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Trillions of dollars are spent on credit and debit cards every year in the US. These payments are all processed on one of the most expensive card processing networks in the world, costing merchants tens of billions of dollars. Account-to-account payments, otherwise known as pay-by-bank, is yet to take off in this country but it does have the potential to put some of these card processing dollars back in merchants’ pockets.
My next guest on the Fintech One-on-One podcast is Eric Shoykhet, the founder and CEO of Link Money. His company has built the infrastructure needed to bring scale to pay-by-bank in this country. After we recorded this conversation there were several big announcements in this space, so it looks like 2024 could be a big year for pay-by-bank.
In this podcast you will learn:
- The founding story of Link Money.
- Why the US has the highest card processing costs in the world.
- How Link Money’s pay-by-bank offering works.
- The data access partners they are using.
- Why this is not an established payment option in the US yet?
- The different components that Link Money needed to develop.
- The coverage they have of the total number of deposit accounts.
- How you get consumers to adopt this new payment method.
- Where this makes the most sense for potential merchants.
- How Eric looks at the competitive payments rails in the U.S.
- Why pay-by-bank will be part of digital wallets.
- The challenges Link Money needs to overcome to be successful.
- His vision for the future of retail payments.
Read a transcript of our conversation below.
Episode 457: Eric Shoykhet, CEO and Co-Founder of Link Money
Peter Renton 00:01
Welcome to the Fintech One-on-One podcast. This is Peter Renton, Chairman and Co-founder of Fintech Nexus. I’ve been doing this show since 2013, which makes this the longest running one on one interview show in all of fintech. Thank you for joining me on this journey. If you liked this podcast, you should check out our sister shows The Fintech Blueprint with Lex Sokolin and Fintech Coffee Break with Isabelle Castro, or listen to everything we produce, by subscribing to the Fintech Nexus podcast channel.
Peter Renton 00:39
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Peter Renton 01:21
Today on the show, I’m delighted to welcome Eric Shoykhet, he is the CEO and co-founder of Link Money. Now Link Money is all about pay by bank, they have built pay by bank platform that competes directly with credit and debit cards. And obviously, the reason to do this is because the processing fees for debit and credit cards continue to rise, it’s getting more expensive. And paying by bank is simply a less expensive alternative. So we’re talking about exactly how their system works, how they’re rolling it out where it makes sense to use. We talk about also why merchant fees are so expensive in the US the most expensive in the world. In fact, we also talk about all the different types of payment methods that are available to consumers today, how they’re going to win consumers over when it comes to sort of the time at checkout when they’re choosing a payment method. We talk about fraud prevention, and we talk about the future of retail payments. It was a fascinating discussion. Hope you enjoy the show.
Peter Renton 02:29
Welcome to the podcast, Eric.
Eric Shoykhet 02:30
Thanks for having me.
Peter Renton 02:31
My pleasure. So let’s get started by giving listeners a little bit of background about yourself. You haven’t, you don’t have a long career because you’re still very young. But tell us some of the highlights of what you’ve done so far in your career.
Eric Shoykhet 02:45
Yeah, so I started my career working at Blackstone in the restructuring group there after university. And then I went on to work at a hedge fund covering a few different sectors, including industrials and financials. And after that, I decided to start a company called Adam finance, which is in the fintech space focused around investing information and data. And after that, ultimately, founded Link Money, which is the company company I currently am CEO of and run, that we’re chatting about today, and have been doing that ever since.
Peter Renton 03:20
Okay, so tell us a little bit about the founding story for Link Money. What did you see and what was the impetus to start the company?
Eric Shoykhet 03:29
So Link Money provides a pay by bank solution for enterprise merchants in the US. That’s our bread and butter. That’s what we focus on. The impetus for starting it really came about from, you know, my days covering financials actually spent some time at the hedge fund I was covering European financial specifically. And in Europe pay by bank has grown quite rapidly in the last decade or so, and has taken a lot of share from cards, both debit and credit. Obviously, debit is a bit more prevalent in Europe. And then credit is here in the US, but has grown to something like high teens percent of payment volume digital payment volume in Europe. So saw that trend there. And obviously was acutely aware of the cost of payments in the United States being pretty much the highest among any developed market in the world. And obviously, this is still the largest and deepest, you know, economy and obviously e-commerce market and digital payments market in general, versus, you know, some of these other countries in Europe.
