Make Time & Space for Payments Innovation
By now, it’s widely known that the payments industry is undergoing massive amounts of change brought about by mobile convergence and the move from analog payments with magstripe cards to digital payments with EMV chip technology.
These changes bring opportunities for the banking industry to profit, while also better serving the evolving needs of consumers. According to eMarketer, mobile commerce is estimated to reach $279 billion by 2018; and, according to McKinsey Global Payments Trends, credit card revenues are expected to grow to $445 billion in the next five years, a prediction driven by fresh ways to use and accept cards.
Banking leaders from around the world recently gathered at the Smart Payments Forum (SPF) in San Francisco to discuss challenges and opportunities sparked by quickly evolving technologies within the payments industry. A common theme in the discussions was the importance of innovation for financial institutions to remain relevant in the changing landscape. The challenge is that payments innovation is notoriously complicated because payments are enabled in a platform ecosystem, with service providers on one side of the equation, merchants on the other, networks linking the two, and consumers who demand convenience, security, and speed as table stakes.
Not surprisingly, the key takeaways from the Forum mirror best-practices that have been written about extensively in innovation research.
Open doors, listen, and collaborate
Innovative ideas are born out of highly collaborative environments. Adopt an open-door policy that is inclusive of all stakeholders in the ecosystem. To avoid overlooking a less obvious but equally important stakeholder, brainstorm a stakeholder map with input from as wide an audience as possible, both business-focused and technical. Are there external players you haven’t considered that may present new market opportunities to serve your existing customers or gain new ones?
For example, by collaborating with merchants and acquirers, a large bank in Turkey was able to design a payments ecosystem that includes an instant rewards program and provides value to hundreds of merchants and millions of consumers. Consumers are now able to earn rewards and redeem them at the point-of-sale, using their preferred form of payment: mobile EMV on NFC or contactless EMV cards.
Start small, fail forward, and iterate
The most innovative financial institutions start small, fail fast, learn from their experiments, and repeat. Even if one program doesn’t succeed at first, are there ways to alter the program to achieve greater success?
For example, contactless payment sticker deployments all but failed prior to the arrival of EMV and may seem like an outdated solution in today’s highly connected mobile environment. But a large Australian financial institution deployed a successful mobile EMV initiative that enables its customers to tap-and-pay with their mobile devices at the point-of-sale, regardless of the mobile platform used. Bank customers using iPhones receive NFC stickers, and those with Android NFC phones receive software versions of their cards wirelessly. For customers it’s simple: They can easily see their cards appear inside their bank’s mobile app. The key to this issuer’s success was in providing a seamless mobile payments experience via the mobile banking app. Tapping a non-NFC iPhone enabled with an EMV sticker or tapping a mobile EMV-enabled Android device both result in an alert message on the user's screen. So from a mass-market perspective, where no one knows NFC from UFC or CFC, this major bank is profiting from a mobile payment service worth subscribing to.
Plan ahead to scale within constraints
It is difficult to predict whether an initiative will succeed in the market, even after a successful trial. The key to ensuring a flawless ramp-up or ramp-down for an initiative is to think ahead about possible scenarios. Give your scenarios a name, such as “utter failure” and “resounding success,” and think through the implications of each. Once again, collaborating with technology partners and key stakeholders in this phase will help you prepare for the unexpected.
A Middle East bank tested instant issuance and card activation to speed up its migration to EMV within a scalable model. After receiving more than 15,000 daily EMV card requests for several days in a row, the bank was soon faced with the most drastic success scenario it had planned for. Because it worked closely with its technology provider to prepare, it was able to make the necessary adjustments and ultimately profit from the increased activation rate.
Evolving technologies and changing consumer needs present market opportunities for the payments industry. Developing a capacity to innovate is the investment that financial institutions must make to profit from the opportunities ahead. At a baseline, initial low-cost, high-reward steps are for leadership to encourage everyone to make time for innovation, collaboration, experimentation, learning, and planning that scales.
Philippe Benitez is a 15-year veteran of the global telecommunications and payments industries. As VP of Business Development for Gemalto Secure Transactions in North America, he leads regional development efforts to increase card revenue for financial institutions ... View Full Bio
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