Strategy

A rapidly evolving industry demands an agile strategy, one that incorporates current market dynamics and anticipates future developments.

The starting point for beginning the strategy development process varies. Sometimes it’s an exogeneous shock – a new regulation, a new entrant or a new technology, or M&A. Other times the catalyst is internal, either good governance in planning ahead or insufficient alignment among a management team on the right go-forward direction. Similarly, the scope can also differ, from top-of-the-house assessments to more targeted, line-of-business improvement.

Regardless of the scope or context, the mission is always the same: to work with the client to ensure that they are best positioned for success going forward.

Examples of prior strategy work

  • Strategic planning with the Board of a major payments industry association
  • Analysis of credit card operating models, internal requirements and associated economics
  • Pricing optimization to improve margins and competitiveness
  • Reset and build alignment around a Top 10 bank’s ATM strategy
  • Business case development and technology stack assessment for a digital challenger bank
  • Review the go-to-market strategy for a new banking self-service product line
  • Evaluate market expansion opportunities for a major payments network
  • Fintech market briefing for a Top 20 bank’s Board of Directors

Risk

Risk is inherent in any business. The goal is not to avoid risk but to understand what risks the organization is taking (or not taking), quantify their size and likelihood, and ensure that the expected return is more than sufficient to justify the action.

Our team has supported major Comprehensive Capital Analysis and Review (CCAR) programs, developed forecasting models, and validated complex models related to commercial real estate and trading & settlement.

Now the firm’s work is targeted to line-of-business risk optimization. Specifically, we work across the payments lifecycle – from applicant underwriting, to authorization decisioning, to transaction disputes and chargebacks, to chargeoff management – to improve both customer experience and issuer performance.

Examples of prior risk work

  • Ran the CCAR program management office for a major bank, ensuring a successful submission to the Federal Reserve
  • Diligenced a large, independent sub-prime credit card issuer, estimating how their portfolio would perform in a downturn
  • Built a production-level PPNR model for forecasting credit card revenue by month under different macroeconomic conditions
  • Researched issuer authorization rates by transaction type, linking transaction declines to customer attrition
  • Developed a robust Review and Effective Challenge methodology, utilized by a major bank’s executive management team as part of their overall stress testing
  • Explored approaches for reaching thin file/no file prospects, and the uplift that could be achieved with alternative data sources
  • Validated complex commercial real estate (CRE) models and identified a number of potential enhancements

Research & Analytics

Sound data, comprehensive research and robust analytics are the foundation for any well-informed decision.

Directly, and through our partners, we access a number of proprietary data sets, including national samples of DDA and credit card usage, as well as regular polling of small business banking behavior.

We draw on decades of experience conducting timely and targeted research, gathering input from consumers, employees, small businesses, merchants, card issuers, acquirers, billers, and financial institutions.  Combined with our industry knowledge, we use this research to generate powerful insights for our clients.

Examples of prior research & analytics work

  • Annual benchmarking of US issuers’ debit card performance based on B2B research with approximately 50 financial institutions and over 150 million payment cards
  • Analysis of a comprehensive sample of consumer DDA statements to track the incidence of overdrafts and other fees over time (by segment)
  • Merchant research to understand the path-to-purchase for POS devices and latent demand for different value-added-services
  • Mystery shopping with small businesses to construct customer journey maps when applying for a loan with traditional banks and fintech lenders
  • Conjoint analysis to inform banking and payment product design, including simulator to estimate market share with different features and price points
  • Primary research with a broad sample of large European banks regarding their payment processing capabilities, current and planned

Partnerships

Every bank and payments company relies on multiple third parties, both as customers and as vendors. But, with so many potential providers, how does an organization pick the “right” partner? And how should the agreement be structured to best align incentives?

We have helped select and structure dozens of partnership agreements across key banking and payment categories. In our experience, it is often possible to materially improve working relationships along multiple dimensions simultaneously, e.g., better economics and better functionality.

Our approach starts with what (we are solving for), not who (which providers).  With clarity around business goals, we work through selection, agreement structuring and ultimately contracting.

 

Example of prior partnerships work

  • Analysis of the co-brand credit card market, identifying potential partners across the value chain
  • Designed and led the full payments network and processor selection process for a Top 20 bank
  • Evaluated a bank’s current merchant services partner, alongside the pros and cons of moving to an alternative provider
  • Introduced a Top 3 airline to a major lender to co-develop and launch an innovative lending product
  • In-depth analysis of different ATM providers (hardware, software, service) and business models (purchase/license versus ATM-as-a-Service)
  • Assessed numerous rewards providers to identify the right points engine and fulfillment vendor for a new-to-market proposition
  • Comprehensive analysis of the retain/divest/partner decision for several banks with in-house merchant acquiring (in multiple countries)
  • Helped form a JV to bring mobile payments to market, and engaged other leading organizations to provide key components of the proposition (e.g., card, network, rewards)

Diligence

With hundreds of M&A transactions every year, the banking and payments market has been a bright spot for capital deployment.  Investors are attracted to the category’s above-market growth rates, expanding margins, strong cash flow and barriers to entry. 

We have worked with financial sponsors and strategic buyers’ corporate development teams to diligence assets across the value chain.  Through our sector specialization, we can quickly assess the company’s competitive positioning and hone in on the most salient risks.

Our playbook includes an estimation of the Total Addressable Market (TAM) with the business’s current capabilities, as well as a perspective on the target’s upside potential via different market adjacencies.

Examples of prior diligence work

  • Commercial due diligences include
    • Independent ATM operator
    • Banking and payments referral site
    • Bill payment provider
    • Community bank
    • General purpose reloadable prepaid operator
    • Merchant acquirer
    • Sub-prime credit card issuer
  • Executed post-deal engagements to accelerate revenue growth, largely through improved pricing and go-to-market discipline
  • Ran the post-merger integration (PMI) workstream for one of the largest-ever payments mergers, ensuring that the anticipated deal synergies were captured