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Leaders In Payments
Leaders In Payments
Episode 346 | NMI Podcast Summary: How Consumers are Influencing the Payments Ecosystem
In today's episode, key leaders from NMI discuss how Gen Z and millennials are shaping the payments landscape and what businesses need to do to stay relevant. Tiffany Johnson, Chief Product Officer, starts by explaining how these generations influence payment preferences. Millennials, having witnessed the rise of the internet, exhibit diverse payment preferences ranging from cash to digital wallets, prioritizing quality, service, sustainability, and convenience. Gen Z, as true digital natives, expects seamless, mobile-first payment experiences and highly values privacy and security. Johnson emphasizes the importance of embedded payments and creating secure, seamless consumer experiences for NMI stakeholders.
Vijay Sondhi, CEO of NMI, further explores the evolving payment preferences of these generations, noting that Gen Z primarily uses digital wallets and mobile payments, viewing their phones as extensions of themselves. Both generations are quick to abandon brands with friction-filled payment processes, favoring seamless, secure, and convenient methods. Sondhi highlights the potential of biometrics for secure authentication and the transformative role of AI in payments, which could shift focus towards enriching life experiences. He underscores the need for businesses to rapidly adapt, adopt scalable and inclusive payment solutions, and think like Gen Z to remain competitive.
Kate Hampton, Chief Strategy Officer at NMI, concludes the discussion by emphasizing the importance of omnichannel strategies and payment orchestration in meeting the expectations of Gen Z and millennial consumers. Omnichannel strategies provide a consistent, connected, and seamless shopping experience across multiple channels, including in-person, mobile, online, and unattended. Consumers seek to eliminate friction by having various payment options contextually presented at the right time. For merchants, the challenge lies in integrating these payment methods while maintaining their brand’s customer experience. Hampton explains that payment orchestration involves configuring and coordinating complex payment processes to create a smooth and differentiated experience. When done right, payment orchestration is invisible, ensuring effortless payments and enhancing overall customer experience and brand loyalty.
This episode is a summary of three NMI podcast episodes - please visit NMI to listen to each separate episode.
Welcome to the Leaders in Payments podcast, where we talk to C-level leaders from across the payments landscape. We'll be discussing the products and services that impact the payment space today, as well as trends and predictions for the future of payments. We will also hear stories from our guests about their journeys to the top.
Tiffany Johnson:Hello everyone and welcome to this special episode of the Leaders in Payments podcast. I'm your host, greg Myers, and, as many of you know, as part of our podcast company, we also help other companies launch and grow their own shows. One of those companies is NMI. This episode is a summary of three of their recent episodes. You can hear the episodes in full by visiting nmicom. Slash resources slash podcasts. In this first section, I'm going to be summarizing how Gen Z and millennials are influencing payments, with Tiffany Johnson, the chief product officer of NMI. So here are some of the highlights, starting with the definition of millennials.
Vijay Sondhi:So millennials are generally defined as those born between 1981 and 1996. And they've really seen the evolution of the internet, personal computers, smartphones, firsthand, giving them a unique approach to digital, non-digital, payment methods. And we see that millennials really value experiences, sustainability, digital connectivity, and that really comes to life in their payment preferences. And then you have your Gen Zers, who were roughly born between 1997 and 2012. And they're really the first generation of true digital natives and you see them starting to prioritize things like speed and convenience and seamless digital experiences coming to life in their payment preferences.
Tiffany Johnson:I think those are great definitions that set the table well for our conversation. So we're going to spend a little more time on Gen Zers, since, as you mentioned, millennials have been influencing the payment systems for quite a while now. But what are some characteristics of millennials that the NMI customers, isos, isvs, payfax and banks what should they be thinking about?
Vijay Sondhi:Absolutely so. Millennials typically you're looking at people ages 28 to 43, kind of in that general range and you find that this demographic is very savvy, but they're diverse. So millennials are comfortable with technology, but they still use a mix of payment methods, from cash to credit cards to digital wallets. You see a lot more diversity there. Millennials tend to prioritize and prefer brands that offer quality products, exceptional service, and they're very conscious of brands that support high ethics and sustainability.
