IP2013 Day 2: Eric Ries, Regulation And The ThinkAThon Winners
By Ben Carsley, Editor/Writer (@BC_PYMNTS)
Welcome to PYMNTS.com’s IP2013 Roundup: an in-depth look at The Innovation Project and all the news, rumors and reaction that spring form payments’ most influential conference. See a story that piques your interest, or have another topic you want us to cover? Let us know in the comments below! And be sure to catch our Day One roundup here.
Ries And Lavelle Debate: Can Payments Innovation Go Lean?
The first group session of the day dealt with Eric Ries of Lean Startup fame, and posed an interesting question to a diverse panel: can the Lean Startup prinpcles apply to an industry as dynamic and complex as payments?
Ries, oddly enough, answered in the affirmative. But Mark Lavelle, SVP at PayPal and co-founder of BillMeLater, had more reservations. After the two industry leaders gave their views on payments innovation, they opened up the conversation to a group consisting of: Ken Paull, CEO of ROAM, Eric Remer, Founder and CEO of PaySimple, Scott Thompson, CEO of ShopRunner, Henry Helgeson, CEO of Merchant Warehouse, and Jacob de Geer, founder and CEO of iZettle.
To read some of the debate that took place there – plus see who Ries pegs as the biggest barrier to payments innovation – check out our recap here.
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ThinkAThon™
While The Innovation Project brought the brightest and best of the newest developments within the payments world, the ThinkAThon brought us even deeper into the future, as teams competed to win over the crowd with their pitch to solve a modern-day payments problem without a modern-day solution. (More details on what the ThinkAThon is all about here. and to see the solutions presented by all 15 teams, click here.)
Below are the winning teams for each of the five issues:
Wally Mlynarski (Elavon) addressed the issue of consumer privacy and mobile commerce. How will electronic mobile payments grow without consumers trusting merchants with their personal information? For Mlynarski and his team, acknowledging that the consumer may never trust others with their personal information is the first step. “Consumers are uninformed,” said Mlynarski. “They may never be comfortable with sharing data with anyone. But others will do so – for a benefit.” This realization lead the team to develop a method that offers a high level of transparency to consumers, offering a ‘rating’ of transactions similar to the G, PG, PG-13, R, etc. rating to movies. The goal is to inform the consumer of exactly what information will be shared with which merchant
As the technology of the payments industry grows increasingly technological, no doubt individuals will develop growing concerns about how safe their information is – especially in the event of a catastrophic failure and systemic risk. Mark Sole of Sipree and his team were already thinking ahead as they proposed a competition of sorts of the world’s top economists and scientists to concoct their own plans before a catastrophe even hits. The award money, said Sole, will pale in comparison to the money preserved in the event of an event that would wipe out the electronics payments system.
Next, the issue of financial inclusion – making banking service readily available to the millions of underserved individuals – was best tackled by the team of Kahina Van Dyke of MasterCard. The 2.5 billion who don’t have formal access to financial services need to be addressed, she said. But everyone has a different agenda. In order to simplify how individuals send money to each other, a solution needs to address many needs and issues. “The problem is so big, it is not a static group,“ said Van Dyke. “They have variations on lifestyle and aspire to come out of poverty.” But by implementing the existing trust a consumer has with his or her institution plus implementing standards and physical cash, financial services may be accessible to all.
Concerning the New Point of Sale, Barclaycard’s Farhan Ahmad endured a night out in Harvard Square – and a subsequent headache – to develop his team’s idea of identification and verification that transports across all channels. “While the current point-of-sales system suffices for technology 60 years ago,” said Ahmad, “What works for today?” The answer, said his team, is the phone number. In addition with a pass code, the number could essentially replace the 16-digit credit or debit card number, along with a passcode, to supplement the POS.
And lastly, in addressing the issue of how to make mobile simple for consumers, Malik Velani of PayPal earned the top spot with his and his team’s proposal that recognized the impossibility of creating a system that is globally vast and delightful to everyone. “We hope you agree that in something this globally vast,” said team member Mike Boush of Discover. “There will be many groups of consumers with many needs and not one product will delight everyone.” Their solution is to stand aside and let the consumer decide what he or she wants – to use existing networks to facilitate the payments industry for a consumer, and promote a standardization process that reinforces the process.
