According to PYMNTS.com, Jim McCarthy, the CEO of payments processor Thredd, issued a stark warning to the banking industry. He says banks are in a race against time as FinTechs like Chime have completely rewritten consumer expectations for credit, making it simpler, faster, and more personal. For the nation’s roughly 9,000 smaller banks and credit unions, the challenge is immense; many are still struggling with basic tech like Apple Pay while consumers have moved on to expecting pay-in-three, pay-in-four, and other flexible models as standard. The article highlights that debit has become the preferred payment method, forming a new foundation for modern credit journeys through innovations like salary advances and flex credentials. McCarthy argues the only short-term path for these institutions is to deploy “sidecar capabilities” alongside their old systems, rather than attempting lengthy core replacements. He closed by noting that winners in the next cycle will be those who act before the market moves again, pointing to his observation that payments evolve in roughly ten-year cycles.
The Debit Foundation
Here’s the thing that might seem counterintuitive: the future of credit is being built on debit. McCarthy’s point is crucial. Because consumers now overwhelmingly prefer to pay with debit, that transaction flow has become the perfect launchpad for credit. Think about it. When a neobank can see your paycheck being deposited into your account, they have near-perfect income visibility. That means they can offer you a responsible, short-term advance without a traditional credit check. It’s low-risk for them and a huge help for you. This isn’t about a big credit line anymore; it’s about small, smart buffers tied directly to your cash flow. That’s a fundamental shift.
The Sidecar Solution
So, how does a small bank with 40-year-old core systems compete with that? They can’t replace the engine mid-flight. The cost and complexity are prohibitive. McCarthy’s “sidecar” model is basically the only viable play. Instead of trying to rebuild everything, you attach a modern, flexible issuing platform—like what Thredd provides—alongside the legacy core. This sidecar handles all the new stuff: tokenization for digital wallets, dynamic credentials for BNPL options, configurable authorization logic. It lets the bank offer a slick, modern credit experience using the same old account on the backend. It’s a hack, but it’s a necessary one. They’re tired of being last to the table.
The Silo Problem
But even with the tech solution, there’s a human and organizational wall to climb. And honestly, this might be the harder part. McCarthy nailed it by pointing to internal alignment. The credit department and the debit department often have completely different goals, risk models, and tech stacks. Getting them to agree on a unified, flexible product is a political nightmare. “It’s oftentimes very difficult to get the mindset right,” he said. You can have the best sidecar tech in the world, but if the left hand doesn’t trust the right hand, nothing ships. This siloed thinking is what keeps some banks “still stuck just trying to get Apple Pay out the door” while the world moves on.
The Next Frontiers
Looking ahead, two things really stand out from McCarthy’s comments. First, agentic AI. He predicts a “proliferation of agents” that will choose the best repayment method for us in real-time. That requires a back-end that’s incredibly flexible—hence the need for those modern issuing rails with dynamic tokens. The AI can’t work with a static, dumb card number. Second, embedded B2B credit. This is huge. Imagine a business payment platform where financing is automatically triggered based on the transaction flow, no manual application needed. Credit becomes a programmable feature. The institutions that build or plug into these capabilities now will define the next decade. The tools are ready. The demand is here. The cycle is turning. Now, it’s just about who executes before their customers finally give up and go elsewhere.
