Friday, November 30, 2012

Starting my journey on the Payments Innovation Road Trip


I've decided to step back from my work as a research analyst to take a broader view and a deeper dive into innovation in the payments industry - what needs to occur, where innovation needs to take place, and what the barriers are.  

To do that, I'm hitting the road. Time to cut out the concalls (most of them anyway) and sit down with the people who make the payments industry work and those who are trying to change it.

I'm calling it the Payments Innovation Road Trip.  It's all about electronic value exchange - between people, merchants, financial institutions, and more.  I'm meeting with POS system vendors, payment processors, payment service providers, MNOs, card brands, and more. 

The three big areas I'm looking at are transaction origination, transaction acceptance, and money movement, from when you start a transaction to when the money actually shows up where it's supposed to go.

I start in the Bay area next week, then during the rest of December and January, it's planes, trains, and my little pickup truck.  Watch my itinerary take shape here and here.  

After each interview, I'll post what I learn.  By the end, I'll have 20 and more company profiles assembled and many conversations to share.  Based on those conversations, I'll build a Payments Innovation Map (explorers build maps after all) and a summary of what I've found with my assessment of those findings.  

Here's where I need your help.

Follow me.  Tell me what you want more of.  Or less of.  I've not done this level of blogging and social media before so I need plenty of guidance.  The pure payments stuff will all be on the blog.  The other bits of the journey, that'll be on my G+ stream and cross-posted to Facebook and Twitter.

If you've got people you think I should talk to, let me know.  

Read this for more detail on the questions I'm asking and why.

See you on the road.

About the Payment Innovation Road Trip

I'm taking the months of December and January to take a broader view and a deeper dive into what drives innovation in the payments industry.

Through interviews and discussion, I want to understand how leaders from across the payments industry view payment innovation.  What does innovation look like to a payment services provider?  A payments processor?  A terminal manufacturer?  A gas pump maker?  A small merchant, a large merchant.  How does each view the direction of payment innovation? 

I don't expect answers to all of my questions because the list is long.  They include:
  1. What are the next steps in payment innovation?
  2. What innovations does the industry need?
  3. What are the barriers to payment innovation?
  4. Where should transaction innovation focus - on  the payment itself or on the value exchange around it, i.e. incentives, marketing, customer relationship, and consumer experience?
  5. What innovations are your customers demanding?
  6. Who do you see as the leaders in payment innovation?
  7. How much is the cost of payment acceptance, and merchant concerns over cost, driving or inhibiting innovation?
  8. If you had a clean sheet of paper, what would you draw to improve the payments industry or transaction flow?
  9. How do you view mobile?  How long will mobile be a separate channel?  When is it all mobile?
  10. What will the role of the mobile operators be in 2017 around payments?
  11. What parts of the payments industry/process are most resistant to change?  How does that impact what you're trying to do?
  12. How do you see the payments industry in five years?  What's going to be the same?  What's going to be different?  Of the new players, who's on the stage?  Who isn't?  What's happened to the incumbents?
  13. Of the major inhibitors to innovation, what percentage can be addressed via technology?  Business barriers?  Regulatory?
  14. Who “owns” innovation in your enterprise? Where are the accountabilities, collaborations, reporting structures? Is it skunk works/grass roots, driven from the top by mandate, some other mechanism?
  15. To what extent does innovation happen at the interfaces between your organization and its suppliers/partners/developers/customers? I.e., is it a “solo” function, managed exclusively in internal structures, or is there a lot going on at the interfaces/edges of the organization?
  16. How does the organization view failure?
  17. If someone came to you with a breakthrough innovation, how would they sell it? E.g., if Steve Jobs walked in with an iPhone in 2005 or an iPad in 2008, how would they get through the front door (or even would they)?  Who would they talk to?  How would they be received?
I fully expect the discussions to include, as appropriate, EMV, PCI, impacts of the Durbin amendment, the merchant litigation, and PIN debit.

These questions arise from my own perspective on essential transaction flows: at the points of transaction origination, acceptance, and in the actual movement of money.  There's a great deal of activity around the first two, some of it important, some of it a waste of time.  Moving money is harder.

All three areas rely on enabling services - security, identity, authentication, marketing and social integration, mobility among others - where innovation is needed. 

After each interview, I'll post what I learn. By the end, I'll have 20 or more of these discussions assembled and posted.  Based on those conversations, I plan to produce a Payments Innovation Map to identify the edges where innovation's underway and needs to take place.  Along with that map, a summary of what I've found, and my assessment on those findings, will go online. 

As far as practical, the discussions will be in person.  Given the time, I'd much rather skip the concall.  

Thursday, November 29, 2012

NCR Acquires Retalix

If one of the thermal characteristics of an industry is M&A activity (and it is), then NCR is keeping it hot.  Last year, the Ohio-based ATM powerhouse took a major step through its acquisition of Radiant Systems, a $1.2B bet on retail transaction automation.  Today it took a second $650M large step into retail automation waters with its offer to acquire Israeli firm Retalix, a developer of enterprise-scale retail systems.

Software and systems are the heart of these acquisitions.  While Radiant makes and sells hardware optimized for point of sale and order entry it's the company's software that matters.  The same's true for the Retalix offer.