In what way is payments innovation like football?
For starters, both are strategic endeavors that require a good coach, a good team and tactical investments. However, even the best coaches need a playbook, and that’s all the more true if, say, they’re coaching a college team that wants to compete at the pro level. A playbook would outline how team members, and the team as a whole, could perform its best and compete on a higher level.
It’s no different in payments innovation, according to Lisa Fugate, VP Product Management, i2c.
Whether banks are among the industry giants — Bank of America, Santander — or are operating on a local or regional level, innovation is happening at a breakneck pace around them. How do some financial institutions (FIs) outperform, and what best practices can other organizations glean from their successes?
Smaller FIs especially need all the guidance they can get to keep up with larger competitors and agile FinTechs, but even larger organizations can learn from the successes of top performers, Fugate said.
That’s why PYMNTS and i2c have teamed up to produce just such a resource. The Bank Innovation Readiness Playbook: The Top Payment Performers Edition, a PYMNTS and i2c Collaboration will be released the week of Jan. 15. Fugate recently spoke with Karen Webster about what to expect in the forthcoming report.
Perspective Shift: Partners
Today, because in-house human capital is limited, smaller FIs generally depend on outside service providers to create a competitive opportunity for them. It’s time FIs take more control of their payments roadmap, said Fugate — but that doesn’t mean FIs should eliminate partners and build everything themselves.
It just means they have to choose the right partners who can help them achieve their goals, which Fugate said may mean changing partners if their trusted providers are no longer delivering the competitive edge they need.
“Your partner is going to bring you the technology that’s needed to be agile and flexible,” Fugate said. “It doesn’t have to be a huge ordeal to do that. It’s a matter of selecting what makes the most sense for the innovation and customer needs that the organization has.”
Fugate said that, according to the PYMNTS Bank Innovation Readiness Index, larger FIs take a broader view of the competition, one that encompasses their peers and larger banks — but also upstart FinTechs. Large FIs tend to be more forward-looking than smaller ones when considering which new products and features deserve their focus to address customer and competitive needs. Then, they focus on their vision and plan for it by setting aside budget dollars to accomplish their goals.
This should be a wake-up call for small FIs. They must take the same view and approach to achieve similar results, Fugate said.
Perspective Shift: Pacing Innovation
Oftentimes, smaller FIs think of innovation as “the next big thing,” but Fugate said this can be overwhelming and prevent them from ever getting started on a task that just gets bigger as even more technology gets introduced in the industry.
Fugate recognizes that undertaking new technologies and platforms in-house is a huge effort for a small FI, where most employees are likely wearing several hats. It’s a capital expense, and it takes time and effort that the organization may not be able to spare. That’s why so many small FIs have simply stuck to the old ways. If a past technology migration was painful for the organization, she added, it may be even more difficult to justify another attempt.
However, faced with increasing demand from customers, it’s clear that FIs of every size must make innovation a priority — and they don’t have to invent the next Amazon Echo to do it, Fugate said. Innovation can be incremental: adding feature functionality, using existing technology in different ways.
For example, one i2c client wanted to find a way to have multiple, separate credit lines but allow customers to move transactions and pieces between them. The technology to do this was already available to the FI, said Fugate; the organization just needed to use it in an innovative way.
Another client approached i2c about a multi-currency solution. The client has a North American card product that converts loyalty and incentive to cash. But the company wanted to expand globally, which introduces a whole storm of new needs, such as different currencies and different local rules to satisfy.
Fugate said the fundamental core technology was there for the client to accomplish what it wanted, but the actual innovation of the solution, like anything in a cross-border situation, was far from simple.
When it boils down to it, said Fugate, innovation is not necessarily about invention. “It’s about leveraging new technologies to do innovative things,” she explained.
For Fugate, the most important thing FIs can learn from the Bank Innovation Readiness Playbook is that taking a pass on tech won’t get them to the financial NFL.
“Technology can level the playing field and make FIs of any size — whether they’re large and a behemoth or they’re small and local — more agile,” Fugate said. “Leveling that playing field is really the key to innovation, it’s the key to top-line margin growth and it’s the key to bottom-line efficiency.”
Flexible core payments technology, she said, is a key differentiator that enables FIs to innovate and deliver products and services on time — and time is of the essence, as they say. Consumers want the payments products they want, and they want them yesterday.
FIs trying to meet that demand are therefore pressed to deliver quickly, Fugate said, almost making time a currency in its own right. Clients don’t just expect the technology to perform a certain way, she said. They also have expectations around how quickly it can be integrated and brought to market.
Look for the report from PYMNTS and i2c the week of Jan. 15, 2018.