60 Minutes, debatably everyone’s favorite Sunday evening television spot, took an interesting look at the fintech industry last week. Focused on fintech startups, 60 Minutes showed how these companies were using new technology to change the financial industry and process payments online.
Lesley Stahl, who hosted the segment, included an in-depth interview with Stripe, an online payments company. Focused on the ease of use of their platform, Lesley went through an example with Patrick Collison (founder of Stripe) on how to set up an online business for homemade dog food. Seemingly with a few clicks and a few lines of code, Lesley was all set up to go. But in all reality, it isn’t quite that easy.
While the setup to process payments online was portrayed as “easy” – the segment seemed to entirely gloss over the role that banks play in this system (and almost seemed to pit them as the enemy). However, in reality, banks are the rails that the entire process is riding on. While you can set up a website for homemade dog food, if the payment gateway hasn’t gone through the due diligence with their bank to prove you’re a reputable merchant, all those dogs will go hungry.
Buyers are always going to want to know that the merchant they are buying from is reliable, just as merchants will want to know that these buyers aren’t fraudsters:
“If you didn’t need that protection, then you wouldn’t need banks, and you wouldn’t need the card schemes,” Dangelmaier explained to Karen Webster of PYMNTS.com. “Anyone would just be able to use anything to pass money back and forth; obviously, it doesn’t work like that.”
Though 60 Minutes framed these fintech startups as poised to take down the banks, that ultimately won’t be the case:
“Banks are really doing a lot more than just lending; they’re actually processing the payments on behalf of this really cool middleware that ourselves [BlueSnap] and others like Stripe have built to make it easier to get connected to the banks. The goal is to make it easier for merchants to put their products online — not eliminate banks,” Dangelmaier said.
With these fintech startups beginning to run at full speed and new norms on how people pay for things being established, of course, banking will change its ways to adapt. However, to keep people safe and secure, we will always need the banks to have our backs.
If you think your payment gateway is taking too simple of an approach to help your company process payments online, you may want to start thinking about switching. Luckily for you, we’ve created the ultimate guide to switching payment gateway providers (you can thank us later):