Edwin Shea Market president, Central Massachusetts Bank of America Local branches: 33 Local deposits: $6 billion
September 23, 2021
Money & technology: COVID accelerated the evolution of fintech
Photo | Courtesy of Derek Canton
Derek Canton founder of the fintech start-up, paerpay
By Sloane M. Perron
Financial technology, or fintech, is an industry used globally every day, but typically goes unnoticed. Every time a customer deposits a check electronically, uses an app to pay for their takeout food, day trades stock using the Robin Hood app, or pays a friend back using Venmo, fintech is being used.
“Fintech really is everywhere,” said Professor Robert Sarnie, Worcester Polytechnic Institute professor of practice of finance and director of the WPI FinTech Collaborative and Wall Street FinTech Project Center.
According to Sarnie, fintech does not just refer to the software and devices used in this industry, but all the financial data and analysis that accompanies the numbers. Whether it is through artificial intelligence, machine learning, or innovation, fintech is always evolving and trying to streamline financial services.
Sarnie believes the term “fintech” is a daunting and confusing word really detracting from the fact that fintech simply describes financial tools and payment methods used by the public everyday such as Paypal and Venmo.
“It seems so hard because of all this terminology, but it is really basic business and every industry does fintech, they might not see it that way, but they do,” Sarnie said.
The Polar Park baseball stadium is planning for a new marketplace in which the concessions will be handled by an AI, autonomous checkout system run by California-based tech startup, Standard Cognition. As part of WPI’s Wall Street FinTech Project Center, Sarnie’s students will be working with the company to improve their app and learn about the interdisciplinary connection that fintech has with other industries.
The evolution of fintech
According to Sarnie, examples of fintech can be found in the 1950s with the advent of Diner’s Club card, the first modern credit card. Working remotely and teleconferences are commonplace now, but according to Sarnie these methods were already being used in the finance sector for decades; he said citing his 23 years with Fidelity Investments. The financial sector was already making a transition towards remote work; however, the pandemic accelerated these changes not only for banking institutions, but for the general public as well.
“The hard part of fintech is not the technology, it is the culture and the ability of the people to use the technology,” Sarnie said.
Due to the pandemic, the public and small businesses were forced to quickly adopt new methods of technology. Scanning QR codes off of menus, ordering online, and using touchless payments have become familiar for most people. Sarnie believes further advancements in cybersecurity will help individuals, and businesses, feel increasingly safe using fintech.
The technology is available and the public and businesses are accustomed to using fintech on an everyday basis; however, Sarnie believes that the future of fintech lies in its ability to reach diverse users.
“It is about social change, financial inclusion, social inclusion, and diversity. The reason I say that is because fintech is viewed as ‘that is for the wealthy and for people who have money’”, Sarnie said.
According to Sarnie, 60% of Americans do not have more than $400 in their bank accounts, meaning that they cannot pay for emergencies. Through innovations, Sarnie hopes to get fintech in everyone’s hands to help elevate saving and streamline financial services, so they are not just accessible to the wealthy.
Investing in financial technology
Bank of America has invested $10 billion in technology each year for the past decade, with $3 billion per year dedicated to new initiatives. In 2021, the new initiatives allocation was increased to $3.5 billion.
According to Ed Shea, Central Massachusetts market president of Bank of America Merrill Lynch, this funding and the 227 patents granted by the U.S. Patent Office during the first half of 2021, established Bank of America as a leader in the world of fintech.
Technology evolves to meet the needs of clients, Shea said, but oftentimes there is an adjustment period as consumers need to feel comfortable and secure with new technologies. In the past, hard copies meant customers had to wait to cash their checks, but the invention of ATMs and remote deposits became part of the everyday banking routine once the public understood and grew accustomed to the technology.
Bank of America’s goal is to use fintech to create an easier, simpler, and faster banking experience for its customers, Shea said.
Erica is just one of the bank’s latest developments. Erica is an AI banking assistant who helps customers navigate the Bank of America app by directing users to services such as card activation, bill payments, alert setting, and more. In 2020, 7 million clients used Erica for the first time, and by the end of the first quarter in 2021, Erica reached nearly 19.5 million total users, according to data provided by Bank of America.
Since 2017, Bank of America has opened a series of Advanced Centers throughout the country. As technology streamlines the everyday services of a bank, banking branches are evolving more into financial consultation spaces, rather than simply teller-based services. Advanced Centers are high-tech, high-touch financial centers where customers enter, are greeted by a video concierge, and are then directed into rooms where financial experts provide meetings via video-conference. The goal is to use state-of-the-art technology to serve the clients lending, banking, and financing needs.
“At Bank of America, we’re pretty proud in the investments we make in our technology and capabilities,” Shea said.
Fintech startup
Derek Canton, founder and CEO of paerpay, who started his company in Worcester, believes the purpose of his fintech work is finding a public need then using software to develop a solution that fills that gap.
In a world that is increasingly going towards contactless payments, paerpay is an app allowing users to digitally see and pay their restaurant bills. According to Canton, 40% of credit card payments take place over the phone which is not the most secure method, and can lead to identity theft. Meanwhile, other restaurant apps require you to make an account for each different company. Paerpay eliminates the hassle of logging into multiple accounts and allows for easier and safer payments.
Launched in May 2020, paerpay was developed as a direct result of the pandemic.
“COVID became this massive escalation of payments across the board,” Canton said about the sudden shift restaurants had to make in their business/payment models.
Many merchants were not ready for the sudden increase in online payments and oftentimes did not have the operating systems to support these payments. Paerpay allowed these merchants to secure payments without having to rework their software.
According to Canton, credit card companies add a transaction fee to contactless payments since they are traditionally not viewed as secure as in-person payments. Canton’s goal is to continue innovating security measures for contactless payments so credit card companies reduce/eliminate these additional fees which ultimately results in more revenue for merchants.
“I would love to see the card not present and the card present transactions be the same,” he said.
Fintech is an exciting field that is ever-evolving, Canton said.
The pandemic further ignited a high-tech industry already moving toward contactless technology. Apart from wanting to see paerpay used globally, Canton is happy to create software focused on human experiences and needs.
“I eat, live, and breathe this stuff,” Canton said.
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