Is It a Dud or Not: Views on Payments Innovation recently published Separating Fantasy from Reality in the Brave New World of Payments Innovation. In this piece, author David Evans suggests five screening rules for identifying successful payment start-ups and recognizing the ones that are left better off in our dreams. Evans welcomed the PYMNTS community to weight in and we received such an overwhelming response that we want to share them with the rest of the community.


1. The new product/service launched has to be provided to a specific category of people to answer a specific need. No mass market offer will work.

2. Show a strong marketing plan, one of the most difficult things in this sector is the people enrollment to the new service

3. The regulatory environment must be well known and the Business plan should give detailed information to investors to show that this aspect is well managed by the entrepreneurs; (everyone could get a bright idea but if the new service doesn’t comply with regulatory environment….)

4. If the regulatory environment is ready (or about to be ready because a new law has just come into force), a license given a central authority may be needed before the activity (service or product) is launched. Depending of the country, this process could last several months and the length (and the cost) of such procedure is often underestimated. This could delay the product launched and weaken the company.


1. The product/service needs to provide a solution for a current, existing need.

2. The solution must be flexible enough to work with many different variables and scenarios. (open architecture)

3. It needs to be easy to utilize and function.

4. It is something the average consumer would understand and appreciate.

This is a short list because the long list is very long. To create a product or service when there is no need only complicates the sales process as you first have to create/sell the need and then the solution. If it only works with certain networks, devices or platforms it will inhibit growth and distribution. If it is complicated to utilize or difficult to comprehend will only stifle adoption. If the solution concept is not something easily understood and appreciated, there will be reluctance from the consumer to try something new.

The dot-bomb era proved that great ideas, solutions and products do not guarantee success. The adage of “Build it and they will come” is the wrong reason to invest in innovation. Sales is everything, revenue is required and cash(flow) is king!

Some innovation is just ahead of it’s time. I have 3 products that have sat on the back burner for 8-9 years waiting for technology, industry or the business environment to advance to a point that they can be brought to market.


Understand the market you’re aiming at. Payments is the same at one level (debit me credit you), but it’s very different when analysed in detail, especially across/between countries. MPesa is an enormous success in Kenya – but it has grown in ways nobody expected – and it’s not (yet?) having the same success in other countries (as far as I know – comments welcome). Mobile payments generally (remote as opposed to proximity) has taken off far better in emerging economies than in ‘developed’ economies. Ideal in NL is another success, which isn’t (yet?) gaining the same degree of adoption in other countries.

Also, there is no such thing as a ‘payments’ market. ‘Nobody wakes up in the morning and wants to buy a payment’ – Eric Sepkes. A payment (clearing and settlement) is a business process component which is necessary to enable a wider business process. Understanding the underlying need is part of knowing the target market.

Look to emerging economies. Many mobile payments, prepaid card and other innovations tend to have gained mass adoption there. (There is no shortage of ‘innovations’ – especially in the mobile payments space. Few of them have gained mass market adoption.)

And of course, be cost-effective. It should be faster safer and cheaper to send money than to send a parcel. The ‘going rate’ for a remittance is sub $5; and as the Bank for International Settlement points out ’From the point of view of those providing remittance services, remittance transfers will often be indistinguishable from any other low-value cross-border transfers, including small payments to and from businesses’.

There are gaps in the market, and most of the traditional payments services – with the exception of Paypal – are nearly 50 years old. The market has changed, and mass market adoption of new technology has changed, a lot in that period. For example, about $1trn moves globally as p2p (often called remittances); there is a G8 initiative underway to reduce fees from 10% to 5%, which still equates to $50bn in potential fee income. Online merchants incur astonishing losses as a result of CNP (cardholder not present) fraud, which is 5 to 10 times the fraud losses incurred on online banking.

And, be patient. Payments is a regulated business, and requires a great deal of trust. That takes time to build. The PSD in Europe last year created a new regulatory environment so payments service providers don’t need a full bank licence. This may have the effect of driving more competition and innovation.


‘New’ as in non-established and therefore risky should be a major concern, but the adjective gets used too widely. Almost none of the ‘new entrants’ in Europe as a result of the PSD are ‘new’ in that sense. They are newly regulated, but the business model is well established and proven. And PayPal, Ideal and MPesa were ‘new’ once. If we shy away from ‘new’, we will continue to be stuck with correspondent banking and plastic cards, which were invented nearly 50 years ago. A lot has changed since then (tho’ relatively little in payments)

P2P is only a problem if the answer to the subsequent question, ‘ok so how are you going to clear and settle the funds at a cost that is acceptable to your model’ can’t be answered. The global P2P market is vast, and is a wide open opportunity. But waving a mobile phone around as if that’s the solution leaves key questions unanswered.

Which brings me to price. I sometimes see offerings brought to market which have not been designed to hit a specific target per trn price. Great technology maybe, but – benefits, price per trn, ease of adoption, ease of use, ubiquity should all come first.


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Separating Fantasy from Reality in the Brave New World of Payments Innovation