The Executive Interview Series provides readers with exclusive insights from movers and shakers in the payments industry. The payments industry is under continuous transformation. This series offers diverse perspectives on everything from strategy to payments technology and the industry’s future.
In this interview, TSG marketing team members Jared Drieling and Rachel Hartley spoke with Guy Harris, former Head of Merchant Services for Bank of America, about his recent appointment to TSG’s Board of Advisors, his valuable experiences as a payments executive, and key industry trends.
Guy Harris is a member of TSG’s Board of Advisors and actively contributes to the growth of TSG. With a payments career spanning over thirty years, Guy brings tremendous knowledge and experience to the firm. As a member of the board, Guy supports the development of TSG’s products and services, guides TSG’s strategic initiatives during its current period of growth and contributes to thought leadership content.
Q: Jared D.
Now that you’ve joined TSG’s Board of Advisors, what excites you the most about this new role with TSG?
A: Guy H.
First and foremost, I knew the organization and its capabilities as a customer. Whether at Bank of America or U.S. Bank-Elavon, I actively used solutions and consultancy from TSG. I’ve seen the benefit of what TSG offers, so it’s an easy transition to talk about why we add real value to companies in numerous spaces, whether from a financial institution to all aspects of the industry.
I was a user who saw how the data and information added real value to how I ran my businesses. I used AIM (Acquiring Industry Metrics) for input to determine some of the pricing and sales strategies we used with our customers. And then, at Bank of America, we used some of the consulting services. We were setting up a brand-new platform and needed help to determine the correct answer for a Bank of our size from a distribution and technology perspective.
The second part of the excitement is operating in the U.S. as well as in a European capacity. I met many industry leaders through my involvement in ETA (Electronic Transactions Association). I feel that I can help build those relationships for TSG and expand on the outreach in terms of connecting with significant customers in the U.S.
Q: Jared D.
As the former leader of the payment processing arm of one of the largest bank brands on the planet, what benefits and challenges of being a payments executive that the greater industry or the greater population typically overlook?
A: Guy H.
Whether running U.S. Bank-Elavon, where I ran their global revenue distribution, and then at Bank of America, part of it is managing a financial institution the size of a bank from a scale and distribution perspective. As I think about Bank of America and their customers and the distribution model there, which is slightly different from what I experienced at U.S. Bank-Elavon, your technology stack has to compete against all the innovative payments companies in the U.S. Part of that experience at Bank of America was to understand what the different value propositions and unique selling points are when you’re considering the technology stack and the sales model for the customers you’re going after.
Second, I was lucky enough to be part of a unique industry initiative to bring merchant acquisition back into the Bank of America and build a brand-new platform. Not many banks have done that and done it at that size. So, that gave me a great insight into what’s required to build something from scratch.
The third part is the experience of doing business within a bank. That is a different experience for many commercial payments companies because of the oversight in place with financial institutions of the size of Bank of America.
Per recent TSG research, Financial Institutions continue to be a significant channel for merchant processing. Bank-sourced merchants represent the second largest sales channel for all new merchant accounts, making up approximately 30% of all new merchants. These merchants often stay 10% longer, use more services, and have 11% higher deposits.
Q: Rachel H.
Looking back at your career, what are some of the lessons learned as an executive that you can share?
A: Guy H.
It’s not about the payments space or the technology stack. All those things become important in domain knowledge, but if you strip it back, success comes through building teams and succeeding through people.
I’ve always felt that reflected glory is better than actual glory. I would point to the belief that our role as leaders is to develop people. If you build people up and give them opportunities, then success will come. It’s a cliche, but it’s reality. You’re only as good as the team you build.
Q: Jared D.
What are your thoughts on today’s current economic landscape, and are we currently in a period ripe for investment as it relates to merchant acceptance in the merchant acquiring industry?
A: Guy H.
Despite all the doom and gloom and noise, you’re in an industry where most transactions are still going through unsophisticated terminals.
The beauty of this industry is that it continues to grow every year, and it’s still coming from a combination of economic dependence. The economy is growing, and therefore transactions are growing, but it’s also in the replacement of cash. Every time people switch to cards from cash, we as an industry benefit. On a macro level, transactions have grown at a high level, and have done this for the last ten years or so.