Eric Shoykhet 04:25
So it’s the largest market, it has the highest payments costs. And it struck me as somewhat of the no brainer for someone to come in and focus on driving down those payment costs through a cheaper pay by bank offering, like we do at Link Money with the view that, you know, merchants were reaching an inflection where the cost of payments was simply too high versus the value that these offerings in terms of accepting card payments we’re providing to the merchant and we’ve kind of hit an inflection in that kind of cost, value add debate from a merchant standpoint. And then I think the second piece was from a and we could talk more about this from a building perspective of the infrastructure available to you no need to build a pay by bank solution that worked well in the US was finally there. And consumer behavior in terms of familiarity, and I guess, experience of, you know, account linking, and bank account authentication had dramatically grown, and especially post COVID. That’s something that most people at that point had finally seen. So I felt that, you know, we were there from a merchant perspective, we were there from an infrastructure perspective, and we were there from a consumer behavior and familiarity of the right UX perspective, and with those kind of key ingredients felt that, you know, the timing was right to launch an enterprise focus pay by bank offering in the US.
Peter Renton 05:46
Okay, so before we dive into Link Money, I’d love to get your perspective on why we, you said that we have the highest payment processing costs in the world for card payments. Why did it get that way?
Eric Shoykhet 06:01
You know, it’s kind of like healthcare in the sense that, you know, Europe obviously has way lower health care costs than the US. And some of that is because they’re free riding on kind of the high cost in the US, right. And I think I think payments is somewhat similar in the sense that Europe is much more regulated, there’s much more strong centralized regulatory authority to drive those costs down. And with respect to payments, it really boils down to that there’s much more regulation of open banking and card processing fees in Europe, that have resulted in cheaper processing costs, and more initial adoption around pay by bank in Europe, in the US, because we don’t have that sort of regulatory environment where the government can kind of mandate payment costs. Obviously, there’s the Durbin amendment inside of Dodd-Frank, which specifically limits debit card, you know, interchange fees for regulated debit cards, which is obviously only probably about a third of the debit card market for the big banks. But basically, other than that, actually, before that, there was no regulation. So even now, there’s still just that piece, right. So most of debit is unregulated. And obviously, credit is completely unregulated, although there is, you know, there’s been some talk in Congress of doing something, I think it’s extremely unlikely.
Eric Shoykhet 07:12
So the reality is most of card processing market, the United States is unregulated. And because of that, there is this oligopoly between AmEx, Visa and MasterCard. And the result of that has been, you know, just empirically rising card processing costs and interchange fees over time, a lot of that increase has actually come or a good chunk of that increase has actually come recently, post COVID. And there’s been basically the largest increase in card processing costs over the last five years versus kind of pretty much any other point over the last 40. So that has led to kind of acute merchant pain, in terms of how much they’re having to swallow to accept payments. And obviously, you know, for merchants, this isn’t new, you know, accepting payments is like not a new thing, right? Card processing is not a new thing. This is not like some new technology that came out of nowhere, the same cards, same network, the merchants are just trying to get paid. And so I think there because of that, I think merchants at this point really see that the cost of accepting payments, and the cost of accepting cards specifically, is very disproportionate relative to the actual value add, which is, you know, it’s a somewhat commodified task, you know, someone needs to just pay it. Again, it’s not a new thing. It’s not a new thing. And digital payments are not a new thing personally. And so that’s kind of where we’re at. And I think a lot of is just due to this, you know, lack of regulatory infrastructure in the US and the nature of the concentrated market of the three major networks versus the fragmented nature of the merchants, obviously, if you had three card networks, and it was just three merchants on the other side, I think it may be a different kind of negotiating dynamic, but that’s just kind of the reality of the market structure.
Peter Renton 08:52
Right. Right. Gotcha. Okay, so can you maybe just take us through how your offering works? I mean, what do you need to do? Um, you said, you’re targeting enterprise, right? How are you actually getting your offering into enterprises?
