovation are a crowded marketplace with different offerings, slow rollout of innovative ideas, and a conservative risk adverse approach.
All successful innovators are very bold in their approach, accept significant risks, focus on speed to market and are extremely customer experience orientated. While appropriate budget for innovation is an important factor I don’t consider budget to be a primary criteria for success. I have seen situations where significant budget was wasted without achieving expected results and, on the contrary, innovative projects that started with very limited funds and grew incredibly due to the leadership of the team – thinking beyond existing norms, rules and restrictions.
OC: Furthermore, a consistent theme in RemTECH is partnerships between incumbents and startups, broad technology companies and MTOs, and so fourth. You’ve had the perspective from many sides, and now from one of the biggest incumbents in banking. What can you tell fintechs who either are interested in partnering, getting investment, or are terrified of an institution like JPM?
SF: Nowadays partnership has become a critical component of innovation.
Each party in a partnership brings what the other side doesn’t have. Fintechs and startups bring innovative ideas, new technology and most import- speed to market. They also accept much higher risks that allow them to rollout products and services to the market that would be considered too risky by large companies.
At the same time large financial companies are very interested in those new services and products once they reach a certain level of maturity, already attracted broad range of customers, or have high potential for that. It is in this moment when large companies can bring very much demanded investments and help elevate innovation of the startup to the mass market.
What are large companies looking for? Products and services that are aligned with their strategy, can benefit their existing customers or help to enter new customer segments, make them more competitive within the industry, can demonstrate clear ROI independently or improve ROI of other services offered by the company. Fintechs or startups looking for a large investment partner should clearly articulate all above components in their proposal.
OC: Back to payments, you are focusing now on domestic payments now. The US is woefully behind here on that. RemTECH Awards will be held in London this year where interbank transfers can happen instantly between any bank. Can you give us any information on whether Americans will have something to look forward to?
SF: Yes, definitely agree that the US is long time overdue to offer real-time payments to Americans. Over 40 countries have launched faster payments/real-time payments in last 10 years. This is no longer a unique offering but a “must have” expectation of the market.
There is a number of payments options in the US market already that are providing near real-time experience such as Mastercard Send, Visa Direct, Same day ACH and Zelle and etc. None of them, though, are giving a true real-time experience on all levels for customers and financial service providers. Some of them give real-time customer experience however still operate with end of day settlement – which means certain risks for the service provider/ financial institution.
The new Real-Time Payments network operated by The Clearing House brings true real-time experience with immediate funds delivery and real-time settlement for all parties. It operates 24/7/365 allowing for secure – push only transactions and provides extensive message set to support more sophisticated applications for all use cases B2B, B2P, P2P, P2B.
Currently about 50% of US deposit accounts are enabled to receive real-time payments. The real-time payments network is rapidly growing and will become a new norm very shortly.
Domestic real-time payments are a first step in global real-time funds movement. While it will take some time, eventually I see the world where all domestic real-time/ faster payments networks are interconnected and accepting international flows. The ultimate real-time global experience will open up unlimited opportunities for the companies and individuals.
OC: Seems payments is a hot theme among fintechs with many opportunities with a lot of our infrastructure sometimes 30 years old. What are you most excited about seeing move forward? What do you think will drive this?
SF: I am most excited about the following trends in the payments industry: Real-time /faster payments initiatives in various countries with future outlook on global real-time funds movement. Latest trends to optimize and speed up global payments by Fintechs and traditional players (swift GPI). ISO standard rollout aimed to reduce complexity of translating messages into different formats and brining richer message set for information exchange. Blockchain for secure data storage, information exchange and supply-demand logistics tracking. Partnership between large financial institutions or payments providers with innovative fintechs/ startups.
Key market trends are always driven by the market demand that is formed by globalization of the world, competitive pressure, increasing speed of operations, growing need for security and reliability.
OC: As a RemTECH judge, can you give any advice to entries on what you look for?
SF: I am looking for a fresh idea or a new approach to an existing issue.
Most importantly the projects should be truly customer focused, address real need, and have a differentiator vs. competitors.