Per TSG, the growth opportunity in the U.S. consumer payments processing market continues to be attractive. In 2022, the total amount of money spent in North America on credit and debit cards was above $11.5 trillion for the first time. Additionally, U.S. consumer surveys about payment preferences from TSG reveal that credit and debit cards are consistently preferred. Debit cards are most preferred for in-person purchases, while credit cards are the top choice online.
Further, the purported recession is now being described as a gentle decline. I don’t think they’re even using the word recession. We’re going to be 2% better than had been expected. The forecasted big decline has yet to take place. This hasn’t taken place at a macro level or at the transaction level.
The market is growing and continues to grow. There are still great opportunities, which is why there are so many people in the payments space. In fact, payments attracted the most funding among fintech subsectors, accounting for over $50B in investments globally in 2021 – up approximately $20B from 2020. A continued surge in interest in areas like ‘buy now, pay later’, embedded banking, and open banking aligned solutions has helped keep the payments space very robust.
Q: Rachel H.
On a related note, consumers and merchants adapt to using newer payments technology when faced with hardships like recession, inflation, or even the pandemic.
So, do you expect merchants to continue to rely heavily on their payments partners to navigate these new environments? Or will new players enter the scene that will use this as an opportunity to break into the industry?
A: Guy H.
About ten to fifteen years prior, payments were considered an expense. Many companies were outsourcing it saying, “We won’t keep it in-house because it’s an investment. It’s just an overhead and an expense, and better people manage it.” Now, the journey we’re on and continue to accelerate on has shifted away from a back-office must-have. In the heart of every value proposition, of every business that we see, from Starbucks to Amazon to Uber to whatever is that payments is no longer a “how do I do a payment as quickly and as cheaply as possible?” It’s a “how do I make this seamless, cost-effective, with a great customer experience?”
As you know, in Europe, it’s consistent across the industry, you “pay at the table” when you can. However, when I was in London recently at an Indian restaurant, they introduced a capability where they didn’t even bring a point-of-sale terminal to the table, it was simply a barcode. From that barcode, you could pay, tip, give feedback, and get a receipt emailed to you. And so, as I sat there finishing my curry, I had a positive payment experience. Looking at how the restaurant had run their business, they were thinking about the start of their relationship with the customer through the end as they paid and left. That changes the investment look, and that’s why I think we have great opportunities in the industry. Familiarity with payments made using QR codes increased substantially from 2022 to 2023, with 78% of U.S. consumers indicating they made at least one payment through a QR code in 2023. This is 11% higher than in 2022.
Q: Jared D.
Throughout your career, you’ve seen many trends come and go. Today, we often hear about how software is “eating payments” as it relates to integrated payments and leveraging those entities as a distribution channel.
Is that a trend we will see continue to gain traction, or are there other meaningful trends that may surface and stick with us for years to come?
A: Guy H.
The answer is that payments and software have been merging for several years now and are doing so at an increasing rate today.
For example, let’s consider a space that has integrated payments into software: healthcare. Healthcare is a prominent sector where paying for your health coverage is a significant challenge. The patient does not pay the majority of dollars billed in a healthcare environment. Why do they not pay? Because it’s a clumsy experience where you receive various bills from different people—the surgeon, doctor, anesthetist, and hospital—all billing you separately, and then the insurance company covers a bit, and so on.
And so, if you think about it, in the healthcare space, having an application on your phone that allows you to pay your bills in one place improves both the customer experience and reduces instances of non-payment. The reason this has yet to accelerate or has yet to happen across the board is because there’s complexity. Still, more and more companies can work out the question, ” How do I integrate and create an integrated experience across multiple channels, allowing you to pay in a software application?”
There are all sorts of examples of where you see this happen, but it has yet to be delivered across every single channel and every single type of partner.
You’re in an industry where off-terminal transactions are growing substantially each year. That’s the opportunity. Whether that be a doctor, a health club, a retailer, or whoever, they will eventually buy an integrated solution that gives more value than just a payment.
Q: Rachel H.
On a related note, what are some payments trends that you expect to gain traction over the next year?
A: Guy H.
As you think about the dynamics of what’s happening in the payments space, a big trend is the drive for instant payments, whether that be consumers with Zelle and PayPal, paying online, or taking money straight from your bank account instead of using a card.
A vast number of instant payments, which are new, must be worked out in terms of the value proposition and what customers will do.
There’s this push-pull pressure on the cards space. For example, merchants sometimes feel they’re paying too much to accept cards.
If I pay instantly and I don’t use my card:
- The money immediately came out of my account, so I lost my 30-day credit.