**The overall winners were Mark Sole of Sipree and his team for their solution to “catastrophic failure and systemic risk.”**
LevelUp, Heartland Payments Announce Deal
The biggest piece of news from Day Two came courtesy of LevelUp and Heartland Payments Systems, who announced a new partnership as the former company expands across the United States. When you start to add the numbers together – Heartland’s 250,000 merchant locations and 800-person sales team, and LevelUp’s one million-plus users and 5,000 merchants – the magnitude of the deal becomes pretty obvious.
We’ve covered the agreement pretty extensively, so to check out the hard news piece read about the announcement here. And for a more in-depth take with
Raj On Regulation: Former CFPB No. 2 Gives His Take
Raj Date, former deputy director of the Consumer Financial Protection Bureau, joined the IP2013 crowd during the lunch hour and helped to host an honest take on the complex relationship between innovation and regulation.
Date’s partner in (preventing) crime during the panel was Tim Attinger, strategy & corporate development at Blackhawk Network, and the two moderated a discussion between: Gordon Baird, CEO of Independence Bancshares, BC Krishna, CEO of MineralTree, Jonathan Lear, president of Earthport Americas, Dan O’Malley, CEO of PerkStreet, Mark Troughton, president of Wonga Americas, and Peter Gordon, GM of FIS PayNet.
Asked to give his opinion on the relationship between regulation and innovation, Lear gave one of the most interesting answers. According to Lear, regulatory complexities certainly make doing business in the space difficult, but also offer a clear competitive advantage to those who can do so well.
“The compliance challenge is a source of significant investment, but also a real source of opportunity, and trying to get that balance right is really challenging but really interesting,” Lear said. “If you imagine all the compliance rules we operate in in the US and multiply that across 60 different countries, that requires a real in-depth knowledge.
It requires investment and consistent monitors, but is also a source of competitive advantage as well.”
O’Malley said that he largely agreed, and noted that banking regulations can be so complex and cumbersome that few companies attempt to navigate them alone.
“As a CEO of PerkStreet, I love how hard this is. We’ve been in the market since the end of ’09 with basically the same product -with continued improvements – and no one has copied us because it is so damn hard,” he said. “The way we manage is it we invest a a ton in being really good at compliance.”
Lerner Leads Conversation On Architecture Of Innovation
Josh Lerner guided and challenged the mid-day panel this afternoon. Lerner has spent many days as a business professor at Harvard University and is well versed when it comes to understanding the intersections of entrepreneurship, venture capital and private equity. He is also the author of the recently released book, “The Architecture of Innovation,” which goes into depth about how larger corporate companies should be thinking about innovation, which was the topic of today’s mid-day panel discussion.
After giving the audience a brief introduction about the broad challenges that both corporations and small startups face in the payments industry, Diane Offereins, president of payments at Discover, joined Lerner in his discussion about the role of innovation within businesses.
So, what did the enlightened panellists have to say about how to best generate and employ innovation?
“Innovation works better when you take small bites, I think the winners will be the ones who take nibbles. If it’s a big bang it’s a lot harder,” said Chris Gardner, serial entrepreneur and CEO of Paydiant.
“In the past, the payments industries hasn’t had a lot of innovation but we are in a period of time we don’t have a choice,” said Marianne Johnson, executive vice president of global and head of product and innovation at Elavon. “There is a shift in technology and a shift in the economy that leaves us with no choice but to shift. It is not an easy thing to do but it takes a lot of courage and it takes a lot of vision.”
The discussion shifted when Lerner asked the panellists their opinion on large corporations acquiring smaller start-ups and how innovation can evolve from this dynamic. Is it a good idea?
Yung Kim, the President of Korea Telecom, didn’t seem to think so. He highlighted the differences in culture and the nature of the corporation playing a significant role in the likeliness of innovation. His take? Both amusing and thought-provoking at the same time.
“Another problem with small companies you acquire, they will start to relax because they start to think they have a sugar daddy,” said Kim. “You need to make sure the desperation still exists in the small company.”
As one of the final questions, Offereins asked the panellists, “How do you know when something is a good idea?”
“We put everything through a pretty rigorous model,” said Chitra Narasimhan, Managing Director of Citi Ventures and former Head of Strategy, American Express. “We try not to make those decisions pre-maturely. We need enough creativity to build new things, but the discipline to put them through phases like protocols to see if will live for another day is important. The rigor is needed to balance that out.”
**Additional reporting by Carolyn Vallejo and Chanel Smith