Insights on Payment Innovation from Harvard Business School’s 16th Annual Cyberposium

I was asked to moderate a panel on Innovation in Payments Saturday (November 13, 2010) as part of Harvard Business School’s 16th annual Cyberposium. This year’s theme was Battle of the Platforms (a subject near and dear to our hearts here at MPD). The conference usually draws about 600 people and this year was no exception, in spite of what was  a gorgeous November Saturday afternoon.
You could have knocked me over with a feather when more than 100 people began pouring into our meeting room to hear our panel’s pearls of wisdom. It wasn’t that we didn’t have a stellar panel who had some interesting insights to share: our panel included the CEO of Blippy, a Google Ventures partner, and executives from Verizon Wireless mobile payments, Amazon payments and Google Checkout. It’s just that our competition was two panels on mobile, the prelude to lunch and a gorgeous Saturday afternoon. As someone later remarked, payments has reached that “cool” tipping point.
So, without anyone’s attribution, except for two instances and my own editorial comments,  here are some of the more memorable conversation takeaways. Some of these will sound vaguely familiar to you regular devotees.
1. Mobile is the future of payments, but not in the way that many are pursuing it today (as a form factor at the point of same). It will increasingly be used a mechanism to blend the on and offline experience by enabling many points of transaction (e.g. at the existing terminal using existing payment vehicles or simply via the way that people interact today when making online purchases). Finally, a sensible commentary on mobile which has the advantage of (a) making complete sense and (b) being something that can be done today without a whole lot of rigamarole on the part of merchants or consumers.

2. Not everyone has a smartphone, in fact, Verizon Wireless shared the fact that roughly 70% of their subscribers in the United States don’t have them. So, although everyone is betting the future on apps, there are a whole lot of people who aren’t touched by them and won’t be for a very long while. Payments via SMS is a pretty darn slick (and profitable) solution for a whole bunch of folks who have phones and oh, who text regularly today so know how to do it.

3. New business models around mobile may emerge, but maybe not the ones that first come to mind. Verizon Wireless is about to eliminate unlimited data plans in favor of metered billing which will have an impact on how consumers consume content (including how they shop). The view is that the “new” business model will be for merchants and service providers to offer “free bandwidth” on all purchases just like they offer free shipping today. To make this workable, it seems like implementation will require some way for consumers to easily monitor their bandwidth consumption (which is not all that intuitive today). I can see it now, the equivalent of a calorie count/fat content label for web sites.  

4. Blippy, is a firm that wants to put a social layer on top of payments and concedes that payments is “pretty messed up.” Their approach to getting valuable cardholder relationships and data is to go directly to the source. Blippy captures card information/transaction data by getting people register their cards and then giving their permission to post what they purchase on those registered cards to Facebook. (Remember when this also included posting account numbers?  WHOOPS.) I personally don’t know of anyone who would want to Blippy their stuff for a whole host of reasons, but what Blippy is trying to do in a clever way, along with many others including Facebook, is find a path to the “identity” holy grail online. I’ll bet a few new pairs of Jimmy Choos that it won’t be Blippy who gets there in any sort of meaningful way, since I don’t think that posting purchases to Facebook is something that a lot of people will want to do. But, the one thing that everyone can agree to is that there is gold in the analytics that sit at the interest ion of purchasing/social/browsing.

5. Speaking of identity, not surprisingly, Apple and Facebook were two names that repeatedly came up as having an enormous head start in that department, in spite of the fact that PayPal and Amazon do too and have been building that capability for a number of years. The reason that the former are a topic of conversation is that they are not core payments players, but have the potential to parlay their community and information around identity into a platform that could challenge both the traditional and nontraditional players in the space. As Facebook continues to make its moves around mobile (clearly interested in not letting Foursquare build a competing social network off Facebook), popularize Credits, and do more to keep people on their platform (will an email announcement be made today?) they continue to position themselves to become a real and viable player in payments. For what it’s worth, there were a lot of snickers when the notion of Apple and contactless was raised, snickers as in why that would still not make a compelling case for contactless payments adoption in the US.

6. We all had fun with P2P prompted by a question from the audience. General consensus is that the market is not big enough to make an interesting and profitable business and that it is a solution that has been looking for a problem for too many years. The splitting checks at restaurants and paying the babysitter are not burning platform issues that people are screaming about.

7. Too many entrepreneurs are trying too hard to fit round peg solutions into square peg holes where there are no problems. Someone said that they had just heard of two new-to-the world companies – one was the “swoopo” for virtual goods and the other was a reverse auction for Farmville animals. I am not making this up. The advice to the would-be entrepreneurs in the audience: Stick to developing solutions that eliminate a real friction in the payments workflow and you’ll have a shot at creating a winner.

Words to live by, in payments at least.

What are your thoughts to what we discussed on Saturday?