Vijay Sondhi:Convenience is key for millennials support high ethics and sustainability. Convenience is key for millennials. Especially during COVID and I'm a victim of this as well we got very used to convenience, like DoorDash and Instacart and just the different experiences that help relieve stress from busy schedules, and so you see a lot of millennials valuing convenience. I'd say one thing that comes through pretty loud and clear for both millennials and Gen Zers are privacy and security concerns, and we see that both generations are prioritizing this. Now Gen Z tends to prioritize convenience a bit more than millennials, but millennials have lived through the evolution of different data breaches and pretty public events, so they tend to be a bit more cautious and pretty public events, so they tend to be a bit more cautious. So, like you said, millennials have been influencing payments for a while, but they are still a buyer persona to be aware of.
Tiffany Johnson:Well, let's dive into Gen Zers, and they're really the first generation to own a smartphone from a very young, early age, and some consider them the single device generation, which I love that term.
Vijay Sondhi:But what does this mean for payments? So there's definitely an expectation within Gen Zers and again Gen Z. We're talking about roughly age 12 to 27, right, and there's this expectation for seamless integration, more so than other generations because, like you said, they've grown up as the single device generation where they expect all different platforms to kind of be in one place as a standard feature and they're mobile first. They use smartphones for shopping, for banking, for entertainment and are much less likely to carry cash and physical cards than older counterparts. You know it's really interesting.
Vijay Sondhi:So my oldest son is 14. He uses Apple Cash and he uses Greenlight Investment. So he has been doing fractional investments since he was eight and he can take out a loan from his parents, from us, and we can charge interest and just the amount of payments maturity that he is exposed to with tools that exist for him, that just didn't exist when we were growing up. And it's really interesting to see not just the single device generation but how much more mature they are with the different financial tools than their predecessor generations have been.
Tiffany Johnson:And if you don't mind, Tiffany, as we close out the show, can you give us a brief summary of the key takeaways for all of the NMI stakeholders?
Vijay Sondhi:Of course, I again just love the series you're doing here, Greg. It's so easy in this industry to get sucked into the cool technologies and to be really solution-driven, but you're bringing it back to where it counts and that's what are the consumers expecting today. And how is that evolving? Because solving customer problems in ways that resonate and meet customers where they are is going to be key to the next chapter of this payments evolution. So I'd say, if there's any takeaways, embedded payments are important. The best payment is the one that you didn't know happened, so prioritize that. Experience and security and trust is key.
Tiffany Johnson:In this second section, I'll be discussing how these demographics are affecting payment technologies with Vijay Sandhi, the CEO of NMI. Let's start with the technology that these groups want to pay with. So can you speak to some trends around mobile and digital payments and the different payment methods and even maybe BNPL? Can you just give us an overview there?
Kate Hampton:Sure, let's start with physical payments, which is using the good old credit card that's in a wallet, and those are two words that are probably very foreign to Gen Zers. They tend not to have what we would remember as physical wallets, these thick things that had checkbooks and bulging cash and coins. And then we added cards. We thought that was modern. Then we made them contactless and put chips on them and called. Then we added cards. We thought that was modern. Then we made them contactless and put chips on them and called them EMV cards.
Kate Hampton:They are just thinking of today the phone being the wallet. So when you say the word wallet, they think of digital wallet, paypal, venmo, apple wallet, google wallet, and so when we think about mobile, mobile is an extension of a Gen Zer's personality and almost physical body, and I would say that millennials sort of celebrate that as well. Maybe not quite as take it that much for granted, but clearly the mobile and the digital is the only way they want to pay. They are not interested in the older swiping, dipping, tapping or you know. Goodness, god forbid a cash or check.
Tiffany Johnson:I feel like there's a generation there that if there's friction they just go somewhere else. I mean, they're just going to get. If it's a website or an app or whatever, they're going to go somewhere else almost immediately.
Kate Hampton:Yeah, one of the things that our research has done around the Gen Zers is that the word friction doesn't enter in their vocabulary and they are also not brand loyal, so they will not go out of their way to accommodate a complex checkout flow which has a payment method that they may not like. They may even have it, they just don't prefer it. They will immediately flip to the next brand where the payment experience is the one which is more native for them. So that's a big change for many of the folks listening to this podcast, because before we would deliver the solutions that were easy for us in the payments industry to deliver and consumers would adapt to us. That paradigm has flipped on its head. We now need to adapt to the payment experience that the consumer wants.