Eric Shoykhet 09:12
So the merchant can either integrate our product directly, or use a partner that we have that they may use for an orchestration layer or processing or, you know, for their software. It depends on the specific industry vertical and the nature of the merchant. But it can either be that sort of direct integration, or basically flipping a switch if it’s through one of our partners. And the way it kind of functions in the user experience is quite simple. There’s gonna be a button in the checkout flow that says pay by bank, or the merchant will text you a link or email you a link where you can click and go through the same flow. Once you click Pay By Bank, you’ll basically select your bank and then either authenticate with face ID or enter your credentials. And you’ll see a little spinner and then hopefully it says payment successful and that’s basically it. The flow, there may be some small additional steps for secondary security measures and other things depending on which bank you use and how their normal kind of login flow is. But it’s basically the same as if the end user was logging into their bank account through their mobile app or, you know, on a web browser.
Peter Renton 10:18
Are you linking through Plaid to get it all connected? Are you doing this? How are you actually getting them to link to the bank?
Eric Shoykhet 10:24
Yes, so we have several data access network partners, including Akoya and Finicity that we work with, which is owned by MasterCard. So they’re very close partners of ours. Through our data access networks, we have for the vast majority of banks, especially the large ones, you know, direct off connections, which means these are extremely secure connections that there’s no actual sharing of password or user ID or any of that nothing is stored, nothing is screen scraped, it’s basically the same as you directly logging into your bank account through a mobile app or a web browser. So that’s how it actually functions. And then once you do this first time flow, the bank account is effectively saved or stored just like a card when on file. Again, we don’t store user credentials or anything like that. But it functions in the same way. There’s a token. And so when the merchant wants to charge this account for, let’s say, another month of the subscription, or you just want to buy something from this merchant again, and then you’d have to save payment information, a function is just like a card that you would have saved in the merchants profile.
Peter Renton 11:25
Gotcha. Gotcha. Okay. Okay. So you talked about Europe, and I’m from Australia, where we’ve had we’ve had pay by bank, I mean, it’s got to be 25 years now, where it’s become pretty ubiquitous. No one’s done this yet. You’re not going up against sort of an established incumbent? Why hasn’t anybody done this yet in the US?
Eric Shoykhet 11:47
Yeah, that’s a really good question. And actually, that goes to, you know, when we’re just talking about what the product is, and how it works before, I think we can dig in a little more of that, because it gives clarity on why this is so difficult. So obviously, the user flow and the merchant experience of integrators is pretty easy for the merchant. It’s pretty, it’s not totally no code, but it’s very low code, and some more integrating any other sort of payment method. So that all sounds well and good. And it’s very easy. Under the hood, in terms of what we have to do, it’s actually extremely complex. So the way the way we operate is, and our goal is to turn this whole experience of pay by bank into basically a card-like replacement for the merchant. So at checkout, the merchant knows the money’s good, the funds are guaranteed to show up in the merchants account, and you know, one or two days t plus one, t plus two, same as cards. And it’s a very seamless UX for the customer. So that all is intended to make, you know, the merchant feel like this is no different or no worse than accepting a card. And the kicker of courses, we tend to charge merchants 70, to 80%, less for processing, than cards. So that’s usually in the one to 1.2% range in terms of processing costs, cards are often well north of 2%. A lot of the merchants we deal with pay 2.5, or even more, and our value prop to these merchants is we lower your processing costs. And we also help reduce fraud, both actual and friendly, because it’s a much more secure payment method. So that’s just zooming out, like what the value prop is to the merchant and how it’s exactly pretty much apples to apples versus cards.
Eric Shoykhet 13:15
The reason this is so complicated is because under the hood, there is no actual real time accounts account payments in the US, we obviously have FedNow. So that enables for the select banks that are starting to adopt it. And basically that’s no one yet. But when that does happen, there will be credit push accounts account money movement, that means that the user needs to approve every transaction and authenticate each transaction. So it cannot work like card on file, like what we talked about before, which obviously, from a merchant standpoint is really not good, right? That actually eliminates a lot of the use cases. So we will have that in the US. But that’s basically it. So ultimately, we have to move money on the ACH network. So what does that mean? That means that the money is not moved in real time, it can take several days or longer, there’s actually a period also where the customer can can kind of recall the money or split the transaction, which has a decent tail to it. And so because of all these things with ACH, it makes it extremely difficult to offer pay by bank in the United States. And the other markets we talked about, I don’t know Australia as well. But I believe this is true. I know for sure in Europe, if you look at India, with UPI or Pix in Brazil, there’s real time accounts account money movement, right? So once you have real time accounts account money movement, the processor or the pay by bank provider doesn’t need to guarantee the money, right? It’s just moves in real time. And you see if the person has enough money, they do great the money moves. And that’s it. Right? Obviously, there’s some complexity to it. But that’s, that’s, you know, much easier in the US because we have ultimately, ACH as the bedrock of what we’re using.
