What is the Future of Payments? “Anatomy of the Swipe” Author Ahmed Siddiqui Weighs In
Ahmed Siddiqui is the Chief Payments Officer at Branch, a workforce payments platform that gives workers fast, flexible access to their earnings. He spearheads product innovation and development and leads Branch’s strategic partnerships with major financial services providers including Mastercard and Visa. Prior to that, he served as VP of product at Marqeta, where he helped to scale the team from 35 to 200+ in 4 years. Siddiqui is also an author, penning the best-selling book, “Anatomy of the Swipe: Making Money Move.”
It’s a tumultuous time for the fintech industry – from record-breaking valuations to the fundraising busts in 2022 – Is fintech dead?
I don’t think fintech is dead, but I do think that there's a lot more scrutiny in the industry. Before the bust, people were just looking at the number of users on a platform as a gauge of success, and you had all these neobanks making a huge splash and saying, ‘look at how many users we have, we're gonna unseat the big banks.’
But they were spending crazy amounts of money on marketing to acquire those users. And then there are compliance risks — the fact that you have millions of users is not necessarily a good thing, because if you've onboarded some bad users, they’re actually costing you money.
So we’ve gone from a grow-at-all-costs mentality to a more focused approach that asks: are you growing in the right places? Are you getting good users? I think this is where the go-to-market strategy matters a lot for fintechs. The whole concept of just using Facebook or Google ads to get users is flawed because those costs will continue to go up. I think people need to get really smart about how they're going to acquire these users at a reasonable cost. At Branch, for example, we're a bit controlled about how we grow our user base so that we get the good users.
Similarly, on the infrastructure side, I think the metrics need to shift because people looking to buy software are now clamping down a little bit. I think the companies that can survive through this are the ones that will be able to tell these customers, “There's a lot of tangible value that we're providing you, to help you avoid risk or grow better.”
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Is there anything that fintechs need to do to pivot and survive this economic downturn?
I think you really need to examine what is the true cost of offering your service to a given user, and how it aligns with how that company makes revenue. For consumer-facing companies, everything needs to be free for a user initially, but then the question becomes, how do you maximize the revenue potential of that user?
What direction do you think payment innovations will go in this next stage as we're going through this worldwide recession?
I'm just a huge fan of Apple Pay; you could say I'm an Apple Pay fanboy. They’ve done a good job automating the payment process. If you've already got your card stored on your phone, you just press the big Apple Pay button on the bottom of the screen, and it's done. It's really slick and easy, and I think we're going to start seeing more of those kinds of experiences where the checkout and payment experience gets easier and faster. I think that's where it's going to be and the reality is that things just need to get more digital and more real-time.
What do you think of Apple Cash and the potential for merchants to bypass the card network fees and just receive direct payments from customer accounts? Is that a thing?
So Apple Cash and Venmo, and Cash App built these massive peer-to-peer ecosystems where you can send money to each other basically for free. Square is doing this now with their merchants: If you go to a coffee shop that has a Square terminal, you can not only pay with your card, but you can also pay with Cash App. It will show a QR code and then you can scan it and basically deduct from your Cash App balance.
In China, that's how they pay for everything, through peer-to-peer QR payments. The U.S. is still quite behind but I think if it gets to a point where enough people have Cash App, and enough merchants have Square as their card reader, you will actually be able to do cash transfers pretty seamlessly. So I think there's going to be a wave that happens there, but the challenge here is the merchants need to be able to accept that form of payment. PayPal has been trying to do this for years. While PayPal has done a great job at getting integrated with a lot of online merchants, in the physical world it hasn’t taken off. And so I don't think anybody's really cracked that nut yet, but there are a lot of people trying to figure it out on both the consumer and the merchant side.
Do you think we will ever replace cards with another payment method?
I think some people rail against the “evil” MasterCard and Visa duopoly that’s charging all these fees and whatnot, but the reality is that they've built a system based on a standard that just works right. And every worker at a restaurant knows how to accept a credit card, or a debit card, whereas like, all of a sudden, now you're introducing all these other forms of payment, and people are like, how do I accept this?
In China, they leapfrogged the whole card system with Alipay. So people there just are accustomed to paying this way, and they never actually had the experience of using cards. In the US, the card became the dominant way to transact.
The other piece is that whatever payment mode we use not only needs to be fast, it also needs to have a lot of protections built into it. What if I accidentally send money to the wrong place — what recourse do you have? Take crypto wallets for example: each ID number is so long and if you miss one digit in there, the money will go to somebody completely different and you have no way of pulling it back.
There are protections that guard against human error or fraud that are inherently built into card rails that I haven't seen with other technologies.
You recently started teaching payments classes. What do you hope other people get out of it, and what's that experience been like?
There's so much more interest now in fintech and payments that even a base-level knowledge of payments could really help unlock a lot of innovation. Let's think about what's happening and try to figure out what are the next major innovations in payments. Cards, ACH, wires — all these payment methods have been around for a long time and haven’t changed much for decades. But now we've got all this excitement around payments and people are questioning the status quo. I would love to help entrepreneurs and technologists think about better ways of enabling payments.
I wrote ”Anatomy of the Swipe” more than two years ago, initially to educate employees at Branch, because not a lot of people have experience with payments and I wanted to help them learn it in an easy way. But it has been so exciting that people outside of Branch have been reading the book and asking shouldn't we just run a class on this? I decided to give it a shot. I teach it as a cohort and there’s a lot of collaboration, with people sharing ideas, asking questions, and every cohort has been completely different. A lot of really cool things have come out of these classes.
It's all about how you inspire people to innovate in the land of payments. If we can do that then I think I am very happy with the outcome.
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