- I didn’t receive any points, so I didn’t get any reward.
- As it relates to chargebacks, what happens if there’s a problem? The money has been transferred to the merchant, but you didn’t get your goods. How is that going to get resolved?
So, what I’m saying is that when I think of the ecosystem, despite the criticisms and the concerns, it does look after the consumer and the financial institutions. Cards get knocked, but overall, it’s a great system. However, there will be a continued push towards instant payments and payments that will not go through the networks.
Per TSG, the payments market has been in a state of rapid change for several years, marked by:
- Blurred lines – increasingly, one company does not fulfill just one role in the payments market; rather, one company may fulfill multiple roles on both the acquiring and issuing side and offer a variety of different products and services to different audiences.
- Shifts in consumer and merchant preferences – the demand for customized, seamless payment experiences
- Emerging technology – the adoption and integration of technology that makes for unified, cloud-driven experiences.
- Additional participants – emerging company types are reshaping the traditional payments landscape. For example, payment facilitators are boarding merchants within minutes, and independent software vendors (ISVs) are providing business management solutions that integrate payment processing, thereby creating a stickier relationship with merchants.
Q: Rachel H.
Touching on the future of payments, how do you think banks will evolve their offerings to their merchants’ customers as we advance?
A: Guy H.
I’ll go back to my point that banks are very regulated. The classic example would be Square versus a large bank. The speed at which the Squares of this world were able to bring their products to market is considerably faster than banks. As a bank, you must consider what makes your value proposition unique. You can’t compete with the technology’s fintechs head-to-head because you can’t win.
But what banks have is distribution. You have to offer your customers a capability different from a fintech solution, and that uniqueness is your relationship with that customer across multiple products. Often, they will have a credit card or a business account, so you must look at how you reward the relationship that you have with that customer as opposed to a single transaction fee. Then, consider how you support that customer and the relationship you build with them. Banks will still have a significant part to play in the payment space, especially on the acquiring side, as they continue to use their distribution.
Technology is driving significant change within the payments industry. These changes are just the beginning, as we are on the threshold of even more rapid technological growth. The next generation of payments includes:
- The use of a variety of payment devices (i.e., internet of things (IoT))
- The reliance on and integration with software
- Integrated frictionless payments
- Machine learning and artificial intelligence
- Omnichannel payments
- Unified commerce
- Invisible payments via automated checkouts
Q: Jared D.
As the current Board Chairman of Chargebacks911, a leading contributor in reducing chargeback fraud, the focus on chargebacks has heightened interest.
What insights could you share about the evolving landscape of chargeback management?
A: Guy H.
One of the stats we found from surveying hundreds of merchants is that chargebacks for eCommerce in the U.S. are growing at 19% on average for merchants. For perspective, chargebacks in general are increasing by 20%. That’s telling you that if you’re in the banking space, online retailers are a sector that requires the same kind of focus and attention that payments had fifteen years ago.
As we think about these dynamics, it’s clear that chargebacks have transitioned from being a back-office overhead to being on par with payments. It’s something that you have to consider from an end-to-end perspective, taking into account the customer experience, whether that customer is the merchant, the consumer, or the issuing bank. The chargeback issue is still growing, and it shouldn’t be.
Also, chargebacks have some dynamics driving change that need to be addressed. When a transaction dispute is raised by a customer, it shouldn’t be automatically categorized as a chargeback; it should be seen as an inquiry, with appropriate parties asking, “Did this payment take place, or didn’t it? Can somebody give me a bit more information?”
What we think at Chargebacks911 is that we need to give the merchant and the issuer the capability to work out whether there is a need for a chargeback. The merchant should first be notified of a transaction dispute and given the chance to submit evidence to the contrary, if available, before it gets escalated into a chargeback.
There’s an excellent opportunity to improve the customer experience and efficiency so that we are addressing the pain point, which isn’t the chargeback; it’s how the customer knows whether a payment has taken place or not in a data-efficient way. Visa tells us that up to 75% of all chargebacks are instances of friendly fraud, where there is a need to provide information to show that the transaction is legitimate and should be paid.
Chargebacks911 has a platform that addresses both the merchant and financial institution side of a chargeback claim, and we’re unique in the industry for that. We have over 2.5 million customers on our platform, directly or through our partners. We have fifty financial institutions on the platform and over five hundred integrations and connections, so we can view the data and transaction flows uniquely and offer competitive solutions.