Eric Shoykhet 14:47
What we need to do then is to figure out, does this person have enough money in their account to pay this and we can’t move the money in real time. So that’s why we guarantee the money to the merchant, so the merchants don’t have to worry about any of this complexity. But under the hood, we have to pull information from on your account, we have to decision you in real time, we have to actually move the money over a period of a few days. And obviously, we’re on the hook if there turns out to be insufficiency of funds. So that makes this very complicated. It’s actually you know, all this decisioning, you need a whole decision engine need to pull in all this customer data on the account, and on the profile of the person to make this sort of decision. So because of this lack of real time, accounts account, money moving to your assets becomes a much, much more complicated exercise. That’s number one.
Eric Shoykhet 15:33
Number two, there is in these other markets, true open banking access. So what that means is that the ability to pull in account, bank account information, and kind of account and routing numbers, things like that is pretty much legislated in Europe. So everyone, the banks have to make that available. In the United States, we don’t have that sort of regulatory framework at all. The CFPB recently released some rules on open banking, that’s going to kind of make this easier. But the reality still is, this is very much a bank by bank type of thing. There is some standardization. But it’s still very different. We obviously have 10,000 banks in United States. So we have to work with our data access network partners to make sure these connections work to make sure the information is sent to us in a consistent way. And there’s a lot of complexity in how different banks report different things. And something as simple as you know, the way banks label transactions in the account history, they do it differently. So something you think that if you get this sort of specific code, it means something and then for another bank, it means something else, right. And that sort of data is essential to us, when we’re looking at the account information to make sure that this person has, you know, there’s not a fraudulent account, there is enough money, because again, ultimately, we’re on the hook for that risk over some number of days to ensure it settles because we’re guaranteeing that money to the merchant. So all this complexity kind of bubbles up into you needing to build a really robust product and infrastructure. And ultimately, you know, as a pay by bank provider, United States, we really are the payment method. We’re both the merchant acquirer, and the processor and the payment method. So we’re doing all of those pieces, versus you know, if you look at cards, you have those pieces split up between several parties.
Peter Renton 17:08
Yep. Yep. So then what what sort of coverage do you have, as far as you know, the banks, you’ve mentioned there’s 10,000 banks and credit unions in this country. If you’re, you know, you bank with a small credit union or a small community bank, are you going to be able to use pay by bank through Link Money?
Eric Shoykhet 17:26
So we have 95% of all bank accounts in the United States, there’s obviously a lot of banks, the big banks still do represent a nice healthy chunk of of the basically the total deposit accounts in us. But we have, you know, well, north of 90% coverage in the US in terms of deposit account. So most folks will be able to use this pay by bank product, pretty much irrespective of who they bank with.
Peter Renton 17:48
Okay. Okay. So it’s pretty obvious what’s in it for merchants, they have credit card fees going up, this is a much cheaper alternative. But what is in it for consumers? Because I like for me, personally, I like to play the credit card rewards game. And there’s a lot of people that do that. Also, many that don’t, but what how do you get consumers to adopt this, this new method?