Tiffany Johnson:Well, let's talk about biometrics, because I think it's an interesting topic, especially within the payments ecosystem, and I don't feel like as far as using biometrics to pay for things, I personally don't feel like it's taken off, although it's there. There are iris scans, there's now pay-by-hand, which is obviously increasing in popularity, but what are your views on biometrics? Where do you think it's heading and how do you think these younger generations will embrace this technology?
Kate Hampton:I'm super excited about biometrics, and the reason why is because biometrics are a far more secure and convenient method of authenticating, whether it is for payments or anything else that requires some sort of authentication, because there's no password to remember or forget or be guessed, there's no pin and there's no God forbid again a physical signature, which some merchants still require. They give you a pen and a piece of paper. It's amazing, and so I'm a very big fan of biometrics. However, the complexity with biometrics has to do with the privacy utility tradeoff and for Gen Zers and millennials ironically they are so digitally native and are very open to publishing all kinds of things that older generations would not online they are very concerned about privacy. So I think before we tackle biometrics, we need to delve into privacy versus convenience or privacy versus utility.
Tiffany Johnson:Well, let's turn to the last subject, ai, and you know I don't have many conversations these days about payments without the topic coming up, but some of the several use cases, or several common use cases, are things like fraud, customer service, marketing. But when it comes to payments specifically and tied to this younger generation, where do you see AI making the biggest impact?
Kate Hampton:So AI clearly, as we see it today, is in its very early infancy, and what I believe is it's a little bit like when the motion picture was invented. One of the things that happened when they invented moving pictures, as they called it back then, was they went into the theater where a play was going on and they set the camera at a fixed position and they filmed the play. They didn't have the sound and they basically did what they thought they would do themselves. They didn't think of. You could make a movie where you could splice together different scenes, you could have different camera angles, and so it took them years and years to realize that the motion picture in the movie was much more of a technology than just filming a play in a theater, which was just time shifting.
Kate Hampton:I think AI is very similar. Right now, we are focusing and gravitating towards the items you mentioned, like fraud and marketing and security, but really I think AI we don't know how it's going to play out. My vision would be that AI can help us, by intersecting with payments and financial management, to really move towards what Gen Z is pushing us, which is a world in which we are spending our money on experiences, on changing the world to make it a better place and living a better life, versus literally just balancing the checkbook and trying to accumulate material possessions.
Tiffany Johnson:Well, before we close out, if you don't mind, can you kind of summarize for us, give us a brief summary of kind of the key takeaways? If you were talking to your partners and customers and others that are stakeholders within NMI, could you kind of give us a summary of what we talked about?
Kate Hampton:I think the first thing to remember is that change is the only constant, and so the speed of change is also increasing, like Moore's law, with the clock speed of chips. So we should be ready to adapt as fast as we can. And what we try to tell our partners is because we are a payments infrastructure company, you focus on your business, whether you're in the medical, dental, software space or you are an ISO that is servicing, let's say, field service or the hospitality industry. Focus on that part of the business, on what is the best experience you can deliver, where payments literally disappear, and we will make sure that we adopt the technology that goes into what I call leading edge, not bleeding edge. We don't want to adopt technology too early, but we don't want to adopt it too late.
Kate Hampton:The second point I would say is closed loop solutions probably don't scale, so look to adopting the broader-based you know, the visas, the MasterCards, things that will touch all bank accounts versus a closed-loop system. And that is where we focus on. Rather than supporting, let's say, a Starbucks card only, we'll give you an open wallet from Apple or Google or someone else. And the last one is remember that we are all millennials and we are all Gen Zers. So, even though we talk about, 68 million Americans are Gen Zers and they influence the trends we actually follow what they do. So put yourself in those shoes of the Gen Zer and think like them, regardless of what age demographic you are serving or that you come from.
Tiffany Johnson:And finally, in this last section I'll be talking with Kate Hampton, the Chief Strategy Officer at NMI, about the importance of Omnichannel in meeting Gen Z and millennial expectations and how payment orchestration makes everything possible. Can you give us a basic definition?
