It was once the case that innovation — no matter the industry — took time. Judicious planning. Trial and error. Increasingly, though, time has become the scarcest of commodities.
Thus, when it comes to payments, the name of the game is innovation on the fly. Innovation in real time, you might say, is key in bringing new technologies and new methods to markets. But how can financial institutions (FIs) innovate with haste, and with safety in place? How to scale with speed?
In the latest Innovation Readiness Playbook, which debuted last month from PYMNTS and i2c (more specifically, the “Scaling Payments Innovation Edition” of that playbook), findings indicate that the top innovators across the financial landscape are those who spend time (precious as it is) developing new features and products that engage customers and cement relationships.
The basic headlines show that 40 percent of the top performers — as defined by PYMNTS and i2c — say that sandboxes are key to helping scale functionality. Yet, only 22 percent of firms use sandboxing. In an interview with Karen Webster, Lisa Fugate, vice president of product management at i2c, said that time remained top of mind.
“When you think about innovation in the payments space today, it is faster than we have ever seen it. I do not know how much faster it can go, but I am sure it can go faster,” said Fugate.
The research from PYMNTS and i2c found that top performers are keyed into satisfying the needs of existing clients, rather than thinking solely about new customer acquisitions. Innovation can, and should, include efforts aimed at retaining and growing existing customer relationships, Fugate said.
Against that backdrop, sandbox testing — which allows an FI to test innovation in a closed environment or with a limited set of customers prior to releasing to the wider market — can pay dividends.
“With sandboxing, you can segment a part of your portfolio, and it can be a small part,” she told Webster, noting that many top-performing FIs receive regular feedback from customers and employees.
As an example of the changes that can come with input from customers or even employees, Fugate offered the idea that firms can test new restrictions on accounts or spending controls — or a credit card company might want to test installment or credit lines rather than simply opting to issue an additional card. In the latter case, FIs can test to see how quick people are to adopt to moving from one credit line or methodology to another.
“You can make small tweaks to feature functionality that get you ahead,” Fugate said. “You want to make sure you are getting the adoption you want, and that there aren’t any bugs before you roll [a new product] out to the rest of your portfolio.”
Webster noted that among the joint findings of PYMNTS and i2c, 70 percent of those with flexible infrastructures that take advantage of sandboxes say their innovations outperform the industry average for success by a significant margin.
Fugate posited that the top performers, who are also using sandboxes, are proof positive of the advantages of planning ahead.
“They’re measuring,” she said. “And if you think about product or feature functionality rollout, not all of those rollouts are going to be successful, and that is okay. You learn a lot from failure.”
The top performers are using multiple methodologies, looking at ROIs and other benchmarks of success. Taken together, these efforts increase the likelihood of success of new product adoption, she added. Yet, despite the advantages of sandboxes, only 22 percent of FIs have deployed them. And of the total tally surveyed, only 16 percent have core payments systems that allow for sandboxing. Why the disconnect?
“An IT infrastructure can either be very helpful or a huge hindrance” to sandbox deployment, Fugate said — and legacy systems are rather inflexible, and for the most part do not support sandbox requirements.
The legacy systems of 30 years ago require hard coding, which is an inefficient process when it comes to sandboxing. In fact, when asked whether the current infrastructure makes it easier or harder to innovate, 50 percent of respondents stated that it was “medium,” which indicates at least a lukewarm view of tech (at least the tech that is in place). That comes, said Fugate, as employees have learned to work with (and within) the confines of their own legacy systems.
Perhaps it is also a matter of that old maxim: Success begets success. Success with product innovation and sandboxing means that FIs that do it will continue to invest in it.
Fugate added that when it comes to embracing sandboxes, “it’s a mindset … it’s not a silo, and people have to open up their minds a bit.”
Start with “what if,” Fugate said, advising firms to also ask “How could we do that ‘what if’?’” She encouraged FIs with some additional advice: “Start with a segment and go from there…”
“My advice,” she told Webster, “is to ‘dream big.’”