Eric Shoykhet 18:12
Yeah, I think first principles, this is a really simple user experience. And it’s more secure than using a card. So for a lot of the major banks, this flow will basically just take take you to your mobile app for the bank that you use, and you’re just going to authenticate with face ID. So in many respects, it’s less friction than actually entering your card information. For the merchant, it’ll be kind of a very easy and secure user experience, you don’t have to give the merchant your card number, your expiry or CVC. So again, it’s very seamless UX and actually is more secure. Taking a step back, look, there’s obviously folks who care a lot about their credit card rewards. That’s definitely a segment of the market. But, you know, as we talked about before, you know, debit is actually 30% of payment volume and digital payment volume in the US, it actually exceeds credit. And then within that two thirds of that volume is fully unregulated. So merchants are actually paying a lot of money for this unregulated debit volume, and the customer’s not getting any rewards for that. And then even within credit, you know, a lot of the cards don’t actually have high rewards. And a lot of folks just use the credit card in many contexts, even when they’re buying from a known merchant. Now for credit expense extension or to be able to dispute or anything like that, it’s just because that’s what they pull out of their wallet. So I think the reality is that adoption ultimately will have to, you know, initially come from merchants pushing this and that’s what we see. And there’s a lot of merchants we work with that can be, you know, creative about how they get consumers to adopt. That means putting this in a certain place in the user experience. That means doing marketing campaigns, and that ultimately may mean giving some incentives. You know, giving some cash back, giving some discounts, giving some rewards, especially for merchants that have strong rewards programs and to know their customer well. And so that’s the sort of behavior that we see from merchants in terms of getting, and giving consumers an added incentive to kind of share in the reduction of overall processing costs that the merchant is benefiting from.
Peter Renton 20:13
So then when it comes to adding merchants, I presume is this live today? Are there people processing volume right now?
Eric Shoykhet 20:20
Peter Renton 20:21
So how are you? How are you approaching sort of the Imagine you’re not going around to the local coffee shop and asking them to join Link Money, but you’re talking like big e-commerce companies? What how are you rolling this out?
Eric Shoykhet 20:33
Yeah, it’s a good question. So well, the way we think about the world, in terms of who should adopt this is we’re very focused on ultimately, what’s the savings through the value chain, and like, what’s the savings to the merchant. So we want to focus on areas. And this is sounds obvious. But we’re saying we want to focus on areas where this product makes sense. And what I mean by that is, it does not make sense for us to push a coffee shop to adopt this for a customer that’s coming in and spending $5 on a cup of coffee, right? There’s just not, there’s not enough value and dollar savings there for that. Where this does make sense is where there’s a repetition of purchase between this the customer and the merchant, so that the customer is buying from that merchant, somewhat regularly, it could be you know, a few only a few times a year, it could be every month, it could be several times a month, it could be daily. So that’s number one. And then number two is the purchase amount needs to be not like a few dollars. So usually, we like to see purchase amount, at least $10 or $15 per transaction, ideally, maybe more in the $15 to $20 range. And that kind of intersection of some repetition of purchase, and at least kind of $10 or $15 per transaction, the economics for the merchant, and the economics of the savings make a lot of sense, the dollars are real, right. So those are the types of areas we focus on. So to give you specific examples, we like high repet, repetition e-commerce. So that could be something like Amazon, where you’re buying very regularly, that could be something like an Uber or DoorDash, or something where again, you’re buying very Instacart, wherever you use for kind of weekly ordering, let’s say it could be subscriptions. So it could be a Netflix subscription, it could be a Dropbox subscription, could be Spotify, anything that’s very repetitive subscription base, which is usually monthly. So it could be things like that. And then it could also be you know, a lot of verticals in that are not related to, you know, the obvious ones of e-commerce. So we have merchants in the parking space. Parking is great, because a lot of folks pay for parking on a monthly basis or park every day. It’s very recording storage units insurance, you know, we have merchants that we’re working with in the charity space, it’s another good one where people are, you know, donating regularly, and often the card processing costs are very high. So there’s a lot of these areas where, again, there’s a known merchant and a known customer, and they’re giving to that merchant, you know, regularly, often on auto pay, right? You think about your screen, if you have a storage unit, you just have a card on file, you don’t think about it, you know, a few $100 a month for storage, and it turns into very, very expensive processing costs for that provider. So those are the types of verticals we like. And those are areas where pay by bank just drives a lot of savings. And it really doesn’t make sense in those categories for necessarily that that money to be moving on card rails.
