A Pragmatic Guide to Payment Innovation

Bob Legters
Chief Data Officer of Banking and Payments
Posted on February 7, 2017


Ongoing FinTech evaluation to spot the diamonds in the rough

Can you spot the diamond in the rough for your next innovation?

Few doubt the era of FinTech is upon us. Financial institutions around the world must have a clear plan in place to adapt to and benefit from FinTech-fueled changes. While the banking industry is traditionally more resistant to change, any hesitation or ambivalence could be costly. Particularly as new technology introduces not just new solutions, but also potential challengers to banks’ long-standing reign as payment processors.

How can you tell if some shiny innovation is truly valuable to your customer for the long term? Innovation is not just about being different. It is important to ask the fundamental question of what is actually changing – the tool, the experience or the value? If you don’t know, it’s probably not innovation. But which have the legs to make a difference, and how can you prioritize?

The Innovation Lottery

We may feel overwhelmed by the current onslaught of FinTech innovation, but isn’t it always this way? The challenge is to be able to invest in the winners, but it sometimes seems like you’re betting the bottom line on a lottery ticket. With so much diversity and an endless array of alternatives, how can you pick with confidence?

The trade press is awash with the latest gadgets and gizmos; everyday some new innovation goes viral, but so few make anyone any money, and even fewer reach the critical mass needed for market acceptance. Sometimes, the press can create a false sense of innovation because they thrive on hype about the future being a better place.  Strong claims are made for improving consumer convenience, but many bring little other than novelty.

Plan, Evaluate and Adapt

Innovation is central to strategy and long-term prosperity, so financial institutions need to plan their attack; knee-jerk decisions are rarely productive, and the implications run deep. Banks must develop evaluation criteria to formalize the investment decision-making process. When considering FinTech innovation, banks need to consider four underlying decision factors: Does it increase convenience? Is it secure? Is it likely to be long lasting? When will we see a return on investment?

It is important to formalize the innovation process and plan ahead. Consider your corporate guiding principles and the direction you want the organization to grow. Which market segments are most important to develop and which customer demographics need to be courted?

Innovation is a constant theme and does not move at predefined schedule. Innovation is a thought process that makes you ask questions during the development process: Do we have to do it that way?  Have we considered all options?

We need to be planning ahead and identifying the potential technology we are looking to invest in one year’s time. Trying to figure out what to allow into the plan is not easy, the trick is to be able to spot and drop the weak niche ideas and focus on the sustainable. It is an ongoing process of monitoring market shifts and any technology streams that develop better than expected. A number of the planned innovations will be dropped as false starts with a few new elements added that matured enough to value consideration.

Maintaining flexibility is vital in such a dynamic marketplace. Focus on what drives convenience for the consumer or client, what is likely to be long lasting, and which technologies look to be maturing in the direction we see the market going. But equally, we’re in this for the bottom line;  which solutions offer a good return on investment within a three- to five-year time span?

In the Field

What diverse innovations are we seeing in the world of FinTech that change the experience by adding real value? The realm of self-support has been gaining interest with many through innovative chatbots, user-empowered interfaces and guided workflow management tools for both consumers and B2B customers.

Innovation that drives ecosystem integration is another area where the shiny innovation is not immediately recognized as the cool kid. For example, integrated solutions for connected cars that automatically turn on a fuel pump, pump the fuel and seamlessly pay for it without the customer having to engage the mobile device or insert a card at the pump. Such innovation doesn’t change the function of the car, the pump or the payment card; it changes the flow and ease that a transaction can take place for the consumer.

Convenience is probably the greatest driver for innovation, by making things convenient we get the consumer to enjoy the experience. The more “hoops” a customer must jump through to use your product, the greater the likelihood that they will abandon it. This can easily be seen with  rewards points redemption. Making points a real-time currency is an innovation that leverages existing assets with new thought processes. It is not the widget, it’s not even the product that is innovative, it’s the enablement and empowerment by making loyalty points every bit as real as debit and credit money in the wallet.

Vendor Accelerator

How do you stay sane in this model? First, remember that there is no wrong way to be innovative, but it is wise to look externally. This is a FinTech revolution, so who better to consult than the FinTechs themselves? If market pressures highlight something genuinely interesting that should be made available to your client base, then reach out to third-party vendors and look to partner.

FinTech vendors have likely done all the hard work of proving the technologies viability and can provide valuable first-hand knowledge of the true capabilities. Consulting multiple third parties allows financial institutions to build a more comprehensive view of competing solutions and conduct proofs of concept with shared investments, otherwise the bank is deciding from a vacuum.

Get Pragmatic

Financial institutions need to look at innovation across their complete enterprise and throughout the full payments value chain. Typically, even small scale innovations impact multiple business units and improve process flows across different market segments. Plan rollouts of innovation carefully. Banks work best with partners to ensure a consistent deployment of good and relevant innovation. The alternative is that banks do not innovate and risk customer attrition. Employ a pragmatic approach when selecting and be sure to keep the corporate values and strategic goals at the forefront.



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Bob Legters
Chief Data Officer of Banking and Payments

For the past two decades, Bob has focused on products and services support for clients. He has spent 17 of those years in a leadership role with groups ranging from 5 to 200 employees. Bob’s unique experience allows him to efficiently operate at a level that exceeds the normal executive role of understanding and recognizing client and consumer needs in the payments space.