A string of new CEOs marched into payments companies this month, extending C-suite turnover this year that’s likely to keep fueling change in the industry.
On Aug. 14, digital payments pioneer PayPal named the long-awaited successor to Dan Schulman, selecting Alex Chriss for the role. The same day card issuer Discover Financial Services surprised the market with an announcement that its CEO, Roger Hochschild, had resigned. Just four days earlier, Zelle parent Early Warning Services also hired a new CEO, Cameron Fowler.
Those appointments were in addition to two new CEOs taking over in January at mega-processor Fidelity National Information Services, where Stephanie Ferris replaced Gary Norcross, and card network heavyweight Visa, where Ryan McInerney succeeded Al Kelly.
The new leaders are showing up as the digitization of payments catapults forward. That trend has been unfolding for more than a decade, but the COVID-19 pandemic super-charged it, fueling a swarm of fintechs that are forcing the industry to evolve.
The advent of new consumer payment tools such as digital wallets and virtual cards as well as new offerings like buy now, pay later and real-time payments are prompting the tsunami of change. Broader shifts like cloud computing and cryptocurrencies have also driven change in the industry.
“In the last 10 years, the world has been experiencing the greatest revolution in money and how value is exchanged,” said West Richards, executive director of the American Transactions Processors Coalition, citing “high-velocity” innovation in payments.
“In that environment, you're naturally going to see a lot of changes at the top and throughout these organizations as they create adaptations to the market and to the regulatory environment,” said Richards, who is also a co-founder of the Atlanta-based processors trade group.
At some companies, investors even argued the CEO switches were overdue. Schulman had been appointed to PayPal’s top post nearly a decade ago, in 2014, the same year that Norcross took over at FIS. Kelly and Hochschild had been in their roles since 2016 and 2018, respectively.
Josh Crist, an executive search consultant at the Chicago firm Crist Kolder, observed that there has been more CEO churn in payments this year than he can recall ever happening before. He chalked that up to a particularly potent impact on payments from the COVID era, when consumers increasingly turned to e-commerce for purchases with digital payments.
“The payments industry as a whole was more influenced by 2020 to 2022,” Crist said. “The industry is very much looking to move beyond that point, [saying] ‘let’s make these changes.’”
Payments stalwarts have been under the most pressure, needing to react to rivals with new technology or risk losing market share and profits. Investors at both the incumbents and challengers egged on aggressive competition, especially as the economy changed last year, with higher interest rates increasing the cost of capital and inflation threatening the health of the consumer.
Venture capital from investors flowing to the new entrants slowed this year, putting pressure on management at young companies in the industry to turn a profit, or at least cut their losses. Challengers like digital payments startup Stripe, card issuing fintech Marqeta and checkout startup Bolt cut employees in reaction, and some of them, including Marqeta, also named new CEOs.
Still, incumbent CEOs felt the brunt of the shifts, partly because activist shareholders stepped in as stock prices sank. For instance, PayPal announced Schulman’s exit after activist shareholder Elliott Investment Management took a stake in the company and FIS abruptly appointed Ferris after the hedge funds D.E. Shaw and JANA Partners took stakes in the company (During the second quarter, Elliott sold its stake in PayPal and acquired a stake in FIS, according to MarketWatch).
Competitive pressures showed up in the second quarter as the Dutch digital payments player Adyen, which had been growing at a heady pace, stumbled in its foray into the North American market. Analysts pointed to tough pricing competition from PayPal, as that incumbent lashed out at the new rival on its home turf.
And it’s not just marketplace dynamics stoking the move toward new leadership. Regulatory expectations are changing too, with policymakers and regulators reworking rules around the new approaches to payments and technological twists, both Crist and Richards point out.
That can be seen in the Consumer Financial Protection Bureau’s effort to draw up new rules for buy now, pay later schemes, recent state legislation addressing earned wage access and congressional efforts to introduce more credit card competition.
Some long-time executives may have a tough time adapting to the new regulatory environment, Crist contended. “The industry may be outpacing some of the legacy guys,” he said. Hiring industry specialists who are steeped in their areas, such as finance, may be more imperative than in the past, he argued. The new CFO appointments at FIS and corporate payments company Fleetcor may be examples of that new tilt.
“If regulation continues to move at the pace we see it moving at now, it’s going to take a lot of change to keep pace,” Crist said.
Asked whether the executive changes in payments will continue, Richards’s answer was immediate: “Yes.”
Those new leaders will bring new teams, strategies and visions for their companies, driving additional tumult and advances in the industry.