Peter Renton 23:13
Right, right. So, you know, let’s talk about the payments rails for a second because there’s, there’s new things coming on, there’s blockchain focused ones we’ve got, you know, there’s there’s pays that hasn’t hasn’t launched yet, which I imagine you would consider maybe a direct competitor, buy now pay later is everywhere you go to a lot of these places, and you you can see you can pay with Amazon at a different different places. So how are you kind of looking at the competitive landscape here? And is there a concern that maybe consumers are just gonna get overwhelmed with too many options?
Peter Renton 23:47
Right. What about digital wallets, though? Because I’d be curious about what you think, you know, I use Apple Pay all the time. You know, I can go into Apple Pay and use my Apple Cash balance to pay for something at checkout, which I don’t think flows over card rails. But you can correct me if I’m wrong there. But I mean, I can imagine this pay by bank being part of Apple Pay or Google Pay, what have you, is that sort of what you’re thinking?
Eric Shoykhet 23:47
I think fundamentally, there needs to be a payment method in the United States that’s new, that’s cheaper. And again, that sounds like an obvious comment. But a lot of these innovations are more expensive payment options, right? You go back to Apple Pay. Apple Pay is a more expensive payment method. It’s apple adding another fee on top of card rails. You look at BNPL. BNPL is, well I think is uneconomic and doesn’t reallly make sense. So that’s a separate conversation, but it’s more expensive. And the reason it is more expensive is because the default rates on these BNPL loans are extremely high. And you know, generally speaking in a lot of cases, you’re extending credit to people who ought not to have credit or you know, aren’t, you know, good counterparties or good risks for these sorts of transactions. So, because of that, the cost of BNPL for a lot of these merchants is 5/6%. Again, it’s a much more expensive payment. And in a lot of cases, actually, the repayment as insane as it sounds, the repayment of the BNPL loan is on card rails. So you’re literally if it will another expensive layer on car rolls, which is wild, you know, Amazon Pay, waving your hands, whatever, all these things, again, it’s just easier UX on top of card rails.
Eric Shoykhet 24:53
So what we need in this country is fundamentally a cheaper payment method, because that’s what merchants need because the cost of processing is divorced on the value that it’s providing at this point. So that’s what we’re doing pay by bank is truly a significantly cheaper payment method, it’s 60 to 70% cheaper for a lot of the merchants we work with. And that is real disruption, real innovation. A lot of these other payment methods, again, are just, you know, nicer you axes or whatever, but again, on top of cartels, and that just makes them unsustainable and more expensive than in a lot of respects. So we’re truly trying to, to actually lower processing costs. And that doesn’t mean these other payment methods won’t be exist and are useful in certain respects. But for a lot of verticals we focus on ultimately, what’s gonna really matter for these merchants is cheaper cost of processing, and you’re actually seeing other payment methods, whether that be PayPal or BNPL, losing share at this point, because their merchants are figuring out basically, you know, I think this mentality has shifted and is helping us there was a mentality of offer every payment type under the sun, that was the old merchant… does offer everything like the consumer choose, when merchants are finding out is that when they pull some of these more expensive payment methods, you know, take PayPal as an example, that volume is going to cards at lower costs, right? Because Paypal tends to be more than cards, for example. And so now merchants are being much more selective and think through okay, what do I really need to offer? And you know, I think the mix of cards and pay by bank makes a lot of sense, because, you know, some of that volume will go on to the cheaper rails of pay by bank, a lot of it will still be on cards, and then you won’t have the same necessarily, of volume going through, let’s say something like PayPal, which is, or BNPL, which are both even more expensive than cards.
Eric Shoykhet 26:57
Yeah, absolutely. I mean, this is going to be just another payment method. So you’ll have your cards, you’ll have pay by bank, you may still PayPal. And this is just going to be another payment method that people use, I think what’s great about pay by bank and what’s going to be key and helpful to the adoption, unlike something like, let’s say crypto or BNPL. This just functions with your existing bank account. So the user doesn’t need to do anything, right, there’s no sign up. There’s no separate flow, there’s no separate app, there’s no other currency they need to do. This just works and functions with your existing bank account. That’s it. They’re just authorizing with your existing bank account. So by definition, pretty much obviously, we don’t cover every single one of the 10,000 banks, but we cover let’s say 95% of US deposit accounts. 95% of people in the United States can use pay by bank already without me needing to do anything, just simply going through the basic initial flow. And that’s what’s so great about it, because customers are already set up to leverage this without meaning to, you know, do something or sign up for something else.
