Reflections on Our First 30 Years & the Evolution of Financial Services

Sometimes it’s hard to believe 30 years have passed since our founder Curtis Downs took the concept of developing contract benchmarks and applying them to help banks, credit unions, and others achieve critical savings – the underlying value proposition behind SRM. That foundation has allowed our clients to add more than $5 billion to their bottom line over the years.

It's fascinating to look back three decades and see the rate of change that has taken place in the financial services industry. As we acknowledge our company’s 30^th anniversary this year, I want to highlight some significant changes in financial services that have also challenged and motivated SRM to evolve.

A Revolution in the Payments Industry

Though we were founded before the first online payment, we were still in our infancy as a company. Online payments began in 1994, followed by the first contactless payment three years later.

Those transactions are ubiquitous today, thanks partly to the tech boom and the rise of e-commerce. The pandemic has accelerated the adoption of contactless payments, which has ushered in more online purchases and consumer adoption of frictionless solutions such as Buy Now, Pay Later (BNPL).

This trend will continue as more people become comfortable with remote transactions. The inevitable adoption of digital currency will only serve to drive more purchases to online and mobile channels. Banks, credit unions, and merchants are adapting their operating models as they look to pivot away from physical locations to invest more in digital capabilities.

Shifting Competition

The competitive landscape has fluctuated dramatically since SRM opened its doors in 1992. I look at this in three phases: early startups, consolidation, and modern-day fintech.

Amazon's rise began in the late 1990s, and PayPal launched in 1998. Google Checkout debuted in 2006, while Stripe and Square were founded in 2010. Each company contributed to an advanced payments ecosystem through new delivery channels or changes in consumer expectations and preferences.

We then entered a period of rapid consolidation after 2010. Vantiv bought WorldPay, then sold itself to FIS. Fiserv acquired Elan Financial Services and First Data, while Global Payments bought TSYS. A more concentrated group of participants allowed us to understand the platforms and their pricing models better.

Now, we're seeing a new competition phase with more cloud-based core providers and fintechs stepping in to remove friction points for FIs and improve the end-user experience. This evolution presents an exciting opportunity for SRM to sharpen its focus and embrace innovation as we collaborate and negotiate with new market entrants.

Adapting to Regulatory Change

The banking and credit union industries have been forced to adapt to shifts in legislative and regulatory agendas over the last few decades. The Financial Crisis of 2008 ushered in many laws and regulations – notably the Dodd-Frank Act and its creation of the Consumer Financial Protection Bureau (CFPB) – that altered the ecosystem.

Another critical change from Dodd-Frank was the Durbin Amendment and its cap on debit interchange fees for institutions holding more than $10 billion of assets. It caused FIs to rethink how they crossed that threshold and how they would boost revenue and cut costs to offset lost interchange fees.

Regulatory changes such as the Durbin Amendment give SRM a chance to shine by helping banks and credit unions adjust their revenue models and identify meaningful cost savings. At the same time, we are watching recent moves by federal regulators to evaluate the CARD Act, overdraft fees, BNPL, digital assets, and much more.

The Bottom Line

The only constant is change, and the financial services industry has seen plenty of it since SRM began in 1992. Banks and credit unions, by and large, have proven themselves to be resilient. I am proud of our company’s role in helping them pivot, adjust, and, at times, bounce back from considerable challenges.

There is no doubt that more change is afoot, forcing FIs to prioritize innovation and creativity in their operating models, cost structures, and short- and long-term investments. It’s exciting to know that the professionals at SRM are equipped to assess the competitive landscape and help position your financial institution for success.