Session 1: Innovation Across the Payments Ecosystem


– Why new payments methods ignite (or not)

– How consumers are using new technologies today

– How retailers are adapting their agenda to new consumer and technology trends

– How to create differentiation that drives adoption

Leaders at PayPal and American Express were among the industry experts who discussed the advantages and obstacles to pursuing innovation in payments in the first panel session of the conference.

Dan Schulman, president of American Express’ Enterprise Growth, spoke about the challenges of driving innovation at large financial institutions.

“Just being a big company and having had past success is no indicator of future success,” he said. “Often past success can get in the way of future success.”

He recalled that when he first started at AmEx, he jokingly told a senior executive, “I’m going to be your worst nightmare,” implicitly acknowledging that in his new role he would pursue ideas that had hard-to-define business models.

Schulman described the difficulty of innovating at a long-standing company.

“It’s battling 160 years of culture that does not want to change, that is risk averse, and that needs it to be perfect before it gets to market,” Schulman said of corporations in general.

He even chooses his work attire with an eye to getting his colleagues to think differently about business strategies.

“I wear jeans and cowboy boots in the tower at AmEx,” he said. “I do it on purpose. You don’t need to be the same. You can think and act differently. It’s healthy for the company to push in new directions.”

AmEx is in the midst of shifting from a product-oriented business model approach to one based around software, said Schulman.

“American Express needed to think differently about what our brand stands for, who our customers are, and how we leverage our strength without geting trapped,” he said. “Brands stand for something, but they can’t be precious to you.”

Schulman did acknowledge that AmEx’s existing cardmember relationships, merchant partnerships and brand recognition did provide valuable leverage.

“I truly believe that in order to be successful, you need to leverage the old with the new thinking that goes on,” he said “Otherwise, you might just be a startup going in. A startup just doesn’t have the wherewithal to challenge this system, though there have been exceptions.”

Given commerce and social networking forces, Schulman stressed that the payments industry will no longer stand alone. Data is now the most critical asset, he said, making a player such as Google a tremendous force in the sector from the get-go.

Schulman advised institute attendees not to “steer the boat by the wake of the boat instead of where things are going.” He explains in the video clip below why he believes that Blockbuster – with its entertainment partnerships and large customer base – should not have lost so much business to Netflix:


“In my experience, key disruptive innovation happens when you have a conjunction of needs that have shifted or new delivery methods that are emerging, and as a consequence, changes that are confronting the business model,” said Patrick Gauthier, PayPal’s Head of POS Product and Operations. “Payments is a means to an end. To understand what’s happening in payments, you need to understand what’s going on in commerce.”

Gauthier asserted that when one in two smartphone users employee the device in the shopping process, “something is afoot.”

“Consumers are changing because of the pervasiveness of information… and the ability to access information any time during the shopping process,” he said.

Multichannel is going to affect every single area of commerce, Gauthier said, adding that the future of payments is not about checkout but about integration into the flow of the shopping process. He pointed to the success of Groupon as an example.

Gauthier also referenced the growing use of alternative payments, in particular the explosive growth of prepaid payments and the proliferation of decoupled payments and wallets. 

The hierarchy of trusted brands is changing as well, Gauthier said, pointing to a study in which consumers said they trusted Apple more than Visa or MasterCard to deliver a quality mobile wallet product.

“The ability to provide tools at the platform level to make payments is paramount to next-generation payments,” said Gauthier.

His co-panelist, Hans Morris of investor group General Atlantic, noted that 99.99 percent of innovative ideas in electronic payments fail. He did point to organizations including Discover, PayPal and Apple, that were able to succeed by addressing “a gap” in the market for “which there was no existing solution.”

Sandip Tarkas, President of Customer Strategy at the Future Group, focused on why payments innovation in India has flourished. And despite being in Brazil, thanks to the wonders of technology, Mohan Sawhney of Northwestern University’s Kellogg Center for Technology Innovation was able to address institute participants via a video recording on what you aren’t doing but probably should be as far as innovation.

One of the newest members of the Market Platform Dynamics team, Sawhney opened by discussing common myths about innovation:


– Innovation does not require you to invent it; somebody else may have already done it for you

– Innovation is not a department; it’s everybody’s job

– Innovation is not a radical department from the past; in fact, departing too drastically from the past may set you up for future failure


Sawhney stressed that being innovative is about finding the proper application of and use for an invention that creates new value for customers and financial returns for the firm. To find this invention, Sawhney advised companies to think beyond technology and products and toward their entire business system.

He went on to introduce 12 vectors of innovation:


– Product innovation

– Platform innovation

– Solution innovation (forms of customer support)

– Customer innovation (focusing on unmet needs)

– Communication innovation (marketing strategies and use of social media)

– Interaction innovation (engagement with customers during the shopping process)

– Channel innovation (ways of bringing products to market)

– Supply chain innovation

– Process innovation (operating costs and policies)

– Value capture innovation (means of payment)

– Management innovation (organization structure or management methods)


Sawhney also gave an overview of the innovation radar that was developed at Northwestern University – a diagnostic tool to help companies assess their innovation strategy:


Visualizing an innovation strategy helps to create a common understanding of goals across executive management and departments, Sawhney said. It can also help companies with the innovation brainstorming process by developing benchmarks for success and differentiating the strategy from competitors.

According to Sawhney, understanding how various industries innovate can help drive innovation within your own organization. He also stressed the importance of balancing different innovation vectors. Using Starbucks as an example, he noted that the company’s focus on product innovation by adding new hot sandwiches and bakery items ended up detracting from the customer experience. (Freshly brewed coffee smells more appealing than freshly burned cheese, joked Sawhney.)

Sawhney and his colleagues surveyed more than 320 companies to understand how different firms innovate and the factors that set the most innovative companies apart. They found ecosystem, product and platform innovation were most critical for IT organizations, while brand and marketing innovation were key to success for consumer-packaged goods companies.

The good news, according to Sawhney, is that innovative companies do grow fasters.

“Customer-focused innovation drives revenue growth. Operations innovation drives profitability,” he said.


This article is part of the Innovation Rumble at Harvard Round 2 Briefing Room. See the rest of this briefing room



The pressure on banks to modernize their payments capabilities to support initiatives such as ISO 20022 and instant/real time payments has been exacerbated by the emergence of COVID-19 and the compelling need to quickly scale operations due to the rapid growth of contactless payments, and subsequent increase in digitization. Given this new normal, the need for agility and optimization across the payments processing value chain is imperative.

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