Dear Friends,
We are excited to share that McGovern Smith Advisors LLC is entering its fifth year of operations this May. To celebrate, we have refreshed our look to better communicate with our clients. Come visit our new website at www.mcgovernsmithadvisors.com.
We would also like to take a moment to thank our clients and partner organizations, reflect on the current state of the payments industry and our collective accomplishments over the past several years and share our expectations for the rest of 2018 and beyond. We are thankful that our organization and our footprint in the payments industry has continued to grow along with the breadth of customers we serve.
The payments industry has extended well beyond the traditional financial institutions that led its development over the past fifty years. Driven by technology, investment capital (FinTech), new and innovative competitors and the changing demographic makeup of the country and the world (Millennials and Gen Z – individuals 35 years of age and younger – will make up 40% of the consuming public by 2020), the payments landscape continues to change dramatically.
McGovern Smith was founded with the expectation of working with traditional industry players in a non-traditional way. We have succeeded in that endeavor by deploying only senior-level professionals to work with financial institutions, transaction processors & servicers, and merchant acquirers to name a few. At the same time, we have been pleased by the number of non-traditional players with whom we have had the opportunity to work. From FinTech providers to e-Commerce startups, McGovern Smith has found itself positioned at the center of the shifting payments landscape. We have helped to shape the strategy, tactics, and operations of emerging industry participants and helped establish partnerships on behalf of our traditional customer base with some of these new entrants.
The last 18 months have been especially exciting for McGovern Smith. Our partners were active in a variety of areas, including, but not limited to Debit and Credit Strategy, Strategic Sourcing, B2B Payments, Bank Sponsorship, Public Policy, and Mergers & Acquisition Advisory:
- Our “bread and butter” continues to be our vast experience and expertise within credit & debit card strategy and operations, including advising several financial institutions and industry trade organizations with related initiatives.
- Our Strategic Sourcing practice continues to lead the market in assisting financial institutions in the US and Canada with the identification, solicitation and contracting of processing and servicing partners for debit, credit and commercial card issuance and other payments industry services. We also expanded into the medical payments field, assisting a medical payment processing organization in identifying unique processing and servicing partners in support of the development of a new, innovative comprehensive insurance coverage/payment offering.
- As the industry has become more and more interested in Commercial Card programs, McGovern Smith has responded by focusing on the corporate buyer and supplier experience and the broader B2B Payments opportunity. Banks, large corporations, established technology providers, and disruptive FinTech players have engaged our Partners to help them consider, grow, and perfect commercial card strategies and operations along with protecting payments card industry data.
- In the world of Bank Sponsorship, McGovern Smith advised a marketplace installment lender in identifying and contracting with a credit card sponsor bank so they could expand their service offering.
- Our Public Policy team continues to offer strategic counsel to our clients where the public policy arena intersects with their business. We have extensive experience interacting with federal and state policymakers and assist our clients in managing their regulatory, legislative and litigation risks.
- Finally, in an active M&A environment, McGovern Smith has played a significant role, working on behalf of long-term customers and first-time collaborators. We have advised our clients on strategic acquisitions and helped them execute playing an active role in due diligence, valuation processes, and negotiations. McGovern Smith’s experience and acumen with transactions in the payment industry remains unparalleled.
2018 has already been another busy year for our team. Ongoing engagements with regional and national banks, a number of large commercial customers, and several new entrants to the payments industry have our Partners deployed throughout North America and internationally. Regardless, we want to take a moment to acknowledge the dynamics that we believe will continue to change our industry this year and beyond:
- Strategy – Perhaps no other area within the payments industry will require more attention than Payment Strategy in 2018. Issuers will face an unprecedented challenge, as the most engaged, profitable cardholders continue to age and be replaced by younger consumers – more diverse and more demanding of new technology and real-time services. Millennial and Gen Z consumers will demand more complex and socially responsible products and services as well as more online and mobile delivery for those services, fundamentally altering the industry’s reliance upon ever greater rewards to lure and retain customers.
- Strategic Sourcing – Similar to Sponsorship, new, innovative competitors will look to third-parties to provide the infrastructure needed to process and service payment cards while seeking control over the levers that affect the customer experience (e.g. online and mobile access, customer service, rewards).
- B2B Payments – The commercial payments landscape is also subtly changing. Recent events and acquisitions will affect commercial card issuers as they consider product options and it remains to be seen how the onset of real-time payments will affect corporate AR and AP payment strategies. Regardless of that, the general excitement around the commercial payments opportunity will continue to encourage new entrants and better technology solutions for both buyers and suppliers. Perhaps we will even begin to see the long predicted decline in the use of paper checks for B2B payments.
- Sponsorship – Traditional payment card issuers will face continued competition from new, non-traditional players as technology-driven organizations focus upon unique customer experiences while contracting with sponsor banks for the “blocking & tackling” required to issue cards in support of their technologies.
- M&A – 2018 has been an extremely active and diverse year for payments M&A, with many transactions occurring in the card issuing, merchant acquiring, commercial payments and broader FinTech areas. We expect this trend to continue for the foreseeable future as banks and other traditional payments players seek to compete against new technologies and business models designed specifically for more demanding consumers requiring faster and more convenient services that leverage digital and mobile channels. We also expect to see additional (and sometimes surprising) partnerships and strategic relationships between technology companies and traditional financial institutions (e.g., Apple/Goldman Sachs, Amazon/Chase, etc.) determine their likelihood of long-term success and take action accordingly.
We here at McGovern Smith Advisors believe it is safe to say that the next few years will continue the payment industry trend of the past several years – change. New technologies will continue to emerge, driven by unprecedented levels of FinTech investment. Younger, more diverse consumers will demand payment products that satisfy their technological as well as social responsibility needs and desires. B2B Payments offerings will continue to grow and evolve as both issuers and users develop new and unique solutions to their commercial payment needs. And some industry participants will “double down” on their payment businesses while others will cash in their chips and focus upon other aspects of their financial services offerings.
In friendship,
Bill Westervelt – Managing Partner
Jim Leroux – Partner
Scott Reaser – Partner
Jeff Slawsky – Partner
Sean Songer – Partner
Jeff Tassey – Partner
Paul Tomasofsky – Partner
Julie Miller – Principal