100 Innovations

Second Day, Second Wind On Innovation Debates

IP 2017 is now slightly in the rearview mirror, but the debates over everything from cross-border remittances to the role of the private sector in cybersecurity to digital identities live on.

 Usually by the second day of a two-day conference people are checking Twitter more than usual and lingering by the pastries more than is good for them. The business cards have all been exhausted, and the hearty salutations give way to weary nods of (yet again) recognition.

But some things are different when it comes to intellectual gatherings — at least, if the gathering is peopled with some of the best and brightest and most insightful in payments.

With blizzard Stella faded like Blanche Dubois’ southern charm, Boston still had its winter chill. But on the second day of Innovation Project 2017, eyes were beyond Beantown and cast toward the world at large. In fact, a global view dominated the discussions on the final day of the conference, with strategy painted in broad strokes from CEOs such as Al Kelly of Visa and Dan Schulman of PayPal, both featured in one-on-ones with PYMNTS’ Karen Webster.

The movement toward financial inclusion, and toward a consumer experience that is seamless and intuitive and secure, is one that brings companies to share process and perhaps even prosperity. As remarked early in the day, it takes a village to build a payments ecosystem.

Connectivity and Collaboration

And if payments remain a collective effort, connectivity is the glue that cements that collective effort. In one panel discussion, David S. Evans, chief economist and founder at Global Economics Group, and a quartet of CEOs sat down to discuss how commerce has been wending its way speedily across borders. The money flow — between, say, the United States and Mexico, or as remittances evolve in newly (almost) cashless India — may be embracing technology, but interactions between banks, wires and processors are still required.

As Aaron Goldman, managing director at General Atlantic, noted, more transactions will happen electronically; and, as BillMo CEO Steve LaBella said, the global money transfers stand at $500 billion (with his own firm’s addressable corridor at $50 billion). Walls erected, literally or metaphorically, noted the quartet, can serve to hurt several economies, but the trend of money flowing across borders is an inexorable one.

Cyber Pearl Harbor Looms?

If global commerce is a growing reality, so too is another less palatable one — and frightening to boot: The “Cybersecurity Pearl Harbor.” Admiral James Stavridis, once NATO’s Supreme Commander, took the IP 2017 stage to warn of the waves amid a tumultuous sea of hackers, state actors and cyberthieves out to grab secrets and topple the security and very functionality of the payments and commerce activities that are so vital to any country’s well-being.

Four security experts — heads of firms with high-level and ground-level experience protecting individuals and corporations from digital threats within and without — discussed the ways we are vulnerable to cyberthreats. One panelist noted that, in general, IT systems are poorly managed, with executives agreeing that it is hard to attract the talent necessary to truly be proactive in the fight against cyberattacks; private and public collaboration is needed.

Another panelist, Blake Hall, founder and CEO of ID.me, stated that a problem that confronts any organization (or individual) interacting with the internet brings with it “a tradeoff between security and usability.” The fact remains that humans are fallible and have, in terms of touch points, 100 instances of remembering, entering or confirming usernames or passwords each day. As such, openings for hackers (as many as 62 percent of hacks) exist where password protections are weak.

And against the backdrop of cyberthreats, one might ask, “whose digital identity is it anyway?” This question was posed to, and answered by, John Dancu, president and CEO of IDology. As he told PYMNTS, a digital identity is one that should be crafted and maintained, in an “invisible and dynamic” manner; one that can promote an optimal consumer experience.

Though it has become more difficult to validate legitimate people, he said, keeping an eye (digitally, that is) on different attributes to piece together a (to use a word above) dynamic identity remains critical.

Lending, Lending Everywhere, With Quite a Lot to Think

And lest we be remiss about what all this digital safeguarding might be about, one underpinning is that it serves to let us communicate, interact and transact in peace and relative safety. That includes lending, and, in one panel discussion, loans themselves came under the microscope.

Payday loans, title loans, installment loans — nonbank short-term lending products have many names and provoke a wide range of emotions. They also face an uncertain future, as regulatory futures remain uncertain and at least one federal regulator seems determined to put them out of the marketplace.

