As mobile devices continue to be a pervasive force in the technology arena, so does the need for forward thinkers in the field. Those that are constantly developing new ways to integrate connected experiences into people’s lives will probably be at the forefront of the tech industry.
In this week’s Commander in Chief series, PYMNTS talks with mobile capture and identity verification company Mitek Systems’ CEO James DeBello about what moves the ball for the mobile industry. He also offers advice for how to innovate in the field.
Here is an excerpt of the conversation:
PYMNTS: How would you define your company’s approach to innovation?
JB: More recently, we recognized a growing global need for mobile identity verification solutions. We knew that our background in mobile capture and our expertise in using artificial intelligence for image recognition and analysis could be applied to solve this need. So we also added a new focus: applying document and artificial intelligence/machine learning to develop enterprise-class solutions for identity verification in digital channels that meet the market need for a great user experience, risk mitigation and regulatory compliance.
PYMNTS: Where do you look for innovative ideas, and why?
JB: I watch how people interact with their mobile devices very closely. Ultimately, we innovate and invent, not for the sake of being innovative, but in order to solve real pain points and problems that we see in the marketplace. You can see where the needs are just by asking yourself, “How could this process be improved? How could we make this better?”
As a company, we never sit still, and as we spot other market needs that we know we can solve, we’ll look to drive innovation in those areas as well.
PYMNTS: What is the most innovative thing you’ve ever done?
JB: Innovation often means taking a risk. When I decided to add an entire new arm to our business that would focus exclusively on solving the challenges around digital ID verification, that was a major, yet calculated, risk. I saw this emerging need that our technology could address in a way that no one else was doing. Adding a significant new focus to our business was the right thing to do, and now we are helping global payments companies, banks and many other organizations create trust in the digital channel using our identity verification technology.
PYMNTS: What do you wish you had more time to do?
JB: We’re based in San Diego, a city that not only has a vibrant and fast-paced software and technology community, but also so many great outdoor activities and attractions. If I had more time, I would go sailing more often. I love being out on the water, and sailing gives me an opportunity to free my mind, which allows me to re-energize.
PYMNTS: What do you think that most people underestimate about innovating in payments?
JB: Generally, people underestimate how long widespread consumer adoption of new technology can take. When I worked at Qualcomm, we used to say that it takes eight years for a technology to go mainstream. This timeframe has probably shortened some in recent years, but I think most people still underestimate how long it takes for a new technology to cross the chasm and gain mainstream adoption. A perfect example of that in the payments space is the slow consumer adoption of Apple Pay, Google Wallet and many other mobile payment technologies. While they’re being used by tech-savvy early adopters, the majority of consumers are still not using them.
The way to achieve mainstream adoption is to make sure that your invention or innovative new technology solves a real pain point that exists in the marketplace. Too many companies try to introduce a “solution” in search of a problem to solve. I like to think of it as the difference between a painkiller and a vitamin: If you have a pounding headache, you’re going to reach for the painkiller because it solves your immediate problem. In contrast, a vitamin is nice to have and you know you should probably take one daily, but it’s easy to forget because it doesn’t solve a problem that you’re experiencing at that moment.
FinTechs that want to successfully innovate in the payments space need to make sure they’re focused on the market, its needs and its pain points — and make sure their technologies are true painkillers that solve these problems.
PYMNTS: What keeps you up at night? What concerns you most in the payment solutions space?
JB: The regulatory landscape in the payments space is constantly evolving, and the Department of Justice has been strengthening its enforcement of anti-money laundering (AML) laws in recent years. The increased focus is a good thing — AML laws and Know Your Customer (KYC) requirements can help reduce crime, prevent terrorism and mitigate the risk of fraud. However, these requirements can also make operations more challenging for businesses. I often think about all the new regulations payments companies will need to comply with and how we can leverage artificial intelligence and machine learning to help them better protect themselves and their customers, achieve compliance and avoid fines.
The fast-growing rates of fraud is another topic that sometimes keeps me up. For example, new account fraud — where a new account is opened in a consumer’s name without their knowledge — rose 40 percent last year, with total losses reaching $3.6 billion in 2016, according to Javelin. Payments providers will need to adopt better technologies and processes for preventing these types of fraud, and I focus on defining the role we can play in helping them solve these challenges.
PYMNTS: What trends and changes are you watching that are affecting the industry and your role?
JB: One of the most immediate/short-term trends that we keep a close eye on are the increasingly stringent laws and regulations around anti-money laundering (AML) and Know Your Customer (KYC). We’re also keeping our eye on the rise of blockchain, as it will likely play a key role in identity verification in the future. And we’re closely watching trends in the use of facial recognition and other biometrics for on-boarding, payments and authentication.
Some of the longer-term trends we’re watching include the continued proliferation of smartphones and the introduction of faster mobile networks, like 5G. These two trends are enabling many new Internet of Things (IoT) services, which will, in turn, create a greater need for digital identity verification, as these services will need fast and easy enrollment processes and the ability to ensure safe, secure transactions.
PYMNTS: What product has had the most impact on payments in the last five years, and why?
JB: The rapid adoption of the smartphone has changed everything about payments. It’s estimated that more than two billion people worldwide owned smartphones in 2016, and the number is expected to reach nearly three billion by the year 2020. Moreover, smartphone usage is nearly ubiquitous among younger adults, with 92 percent of 18- to 29-year-olds owning one. More than even the advent of home internet usage, the widespread adoption of smartphones is transforming the way people connect with each other and businesses. Without the smartphone, there would be no mobile payments, and it’s doubtful peer-to-peer lending would have taken off like it has.
This trend is going to continue to impact the payments space in the years to come, as more people shift from using their desktop or laptop, to using their smartphone as their primary device for accessing the internet and conducting digital transactions. In 2016, more than 31 million Americans accessed the internet solely through their smartphones. This shift is not only changing the payments landscape, but also commerce in general.
PYMNTS: What person or company do you think “gets” innovation, and why — and, conversely, who or what has missed it, and why?
JB: PayPal and other digital financial service providers like Loan Depot and Credit Karma are doing some really great things in the mobile payments and alternative financial services space. By using digital technologies and interesting new techniques, they’re able to provide today’s consumers the services they want, in the way they want them. They’re making mobile payments and other types of digital financial services transactions faster, easier and more secure. As a result, they’re beating out the more traditional financial services companies, which are not innovating fast enough, and they are leading the industry.
I’ve also been inspired by the companies that are adding an element of biometrics to their payments process. I think biometrics is a natural fit for smartphones and provides a higher level of security than asking customers for passwords they often forget or that can be guessed from a casual glance at their social media feeds. These techniques for identity verification are not only out of date, they create vulnerability for consumers and businesses. Any time I am asked to key in a lengthy password on my tiny mobile screen, I just shake my head now because I know there are better methods currently available that provide a higher level of security.
PYMNTS: What advice would you give a young innovator in this space, and why would you tell them to heed it?
JB: I would tell anyone starting out to watch his or her market. As I mentioned previously, you need to identify a problem that is causing a true pain point in the market and develop the painkiller for it. If you stay market focused and do your research, you will find a problem to solve in a way that no one else is thinking about. Watch the market for the convergence of macro trends (for example, by observing what’s happening with consumer habits, devices and networks), then position yourself to be at the intersection of those trends, which is where you’ll likely find a real pain point that needs to be solved.