All you need is a hot idea and some funding. All you have to do is listen to what consumers say they want. The big players have an inherent advantage. Meetings suck the creativity out of any worthwhile project.
Those are some of the common myths of innovation, and they apply to the payments world. At best, they are superficially true, ne’er-do-well siblings of cliché. At worst, they can lead believers down the path of irrelevance.
Moving past those myths, and finding deeper truths about payments innovation, was the underlying result of a recent PYMNTS webinar, featuring Karen Webster and Amir Wain, founder and CEO of i2c, an integrated commerce and smart payments firm.
“How to Create and Executive an Effective Payments Innovation Agenda” relied on survey results from some 200 financial institutions (FIs) to arrive at lessons for banks and credit unions (CUs) that want to craft or keep a cutting-edge innovation agenda, as more consumers demand sophisticated digital and mobile payments experiences. The world is going through a golden age of FinTech. There is no guarantee that any FI — no matter how much of a legacy and tradition it might have — will survive and thrive without a solid focus on innovation.
“The cost of [not] innovating is extremely, extremely high,” Wain said. “It’s not an option at this point.”
Lessons From The Top
The webinar focused on what works for the FI “top performers” when it comes to payments innovation. Before going any further, a note about those top performers: They come in all sizes, though they have certain traits in common, which Webster and Wain explored during their hour-long discussion and slide presentation.
Four common themes are tied to successful payments innovation and those top performers.
First, instead of being about “cool” technology, profitable innovation revolves around a customer focus and seeks to solve a problem consumers have. That doesn’t mean some idea fished out of a focus group, Wain said, or even listening too much to what consumers say they want, as they don’t always know much about technology. It may seem like a fine line, but the real trick here is having what he and Webster called a “customer focus,” which, in general, means looking past the easy answers and figuring out the real problems that innovation can solve. It means, in Wain’s telling, to development an idea, build it out, tie metrics to it, then test it to see if consumers really respond.
That lesson seems to have taken hold with most FIs, though many of them have yet to learn it. According to the survey results, 63 percent of financial institutions said that meeting a consumer need was a main driver of innovation.
Second, top performers embrace accountability. Ultimately, of course, that means turning a profit on the new product or service. Before that state, of course, it means writing plans, creating metrics and defining a meaningful outcome, against which the innovation will be regularly judged — and not just putting a multi-year timetable on the project, then neglecting it and letting it veer off track. In fact, regular meetings about a particular innovation — Wain advised no less than two annually — can contribute to success.
The survey found that 100 percent of top-performing innovating FIs — yes, 100 percent — plan out definite priorities for three years into the future, with a focus on three or four specific areas. And 93 percent of top performers use return on investment (ROI) calculators to project how much revenue a particular innovation will produce.
The third trait is relevance. That means more than a product or service that solves a real consumer problem, but also matching the innovation with the right time frame “relevant to solve those problems,” Wain said — in a sense, striking while it’s hot.
Finally, top performers need an institutional culture and mindset that promotes innovation, and is, according to Wain, more interested in actually bringing a sustainable product and service to market than making a splash with a press release. That also means “innovation is not isolated in a particular department,” he said. Indeed, instead of forming a general innovation team, he favored involving a wide variety of departments, which can help encourage institutional buy-in.
Technology, too, enables innovation — and it serves as an equalizer that makes it possible for smaller FIs to compete with the bigger players in innovation, Wain said. “And it can be a differentiator,” he added.
Technological and other forms of flexibility are also important. The survey found that 70 percent of top-performing FIs with “flexible IT infrastructures” said their recent innovations were “extremely successful.” That is twice as high as the average for other FIs.
Successful payments innovation, both now and in the coming years, requires a different mindset than what is still common with many financial institutions. “One-size-fits-all doesn’t work anymore. Consumers want options. We have to think of mass customization,” Wain said. He added that there is probably a “middle ground” between those two poles, “but we certainly cannot have one-size-fits-all.”
The myths of innovation will persist, as all myths do. However, the webinar offers lessons and data that dig into the real truth of payments innovation, which can keep financial institutions on the path to profitability.