Innovations in FinTech are set to change the way everything functions. As Harel Kodesh, Chief Technology Officer at Blackhawk Network says, “Everything from how you get compensated when your flight is delayed to how you purchase real estate or get rewarded at your job will move to being conducted in a digital way.”
Catch the excerpts from the complete interview:
Can you tell us a little about yourself Harel? What’s a typical day at work like for you at Blackhawk Network?
I’ve been in the industry for many years, most recently serving as an operating partner at global investment firm, Silver Lake, which is also Blackhawk Network’s parent company. Before Silver Lake, I was the CTO at GE Digital and vice president and general manager of Predix, GE’s operating system from the Industrial Internet. I also co-founded and served as CEO at Nurego, a spinoff of EMC Corp.
I decided to make the move to Blackhawk last year because the future of fintech as it relates to what we do every day is really exciting. I joined an amazing team and we are working hard to build a strategy and efficient processes for a very dynamic market. One of the biggest rewards in my career at this point is getting to work with people that I truly enjoy working and collaborating with.
When I’m not working, I enjoy flying small airplanes and I’m also a recovering runner. I say “recovering” because I’m trying to get back to it. I injured myself while running my 99th marathon, but I’d really like to get back to be able to finish number 100.
Given your vast experience in the technology industry, we’d love to read about some of your biggest leadership hacks and learnings. Could you share your top few?
One of my favorite fintech quotes and biggest learnings is from my former boss, Bill Gates. He said something along the lines of, “Everybody is overshooting the short-term future and undershooting the long-term future.”
I believe that quote rings true and it’s hard not to fall prey to that thinking. There are always people that think everything is going to change really quickly, and there are also people that think things are going to stay how they are (“If it isn’t broken, there is no need to fix it”). For both groups, when change does happen, even if it doesn’t happen quickly, they underestimate how pervasive those changes are.
Many people in fintech fall into this way of thinking; for example, the prediction that checks and plastic gift cards are going to disappear. Neither are going to go anywhere anytime soon, but at the same time, people will be surprised in 5–7 years how pervasive the changes are in the digital and mobile arena – not only for early adopters, but for everyone.
In terms of leadership, the war for talent has never been so intense. We now have a process that allows us to find talent from all over the world and hang on to them. Talent is becoming harder to find, and harder to retain. I believe this is going to be one of the biggest challenges for businesses moving forward. If you don’t work to find the cream-of-the-crop product managers, program managers and software developers, your progress is certain to lag behind others that have.
How according to you will the fintech segment evolve in the coming years? Which industries will benefit most from the latest innovations in fintech and how/why?
Cash is becoming like software in that it changes and gets updated; you have to live by the rules of software. Take TVs for example. Twenty or thirty years ago, there wasn’t much to innovate. But as television became digital, people started changing to bigger screens, lighter screens, etc. The evolution of payments is similar. Once cash became digital, it created the need to update it for efficiency, usability, dynamism.
Because of this shift, fintech will continue to evolve in the three dimensions we have at Blackhawk today—B2C, incentives and retail. Everything from how you get compensated when your flight is delayed to how you purchase real estate or get rewarded at your job will move to being conducted in a digital way. Everything is going to get faster, which is going to be a huge boost to the way business is done.
What are some of the in-demand fintech features in the prepaid and alternative payments market that are driving popularity of these apps/technologies, how do you see these products/ platforms evolve or shape up in years to come?
Stored value is getting more and more popular and we’re seeing places like India and China that have made the huge transition to paying with apps like Alipay and PayTM. The driving factor in the increase in popularity is the desire for people to not only be able to conduct transactions in their own environment, but to also be able to easily pay for things when they travel. When Chinese tourists come to the US, they expect to be able to pay with Alipay, and they should be able to do that. It’s not possible to do that with paper money, but with digital payments, it can be done.
Another driving factor is the reduction in friction for low denomination transactions. When you look at digital transactions today, they are becoming better and better at multiple types of transactions. We can now innovate with new ways of conducting transactions, like Venmo, etc. We may not be there yet, but we’ve started being able to see what life looks like with more people using apps and we need to be ready for that.
Lastly, with millennials and Gen Z prioritizing experiences, custom payments are one of the most exciting opportunities. When I say custom, I’m talking about a type of branded payment—like gift cards—that are more personalized (or customized) for the end-user. For example, our line of Happy Cards are multi-merchant gift cards centered around a theme tailored to specific interests and occasions (e.g., Happy Dining, Happy Teen, Happy Student). The benefit to a consumer is that they’re getting an experience they can choose from a gift card curated for them; and the value to the merchant is that we’re able to introduce a new audience of customers to their business that may not have otherwise considered shopping there.
What are some of the biggest fintech challenges for the B2B sector today that teams face when it comes to adoption and selection of the best fintech stack to drive efforts, goals?
As I mentioned before, many people are overshooting the near-term future. People expect that everything will change quickly, but it doesn’t always. And, while the transition is happening, you need multiple means of supporting the same outcome.
Additionally, since we started moving to digital, partners in the industry are wanting to see the data and the numbers immediately—and they still want accuracy. As an industry, we are stuck in the middle with digital reports, but still having to provide them via email. This is accelerating the performance for everyone. The industry has to come up with a software solution that we can provide, settlement reports, for example, that are not only very accurate, but also immediate.
Fraud and the war on fraud is also going to continue to be a challenge. As things are getting more digital, creativity is expanding on both sides: there are more and different ways to commit fraud, but there are also more ways to solve the problem and integrate technology than ever before.
We’d love to know what some of your top FinTech predictions for 2020 are?
The continued move to mobile. Phones are already starting to replace indispensable parts of people’s lives, like hotel room keys, car keys, etc. and mobile wallet adoption is on the rise. Mobile wallets have the potential to generate billions in the U.S. by 2021, but there is still a disconnect between digital payments and in-store point of sale. There is a huge opportunity for engagement and for driving foot traffic to stores by leveraging omnichannel payments experiences and better acknowledging the digital shopper.
Blackhawk recently conducted some research to examine how U.S. consumers want to pay at POS to provide retailers with some clarity on how to close the gap between digital and physical shopping experiences. According to our research, 6 in 10 shoppers surveyed would like to pay for things in-store using loyalty points on their smartphone and nearly half of shoppers said they would be more likely to join a loyalty program if they could use their points to pay for things. Additionally, 7 in 10 shoppers surveyed said they were interested in adding cash to an app or digital wallet like iTunes, Netflix, Uber, etc., while in store, and if they were able to, 68% said they would shop in the store more often than they normally would. This research shows us that creating a unified branded payments experience helps retailers and marketers to build stronger customer relationships.
Could you share some last-minute tips for CTOs in upcoming fintech startups – what are the top few things they should always keep in mind?
This year and next, we are going to reach an inflection point after which fintech is going to be a major software undertaking. In many ways we already have, with having to address privacy, moving to the cloud, etc. My advice is to take the time and try to make sure that you are innovating on the features, but also make sure you are taking the time to prepare your infrastructure for the next 5 years. If you don’t make that a priority now, you are going to be behind your competitors that have taken the time to build for the innovation and scale that will happen in the next 5 years.
At Blackhawk Network, we look for people who want to shape the future of the global branded payments industry. Collaborating with our partners, we deliver the innovative solutions required to meet our partners’ business objectives — extending commerce opportunities, introducing innovative incentives and creating meaningful employee engagement.
As CTO, Kodesh is now based out of Blackhawk’s corporate headquarters in Pleasanton, Calif. In his role, Harel is responsible for Blackhawk’s technology roadmap and execution, including product innovation and development, infrastructure, security, network expansion and desktop services.