Building out the digital connected economy has created a demand for new, end-to-end financial services infrastructure.

As Ricardo Josua, CEO of FinTech Pismo, told Karen Webster, without that infrastructure in place — where banks and FinTechs have ubiquity across their networks and sidestep decades-old legacy plumbing — the connected economy will not reach its full potential.

That’s especially true in Latin America, Pismo’s key market, where the “rails” underpinning those financial services have been around for decades. In the near and longer term, there is the need to have core infrastructure to clear and settle, to authenticate, to create the interoperability, to ensure safe and secure transmission of funds. Those funds, increasingly, are flowing not just between accounts but across borders too.

“There are so many things that can be done differently,” he said, noting that every debit, credit and ATM withdrawal uses a protocol that was envisioned and implemented in the 1970s or 1980s. As such, much of what we’ve gotten used to in payments has been, to put it gently, limiting, frustrating and not at all an optimal client experience. We have a devil of a time deciphering transactions on our monthly credit card statements.

In short, he said, all manner of financial services firms seeking to re-imagine and change those experiences must grapple with a “piling up of technology.” Banking application programming interfaces (APIs) and platforms can help providers — from banks to FinTechs to acquirers and marketplaces — launch next-generation solutions without wrestling with the old infrastructure.

The conversation came against a backdrop in which Pismo said Tuesday (Oct. 19) that it raised $108 million in a series B funding round led by SoftBank, Amazon and Accel, among other investors.

In terms of mechanics, the company’s cloud-native core processing platform lets bank and FinTechs come to market with — and scale — new products and services, ranging from digital wallets to payments, with speed and agility.

The desire on the part of consumers to tap into those new providers’ offerings is there. PYMNTS’ own research has shown that a significant percentage of consumers — more than a third — would be interested in using financial services from companies like PayPal, and a quarter of consumers would, or do, use services from digital banks.

Read also: The Many Answers to ‘What Is a Bank?’

As Josua remarked, “Clients are willing to share their consumption information in exchange for direct benefits.”

Processing at Scale

The company’s focus, at present, is on Latin America, where Pismo has already been working with large financial services players. The company, he said, has already been processing volume, at scale, across a broad range of services.

“That sets us apart from other players that are using legacy solutions, and from the solutions where the technology might be new, but they have yet to be tested at full volumes,” he said.

Contrary to conventional wisdom, although banks are being targeted by neobanks and platforms such as Mercadolibre, they’re not too late to the digital game to build out their own financial services ecosystems, he said.

The accessibility afforded by platforms like Pismo means that banks are anything but dinosaurs, he said. Initially there may have been some hesitation about creating end-to-end digital banking experiences (such as extending microcredit to underbanked populations in Latin America), because scale may have seemed daunting, but those headwinds are abating.

Gone are the days when financial institutions (FIs) would conduct tests before full-scale deployments, inching ahead a few percentage points at a time to see how new implementations “behave,” said Josua. Now, the implementations must be continuous.

“I think banks are still very relevant in the space,” he said.

That’s because they have treasure troves of customer-level data that are essential in helping other players (FinTechs among them) develop new products and services. And that data is what will allow the neobanks to move well beyond the confines of, in Webster’s words, simply offering pre-paid cards wrapped up in mobile phones. The more successful neobanks, said Josua, are getting their own banking licenses, with grand ambitions on coming to market in new ways.

But down the line, beyond the initial splash as companies build new experiences, Josua noted that these same firms run into scaling challenges. Three to four years after an initial implementation, a FinTech may have hundreds of engineers, even if there’s not much change in the interface.

The enterprise, he said — especially the incumbent players that will help “revolutionize” payments — must measure how well it can manage product/service portfolios and operate them at scale while anticipating the demands of end users.

To help those clients scale, Pismo has been dividing its platform into a series of layers, where transactions can be connected across a variety of interfaces or across different data streams, such as Social Security numbers, biometrics or chip data related to credit cards. Eventually those data streams can involve real-time authentication, notarized authentication by third parties or other information.

Looking ahead, he noted that Pismo, with additional offices in Asia and in Europe, is seeing several banks striving to replace their legacy technologies. They’re also seeing demand from FinTechs that have used “off the shelf” solutions in the past but now do not feel as if they are, in Josua’s words, “in control” of the payments and commerce experiences. Pismo’s platform enables those firms to issue cards and facilitate peer to peer transactions.

Many markets are offering subsidies or other incentives to use their digital accounts. The incentives are necessary, he said, because in markets such as Brazil, there may be an acceleration of new account openings, but transaction volume is not keeping pace. Ubiquity is a goal, but utilization is too.

No conversation on financial services would seemingly be complete without mention of the blockchain and its place in infrastructure — and cryptos too. Josua said that the vulnerabilities of crypto to fraud and the inherent risk make those options less interesting for banks. People want to have control and someone orchestrating the experience for them — and there will thus be room for intermediaries in the mix.

As he told Webster, “So much of what happens and what matters are not necessarily features that a client can see and touch.”

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NEW PYMNTS DATA: THE 2021 HOLIDAY SHOPPING OUTLOOK

About: It’s almost go time for the holiday shopping season, and nearly 90% of U.S. consumers plan to make at least some of their purchases online — 13% more than did in 2020. The 2021 Holiday Shopping Outlook, PYMNTS surveyed more than 3,600 consumers to learn what is driving online sales this holiday season and the impact of product availability and personalized rewards on merchant preference.

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