Speaker 5:Certainly Omnichannel. To put it simply, all it means is consistent, connected and seamless shopping experience across multiple channels, and these channels are in-person, mobile, online, unattended. But the important step of this strategy is the payment step, which we're here to talk about Great.
Tiffany Johnson:What are the consumers' expectations today? Or maybe ask in a different or better way what are their pain points when it comes to the shopping experience.
Speaker 5:So that is a very broad question that we can take in many directions. But if I had to boil down the answer, it's going to be they want to eliminate friction, and friction can come from, for instance, seeking information and decision making. So take, for instance, as a consumer, as the card holder do you guys take apple pay or card? Only can I tap, can I dip, can I pay in app, or do I have to do it at register? And so what consumers want is optionality in all of those but, more importantly, importantly, contextuality, which means seamlessly being presented with the option that makes the most sense for them at the particular time.
Tiffany Johnson:So let's talk about it now from the merchant perspective. And obviously consumers want to pay the way they want to pay, with as little friction as possible, as you just mentioned. But what makes this hard or challenging for the merchants?
Speaker 5:For the merchants. So, if you think about who they are, merchants are experts in things other than payments. They can make the best coffee in town, they can deliver the best pizza, they can provide the best CPA advice around in the whole county. And so what merchants have to do is they have to entrust their customer experience to someone who understands their needs but also their customers, and that's a tricky thing to do. Right, and with more and more merchant accounts being issued through software versus traditional payments like a payment terminal from your local bank, the message that we are getting is clear Consumer experience is important to merchants. That's the first one, and the experience is an extension of their brand. The coffee shop wants a certain experience for someone who comes to get their daily latte. The best CPA advisor in the county. They want a frictionless experience for their customers, so when they come to get their taxes, they can have a certain experience without having to think too hard about the payment. They want to focus on the service that they provide and then give them the best experience possible.
Tiffany Johnson:Can you give us the definition of payment orchestration?
Speaker 5:Payment orchestration in payments. Specifically, it just means configuration and coordination. It's a pretty vague term, this orchestration and configuration. That means across either channels or payment types and methods, geographies or even customer specific use cases. The objective of orchestration is to take something that is complex right. You have all of these omni-channel, you have these multiple channels, you have multiple use cases, maybe multiple processors is to curate something simple and intentional for the end user and the orchestration really is means of creating a differentiated experience.
Tiffany Johnson:In this context, what does good payments orchestration look like, or what's the value?
Speaker 5:So, ironically enough, good payment orchestration doesn't look like anything because it's invisible. But a sign of payment orchestration done right is the consumer does not have to think when making a payment, because experience was intelligently, painstakingly curated for them. The value is a broader topic and it depends on the stakeholder anything from superior experience, differentiation, future proofing less customer calls you name it. Orchestration, though, if I had to boil it down is so commonplace now that these values are non-negotiable anymore. So you have, for instance, majority of SaaS platforms that curate differentiated payment experience. They're really orchestrators, if you think about it. They take the use case, how users of their product are going to interact with it, and then they weave together a solution that presents itself at the right time. Or even retailers that have an omni-channel strategy. They're really the orchestrators because they orchestrated what is appropriate for their target market.
Tiffany Johnson:If you don't mind, would you sort of connect the dots for everyone between the customer expectations, omni-channel, more from kind of the merchant view, and then this payment orchestration concept? Can you kind of connect the dots for everyone?
Speaker 5:For sure. So all three that you mentioned, they go hand in hand right. Customers expect a curated experience. The payment orchestration is a means of curating that experience and Omnichannel offers optionality from which that experience can be curated.
Tiffany Johnson:A special thanks to NMI, and specifically Kate, vijay and Tiffany, and as a reminder to listen to all three episodes in full, visit nmicom, slash resources, slash podcast or go and listen anywhere you get your podcast. And to all your listeners out there, I thank you for your time and until the next story.
Greg Myers:Thank you for joining us this week on the Leaders in Payments podcast. Make sure you visit our website at leadersinpaymentscom, where you can subscribe to the show and where you'll find our show notes. If you enjoyed listening, please share on your social channels as well.