Cloud 401 Lesson 1: Landscape

by Tim Attinger

LESSON ONE DISCUSSION QUESTION:  Have payments always been a business of igniting external development and distribution to grow? Click here to respond.

Well, PYMNTS University class of 2010-2011, we’ve made it the last course in the curriculum.  Just three more days, a class quiz, and a final exam are all that stand between you and a diploma from PYMNTS University.  With that diploma on the wall in your office, you may tell the world that you understand the two most fundamental tenets of payments innovation: 1) that the basic forces of customer behavior and payments stakeholder dynamics are relatively constant and change slowly over time, and 2) that the forces of competition, evolution, and innovation that seek to capture revenue from that behavior are in constant motion.  And perhaps this last point is why so many of us love working in the payments industry so much.  Sure, it’s a glamorous, high-profile, well-known, and well-loved industry (), but it is also an industry that is undergoing constant change.  

As we bring it all home for this final class of the year, our theme will be “change is constant” and our focus will be “how to manage change and grow.”  If you have skipped out on every other course, or cribbed notes from that cute classmate in the seat 2 rows back, you will want to sit up and pay attention for this one. It is, in the eyes of your faculty, the most important – and least well understood— lesson in the entire curriculum.  Is everyone awake? Well-caffeinated? Alert? Interested (or at least pretending to be)?  Great – let’s get cracking~!

Future Proof?  In our last class of the year, we will discuss one of the most important ways in which a payments enterprise may invest in making its business highly flexible and adaptive to change.  Change is a constant in the payments universe, and networks must be able to change to remain relevant, to grow revenue, and to realize potential.  Despite a company’s position in the marketplace, its current customer set, its size, its growth, its relative profitability, its competitive strength, its past successes, there is nothing more important to success in the coming years than building a highly adaptive and flexible interface to the changing payments landscape around it.  For every payments enterprise, the ability to adapt to changing rapidly changing competitive dynamics in the marketplace and the changing landscape of companies working to generate and ignite commerce is fast becoming the most important skill imaginable.

For the managers of payments businesses, the way to manage change and take advantage of the coming convergence is to increasingly embrace an approach that may for many feel like letting go.  Opening the edge of a payments business to external developers brings significant benefit to the external developer, to the payment business, and to the adjacent businesses that work to embed that payments enterprise capability in their core commerce proposition.  In the process of building a developer platform interface and toolkit, a payments business may realize the ancillary benefits of enabling flexible interfaces for their own partners and traditional third-party development partners. This requires acceptance by payments managers that the evolution of their platform business, or at least the application of their payments capabilities to new marketplaces, will be primarily determined by others.
Or Back to the Future? Upon reflection, however, payments managers will realize that this has always been the case.  The bankcard networks, for example, have network reach that spans the globe touching billions of payments devices and tens of millions of acceptance locations – none of which these networks established directly.  Payments has always been a business of propagating a distributed ecosystem.  Acceptance innovation, product development, systems integration, participant penetration, and platform expansion have always been a group effort.  In plain truth, the history of payments has always been one of “open” development, albeit under a structure of tightly defined network platform rules and processing interfaces.  For most payments business managers, the thought of open platforms conjures visions of published SDKs, all the network functions out there in the open marketplace, and a host of programmers in darkened dorm rooms and programmer sweatshops writing payments applications – some great, some good, some not so great, and some bad by design destined to wreak havoc on core settlement systems.

But to be fair to the way “open” platforms actually function today, this is an exaggerated view of what actually is out there. The landscape for open platform developments is populated by large and well established businesses.  These companies have learned that the best way to integrate their complementary business processes, and to knit their respective ecosystems together in an embrace that brings more participants and value to each, is to open the edges of their platforms to let developers bring them together in ways that they might not achieve directly.

In our next class we will discuss how this is happening in the marketplace today, which platforms and industries are driving the transformation, and how they are doing it. In our last class we will make some predictions about how all of this might play out. But for now, let’s discuss the following:

LESSON ONE DISCUSSION QUESTION:  Have payments always been a business of igniting external development and distribution to grow? Click here to respond.

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