Peter Renton 27:59
Right. Okay. Okay, so last question, then I want to sort of, if you could sort of look into your crystal ball and give me a vision for the future of of retail payments in the same time, maybe, obviously, I’m sure your vision includes Link Money being wildly successful, but what are the challenges that you need to overcome to actually achieve that vision?
Eric Shoykhet 28:23
Yeah, so I think if you look, let’s say 10 years from now, I think digital payments are going to comprise basically credit and debit cards and pay by bank, I think you’re gonna see PayPal effectively disappear over the next 1010 years, I don’t think there’s really a true use case anymore, for most merchants. And I think BNPL is unsustainable and will also, you know, in a large respects disappear, because the model doesn’t work. So I think ultimately, what you’re gonna have is, you’re gonna have your higher cost payments, there’s gonna be credit cards, you’re gonna have your middle ground, which is going to be debit. And I think pay by bank will take a lot of share from debit and, and a bit from credit as well over the next 10 years. And I think you’ll see it evolve, in many respects, like it has in Europe, where it will be, at some point, some double digit percent of digital payment volume, and you’ll see both debit and credit probably come down a bit, and then I think you’ll see a good amount of share loss from PayPal and BNPL. So that’s my kind of overall prediction. I think that’s just going to be a function of payment volume looking for cheaper rails. And again, the reason the reason why it’s not going to be everything and this isn’t a zero sum game is because there is a lot of volume that should be on, you know, credit cards, let’s say right, if you’re buying from, you know, merchant, you don’t know it’s travel related things, maybe you want to cancel more easily. There’s a lot of there are use cases where you need credit extension. So that will continue, obviously, but there’s a lot of volume, which has no business being on expensive rails, where it’s kind of a recurring purchase between a known customer and a known merchant, and the merchant can encourage and better incentivize adoption on cheaper rails. So I think that’s how the market is gonna evolve.
Eric Shoykhet 30:00
In terms of challenges, look, any new payment method has challenges in terms of getting consumers to adopt, right? It’s no different than, you know, I remember, let’s say, you know, six, seven years ago where people were saying that wallets will never become popular in the US, right? And wallets had been very popular in places like China and Europe. And lo and behold, wallets are now popular in the US. And so the US just tends to be a little bit slow on adopting payment methods. I think we’re, you know, I don’t know why there’s a bunch of reasons where it’s more fragmented ecosystem, there’s less regulation, consumers are maybe a little less on the bleeding edge of the tech curve when it comes to payments versus some other markets. But ultimately, these things happen in the US just like they do in other markets. So I think this whole notion that pay by bank won’t take a lot of share in the US is, is incorrect. And I think it’s going to evolve similarly to other markets just on a lag, both because of, you know, maybe some of this consumer behavior, but also just because the infrastructure, and the money movement hasn’t, in terms of real time account to account money movement hasn’t been here in the US. So we’ve overcome a lot of those obstacles to build a product that works easily. But of course, consumer adoption always takes some time, it’s going to take merchants to drive this and to educate consumers. But the good news is that I think merchants have had a come to Jesus moment and are at the point where they can’t put up with these high cost of payment processing fees anymore. And so they are aggressively pushing and thinking about pay by bank, and that will ultimately drive consumer engagement. As consumers become more familiar with it and see it’s an easy UX, are getting some incentives and discounts and rewards for merchants to adopt. I think they’re just going to naturally get more familiar and want to use it more just like has happened with other payment methods.
Peter Renton 31:41
All right. Okay. Well, will be interesting to see how it pans out. Eric, I really appreciate you coming on the show today. Best of luck. And let’s let’s see if the US can follow the lead of other countries there. So anyway, thanks for coming on. See ya.
Eric Shoykhet 31:56
Thanks for having me.
Peter Renton 31:59
I hope you enjoyed the show. Thank you so much for listening. Please go ahead and give the show a review on the podcast platform of your choice and go tell your friends and colleagues about it. Anyway, on that note, I will sign off I very much appreciate you listening, and I’ll catch you next time. Bye.