But that, our panel noted, would be far from the best move for consumers, many of whom rely on short-term lending products to bridge critical gaps in their finances — for things like unexpected car repairs — and whose needs won’t be well-met in a world where small dollar short-term lending doesn’t exist.

“It’s a big problem. I’ve been around this industry now deploying capital for, let’s say, 18 years, and I’ve never seen a product or invested in a product that has higher customer approval rates than the traditional deferred deposit advance loans. Consumers love it, but consumer advocates hate it,” said Paul Purcell, principal at Continental Advisors.

Pot Shots in Payments

Other panels touched on — dare we say it — “high”- level concepts in payments. In 1996, California legalized medical cannabis; in 2014, Colorado did one better and legalized marijuana for adults over 21 for recreational use.

But marijuana remains an illegal drug per the federal government. Though the feds have so far agreed to look the other way when it comes to buying and sell pot — obtaining payments is another, much more complicated, story entirely.

The dispensary can sell, and the patient or customer can buy, but if a bank or card network helps to enable that payment in any way, they are facing federal wire fraud charges, which means cannabis is solely a cash business these days.

So take all the security, administrative and efficiency problems that come with being cash only — but writ large. Our panel talked about future solutions for the cannabis conundrum and the future of building payments in the legal grey zone. Interestingly enough, no one on the panel represented themselves as a marijuana advocate. But all noted, like participant and Green Bits Co-Founder Ben Curren, that they were fans of secure, information-rich and transparent systems.

“The will of the people is to legalize cannabis — and with a few states opening up, you can collect data and see more people under 21 aren’t smoking it, you can see opiate use going down and you can see the black market retreating. To me, this is what’s interesting, and it’s a good, good cause to make society better,” Curren noted.

Numbers for Fun, Profit and Failure

While the predictive power of algorithms is undeniably impressive, there is a big problem with the standard marketing for algorithm-based decision-making, according to Weapons of Math Destruction author Cathy O’Neil during a separate discussion. People like to believe algorithms are neutral — and purely rational mathematical deductions — when, in fact, they are man-made models codified by math.

And man-made models have problems, biases and bigotries baked-in, which means ostensibly “neutral” models are coughing up very biased results.

Sometimes those results are intentional — the model maker is cognizant of the effects — but oftentimes the bias is unintentional, according to O’Neil.

But the outcomes can be terrible: People can lose jobs, employment opportunities, spend time in jail, fail to advance in their career and be unable to access financial services and credit because of an algorithmic result that was flawed, but invisible. And those costs are costly to businesses, the panel O’Neil led noted, because they means consumers aren’t getting matched to the right products, and financial services are missing out on a lot of opportunities.

“Algorithms are opinions embedded in code, and they need to audited. Too often there is a screen between ourselves and the person who built the algorithm on the other side. They claim what they are doing is purely mathematical and technical and that it has nothing to do with ethics or societal impact. That is not true,” O’Neil noted.

Winners, Wrapping Up, and Even Laughing a Bit

What would a discussion about payments, innovation, cybersecurity and all manner of commerce be without a few laughs? The end of IP 2017 came at Fenway Park, at the annual Innovator Award dinner, emceed by actor Jason Alexander — who made a bit of a mark and a splash in “Seinfeld,” among other vehicles. Fitting that a man known for the “fat wallet” should grace the stage at a payments event.

(As an aside, in what might be thus far the only recorded link between blockchain and the great beyond, Alexander stated that he’d hoped people removed their belts and shoelaces — a la prison — before entering a two-day discussion of payments technologies.)

Top awards, at the gold level, to name just a partial list here, went to ID.me for “Most Disruptive Innovation” and Payoneer for “Small Business Innovation,” while DocuSign won the “Best Newcomer” award.

A full list is available here.

‘Til next year — perhaps by then spring will finally come to Boston.



The pressure on banks to modernize their payments capabilities to support initiatives such as ISO 20022 and instant/real time payments has been exacerbated by the emergence of COVID-19 and the compelling need to quickly scale operations due to the rapid growth of contactless payments, and subsequent increase in digitization. Given this new normal, the need for agility and optimization across the payments processing value chain is imperative.

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