Defining “payments modernization” is not an easy task.
Ask 10 payments executives for a definition and you might get 10 different answers.
But for payments processor Thread CEO Jim McCarthy, modernizing payments isn't an abstract concept: it's a fundamental mission. As he told PYMNTS' What's Next In Payments series, modernization is synonymous with adaptability and flexibility, which are essential to staying ahead in a competitive marketplace.
“Being modern means having the flexibility and adaptability to react in near real time,” he said, setting the tone for a discussion around the complexities of being a fintech company, including risk management, enabling technologies, international expansion and the importance of partnerships.
For McCarthy and Threads, being a fintech in today's market means more than just keeping up with technological advancements. It's about embodying an inherently flexible and adaptable mindset. McCarthy emphasized that Threads' mission is to stay agile, a trait that has helped the company navigate the turbulent regulatory environment of new markets, especially in its recent expansion into the U.S.
“In my opinion, you look for things that are universal truths,” he said. “Payments touches on everything: risk management, compliance, reconciliation. Those are the things that aren't talked about as much because we all want to focus on the user experience and the user interface. But to me, the most interesting thing is the plumbing. Something that does it well, and does it in a compliant and secure way, that's where the focus should be.”
The ability to quickly pivot and establish new relationships and partnerships is fundamental to Thread's strategy, enabling the company to offer clients seamless entry into complex markets. McCarthy said this adaptability isn't just a competitive advantage, it's a necessity.
No charm
McCarthy said the importance of compliance such as anti-money laundering (AML) and know-your-customer (KYC) cannot be overstated, especially in an environment of increased regulatory scrutiny.
“AML and KYC are things we've been working on for quite some time and they're things we have to do,” he said. “If we weren't doing those things, we would have ended the program pretty quickly. So I think a lot of the action is going to be focused on the less sexy aspects of fintech.”
Thredd is positioned to help clients, especially those looking to expand into new markets, and McCarthy highlighted the company's role in providing compliant, reliable payments capabilities, allowing clients to focus on their core competencies.
“We want to be the best platform for them to easily get in and do it in a compliant way,” he said.
With a strong focus on helping our clients, we are committed to supporting a variety of payment methods, including the increasingly popular debit transactions.
“To be active in debit, we have to comply with the Durbin Amendment,” McCarthy said, referring to the Durbin Amendment, a regulation that affects debit card transaction fees in the U.S. By ensuring compliance, Thread is enabling its customers to take advantage of new opportunities without being burdened by regulatory concerns.
“My goal is to build a payments capability that's compliant, easy to use and reliable so I can focus on what I do best, which is often the software space: travel, consumer services and payments,” he said. “That way I can focus on UI and UX, which are all important. And the value proposition that you don't have to worry about is that your payments partner is reliable, secure and compliant, so this combination lets you sleep well at night and focus on growing your business.”
International expansion
McCarthy said geographic growth remains a key driver for Threads. The internet is a tool that has made the world “relatively flat,” despite various regulatory regimes. Threads aims to facilitate its clients' international expansion.
“We see being an enabler of that and leading our customers around the world into new markets as a huge differentiator for us,” McCarthy said.
Latin America, Asia and now the United States are Thredd's key focus markets as the company sees these regions as ripe for innovation and growth, leveraging its highly adaptable platform to support its clients' global ambitions.
“Latin America is a great market that's growing really fast,” he said. “We want to get in there. We're doing really well in Asia and we want to get in and expand in the U.S.”
Partnerships and collaborations
In the interconnected world of fintech, partnerships and collaboration are essential, and McCarthy pointed to Apple Pay as a prime example of collaboration working well, as Apple worked with a network of U.S. banks, Visa, Mastercard and others to create a groundbreaking payments solution.
“This industry has been predicated on collaboration,” McCarthy said. “Apple opened up their devices, they put NFC chips in their devices, they worked with US banks, Visa and Mastercard to create what is now Apple Pay, which I just saw a report today that is hands down one of the most successful payments inventions of my lifetime. These things happened in partnership, which led Visa and Mastercard to create the token that became the basis of many of the talk tracks on both networks.”
Initiatives like the Meta-led Anti-Fraud Consortium are a great example of how the industry is moving towards stronger partnerships to combat new threats.
He said the missing piece in the fight against fraud is efficient information sharing across the payments ecosystem, “especially when it comes to identity theft and account takeover. That's going to require a level of cooperation and information sharing that we've never seen before, because that's the only way we're going to stop these frauds.”
Looking to the future: opportunities and innovation
As Thread looks to the future, geographic expansion remains a top priority, with McCarthy identifying Latin America as a fast-growing market and expressing interest in disrupting consumer credit.
“Consumer credit is an area ripe for disruptive change,” he said, signaling Thread's determination to explore new avenues for growth.
Continued advancements from major networks like Visa and Mastercard are also fueling the industry, and McCarthy said he looks forward to announcements at upcoming forums that he believes will drive further innovation.
“There's always something around the corner,” he said.
