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The Week In Payments: Challenger Banks For Business, The Shifting BNPL Race And Crypto’s Killer Use Case

Say what you will about the world of payments and commerce, it’s never boring as every week brings a new slew of issues to the table. And last week was no exception as the great challenger bank disruption started looking away from consumer banking in favor of banking for business, the CFPB finally took notice of buy now, pay later (BNPL) offerings and Square/Twitter CEO Jack Dorsey anointed bitcoin as the currency of the internet.

It’s a world, Ingo Money CEO Drew Edwards told Karen Webster, where things that seemed distant and unlikely a year ago are rapidly becoming real, and causing established players and newcomers alike to start to pay attention.

Square Signs On To Be A Challenger Bank For Business

The rise of digital banks, for example, has been a closely watched trend over the past 18 months, but that scrutiny intensified this week when Square announced the launch of its business-reaching challenger bank, which rapidly drew the world’s attention.

If there was ever a firm to do it, Edwards told Webster, Square is it, because it’s already got such a strong hold on a small business market. There will still be challenges to overcome, Edwards noted, suggesting that while business banking won’t likely see the level of fraud issues found in the consumer realm, the onboarding and authentication process is likely to need to become quite a bit more robust.

But on the whole, Edwards called this week’s move a “beautiful addition to the Square ecosystem.”

“The question, to me, remains how can any of these neo business banks get to know their small businesses well enough to really provide them the credit and the working capital that they need. But again, Square is already doing that and there’s an opening there for truly great customer experiences and modern small business banking. And it’s going to be exciting to see where Square goes with that,” Edwards said.

BNPL’s Uncertain Path Forward

Also of note this week, the CFPB finally took notice of the buy now, pay later segment, via a blog post discussing the fast-growing form of finance with consumers and warning them of potential risks.

It’s a development that Edwards logged as somewhat amusing, given that BNPL is a classic case of “what’s old is new again” heating up the market and turning regulators’ heads, despite the fact that it is essentially a new variation on old-style layaway and installment plans that have been around for generations.

Even so, he said it is still a far more competitive space than had previously existed as issuers, startups and well-established firms are all now entering and jockeying for position in this emerging segment.

For Edwards, his money remains on Apple, which recently announced intentions to wade into the fray itself, though final details are still emerging on whether its Apple Pay Later offering will fit into its existing digital wallet offering.

“Apple has never claimed to invent anything. They just make everything better,” Edwards said of the firm’s entry into the field and its potential. And there is potential here to be built upon, he said, as Apple isn’t the only big name in the game pressing into installments. But based on his previous experience, he said, it has turned out to be less than customer friendly.

“You have your balance and then you have your interest savings balance, and then you have your minimum payment and I’m having to study to figure it out what I actually owe. You can no longer go, ‘Here’s what I owe and here’s the minimum payment,’ there’s this whole other thing there now.”

The Crypto Roller Coaster

As Jack Dorsey anointed bitcoin as the coming currency of the internet this week it was a bit of a head scratcher for Edwards. Edwards owns cryptocurrency (most out of curiosity) and has friends and co-workers who have made millions and even tens of millions on it. But he wouldn’t advise anyone to put their savings in it as a unit of currency, he said, because it is not one. It’s more like a gaming token or a lottery ticket — one might get lucky playing the game, and there are better and worse strategies for play, but at the end of the day bitcoin investment isn’t the world of the serious, from his point of view, though he readily admitted that the likes of Jack Dorsey and Elon Musk are better at predicting the future than he is.

But there are areas outside of the bitcoin roller coaster that look a good deal more promising, he said, such as stablecoins for consumers in markets where currency’s value is unstable, attaching more complex and complete messaging to financial transactions taking the slowness and expense out of moving funds cross-border.

“I think Elon Musk and Jack Dorsey and that whole crowd, they definitely see something and I’ve looked at the numbers, there’s a ton of money there,” he said. “So I don’t see it going away, I just don’t know what it becomes.”

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