His thinking began to change as eCommerce began to gain ground.
David Yates was working at First Data, running its international business, and online retail, as he recalled in a new PYMNTS interview, was “really starting to lift off.” He started to really consider the role of payments in the overall transaction experience, one not totally tethered to the physical world.
Another Road to Damascus moment — or, perhaps a series of moments, as so much innovation and creativity, contrary to popular conception, is incremental, not sudden — happened during his tenure at Western Union. The company was setting up its dot.com operation, and he saw how all the choices made around sourcing, transmission and other areas vital to the funds-transfer business could significantly impact profitability, he told Karen Webster during that Monday (Nov. 19) interview.
“Once you go into the online world, all the risk changes, and all the pricing changes,” said Yates, now president at Mastercard. The world of payments had long been compared to the world of utilities — vital to civilization, of course, and a reliable source of revenue, but rather boring, and pretty much a backwater when it came to technology, innovation and creative progress.
But Yates understood how the rise of the digital economy was going to make payments a hotbed of cutting-edge technology, and how the payments experience would become part of the overall consumer experience, and could no longer be taken for granted.
Past Guides The Future
The discussion between Yates and Webster served less as a mere trip down memory lane than as a talk about how payments used to be in order to better understand how it is developing — and developing in large part under the oversight of industry veterans such as Yates, not just younger professionals who barely know a non-digital world of payments and commerce.
“When I first started 35 years ago, I don’t think anybody spent any time thinking about payments at all,” Yates said. He noted how so much of consumers’ financial lives were tied to local bank branches, where a visit to the branch manager or a designated underling was required for a loan and other products and services. Now, Yates leads teams that are figuring out how to best serve consumers who view their smartphones and other devices as the prime — or one of the top — ties to commerce and payments.
Even personal computers, which used to be fixed in a single location in and home and office, cannot compete easily with mobile payments and commerce technology. “Mobile has created a groundswell of opportunity,” Yates said. That’s because the mobile channel is relatively cheap but also provides relatively high levels of consumer satisfaction — a “virtuous circle,” in his words.
Showrooms And Payments
How might that play out in commerce and payments, in the daily life of consumers and merchants?
Yates — as have other experts recently — puts significant stock in what one might call the retail showroom concept. That means having a store that sells high-value goods where consumers can look at and touch products — which, according to surveys, remains a desirable activity before buying — and also having a non-fixed, portable, mobile point-of-sale system that can also handle other tasks, such as delivery, loyalty programs, price comparisons, installment payment plans and the like.
Another trend in the making is the marriage of contactless payments and biometrics. For one, that would replace the use of signatures as a form of authentication. As Yates pointed out, “no one looks at signatures, or who is signing.” Biometrics could help solve the problem of authentication, and help reduce payments friction while providing more convenience to consumers.
That is, indeed, among the biggest challenges in payments and commerce. “Finding a way to achieve a really good balance between risk and friction, and getting that balance right, is incredibly difficult,” he said. “It’s sort of the holy grail of what we are all trying to do.”
Finding that holy grail requires the creative input of payments professionals, some of whom are ultimately supervised by Yates. One secret to inspiring his team? Don’t get too much into the weeds when it comes to details, he said. “I spend a lot of time talking about what I want to see, and try to communication that to a group of people, and give them a sense of purpose around something,” he said. “I don’t get into the details about telling people how to do it. I just tell people what I want to get done.”
What’s Really New?
What he — or any other payments leader — wants to get done when it comes to innovation will, by definition, involve something new, whether via a product, a service or a way of doing things. But how new is new? How new does something have to be for it to qualify as innovation? Those may seem like questions better suited for dorm-room philosophy sessions than, say, an office conference table, but the answers matter greatly.
That’s because something that might be considered totally new in the popular view is likely to require new payments infrastructure, and that can be a tall order, to say the least. “If you need brand new infrastructure, you can forget about it,” Yates said. Totally new also can be difficult to scale — and payments is nothing if not a scale business. “If you want something absolutely new, you are going to need the backing of regulators to force it into the marketplace or it’s not happening,” he said, pointing out that the ongoing adoption of faster payments worldwide is fueled in large part by regulatory pressure.
Going forward, real-time payments represents one of the most important areas of coming innovation — not just generally, but specifically for Yates and Mastercard, he said.
As for his own best moment of innovation, the innovative project he’s most proud of, he wasn’t able to say. “It’s yet to come,” Yates said.
That’s payments today, as 2019 looms. Innovation in the industry is expected. Innovation is always coming.