Known as Transaction Alley, the Atlanta area has come to dominate the worlds of payment processing and fintech innovation. As Atlanta’s payment technology community has grown — employing more than 40,000 people — a unique, collaborative ecosystem has grown between enterprises and startups, between payments processors, vendors and customers.
Last month, Enterprise Innovation hosted a roundtable discussion with a dozen fintech innovators to discuss the opportunities and challenges facing the payments industry and how the Atlanta community can tackle them together.
Blockchain Isn’t Here Yet
If you’ve followed any financial news in the last few months, you’ve noticed the breathless coverage of wild swings in the cryptocurrency markets and likely walked away with two lessons. First, no one knows what they’re doing. Second, it’s not for the faint of heart. And while cryptocurrency may only be one narrow application of blockchain technology, the volatility of the market and caution of mainstream customers has taught payments innovators that, for all intents and purposes, consumer-level blockchain isn’t here yet.
Our innovators shared that while they believe blockchain technology may lay the foundation for the next wave of disruption across a number of industries – and its first impactful applications will almost certainly be in payments and banking – consumers simply aren’t interested in an unproven technology linked to nefarious purposes. So far, blockchain has followed the standard hype and acceptance curve, gaining early interest and excitement from merchants, consumers, and payment companies but falling short of customer expectations. While it’s something to remain aware of and to build adjacent use cases, blockchain isn’t part of the near-term customer experience.
Which leads us to what should be the guiding principle of every approach to emerging technology…
Consumer Experience is Still King
As is the case with so many emerging fintech trends, from cryptocurrencies to mobile wallets, too many companies are chasing the early adopters without solidifying a true business case for a new product. When we spoke to First Data’s VP of Client Innovation, Kevin Lewis, he shared a story of how an executive pushed the innovation lab to develop a mobile wallet, since it was the next big thing every financial company needed to compete. After building it and launching it, they spoke to vendors who told them no wanted or used mobile wallets.
Will mobile wallets and payment services play a consumer role in the near future? Absolutely. Yet, adoption in a massively fragmented marketplace remains a critical challenge for U.S. companies. Nearly every retailer is launching its own payment platform. Apple Pay dropped the customer experience ball early in its experiments. Android users have competing platforms like Samsung Pay and Android Pay, depending on their device. And the simple truth is: swiping a card just isn’t difficult enough to warrant the hassle and security concerns of loading your cards into a mobile wallet.
While some in the room said EU-style regulatory pressure could help consolidate a fractured marketplace, but we posed the question: does forced regulation actually solve a consumer problem, or just the problem of financial service providers?
Offering a variety of payment options has been shown to increase customer sentiment that a vendor is progressive and forward-thinking, but the bottom line remains: customers really only care about convenience, so any payments solution had better be frictionless. The competition and innovation inherent to the fractured marketplace has already resulted in great outcomes for consumers, yet consolidation is inevitable, and the results may not shake out in favor of entrenched giants. Like banks, for instance.
Banks Have a Looming Loyalty Crisis
Between shifting demographic biases and the productization of bank products from lending and peer-to-peer transactions, the Atlanta payments industry wonders why any consumer would remain loyal to a single bank. While it may seem a crisis, we see it as a unique opportunity for banks to leverage established history and innate trust (for some banks) into more targeted services for consumers. While the financial crash may have left millennials wary of large banks, forays into blockchain and other emerging technologies show that identity security and trust remain the key drivers of adoption. Banks, though they may have a generational trust gap, can still leverage a wealth of earned brand equity.
Let’s All Learn from Venmo (and other startups)
A few years ago, any enterprise fintech innovator probably would have said it was impossible to make peer-to-peer payments fun. Turns out we only need emoji and an almost-absurdly easy-to-use user interface.
Like Venmo, startups tend to attack problems in ways enterprises can’t – or won’t – consider. Large organizations obviously have barriers to thinking in terms of “fun,” yet our group says they’re constantly pushing to look at today’s experiences through a consumer lens to either address a problem or incrementally bring emotion and loveability back into their experiences.
While intrapreneurs can learn plenty from a startup mentality or by working with startup partners, innovators need to use caution when handling startups.
Treat Startups with Kid Gloves
If you raised a hamster as a kid, you probably learned that it was too easy to smother your pet with affection (sometimes literally. Startup partners are often the same way when innovators start to play. Enterprise-startup relationships are precarious by nature, particularly for startups that cater to the needs of a single, large client and quickly specialize their product out of usefulness for the broader market.
Any partnership with a startup must begin with respect and a clear goal in mind. Most enterprise innovators work with startups to accomplish goals they simply can’t: to work in adjacent spaces beyond the business unit, to be agile when the enterprise is cumbersome, and to take risks when the corporation wants to circle the wagons. Before engaging any startup, innovators need to define the framework in which they’ll work to achieve business growth objectives.
Innovators should focus more on co-creation of actionable solutions than forcing startup resources to fit the needs of existing business units. This freedom of thought and movement allows startups to do what they do best – fix horrible consumer experiences – while effectively leveraging the enterprise resources and brand equity to drive change in the marketplace.