Merchant Innovation

The Three 'Ds' Of Payments Innovation

In a story most of us know all too well, Kodak went from being at the top of their game in the 1990s to slowly but surely transforming into a cautionary tale of how not to handle a digital revolution.

As MPD CEO Karen Webster pointed out in a piece earlier this year, “Kodak didn’t think it had much to worry about – until it did – and by then, it was too late. Their ‘Kodak Moment’ came in 2003 – seven years after its best year ever – and not long after a board report concluded digital was nothing to really worry about.”

“In 2016, retail is on the verge of its own 'Kodak Moment' – and not because it doesn’t understand the impact of digital to its future,” she added.

Let’s get it straight – nobody wants to be Kodak. To be honest, no one really thinks they are going to be Kodak, but it happens.

Peter Diamandis, Chairman/CEO of The X-Prize Foundation and Singularity University, made that point very clear during his keynote speech at PYMNTS' Innovation Project 2016 last week.

Diamandis explained how Kodak had actually invented the very technology that was going to disrupt their entire field back in 1976, when it created and patented the digital camera. But when the concept was brought to the boardroom, it was rejected by the company’s leaders because the “paper and chemicals business” was what they considered to be their profit center.

“What they forgot was they they were really in the business of giving consumers a way to retain their memories," Diamandis said, noting that roughly 30 years later in 2012 Kodak was going bankrupt and essentially put out of business by the very technology they had created but ignored.

In that same year, a startup with just 13 employees that was also in the digital imagery business and called Instagram was acquired by Facebook for $1 billion.

Talk about a cautionary tale, huh?


“If you don't disrupt yourself someone else will."

Kodak just didn’t understand the rapid growth of exponential technology.

Looking at Kodak with its linear thinking juxtaposed with the exponential disruption brought about by Instagram is what Diamandis has coined “the new Kodak moment,” which is really the big challenge facing companies today.

The business leaders of today have a tendency to become so comfortable in their profit centers that they can quickly forget the reach and impact of disruption — it can happen to any industry and if it hasn’t yet, it probably will soon.

Diamandis shared a forecast from the Olin School of Business, which said that over the next 10 years, 40 percent of the Fortune 500 companies today will no longer exist.

That’s a sobering thought. But not really that sobering once you realize that, according to the Kaufmann Foundation, two-thirds of the original Fortune 500 list was gone within 30 years.

And that includes some of the biggest names in commerce – like Uber which is more valuable than 72 percent of today’s Fortune 500 companies, and Amazon at No. 35 – which are successful because they are focused on the value that they bring to the stakeholders they serve, instead of being driven solely by what they do. Uber isn’t in the ride-sharing business, they are “changing the logistical fabric of cities around the world.” Amazon isn’t an online merchant, they are the “world’s most customer-centric company where customers can find and discover anything they might want to buy online."

Powered, of course, by new technologies, data and the cloud.

The raw ingredients that Diamandis says fuel disruption and drive its continued surge at an accelerated pace.

We can look no further than Moore’s Law, he said, which is a driver of exponential growth, to see disruption playing out right before our eyes. Gordon Moore, co-founder of Intel, made the observation that the overall processing power of computers was doubling every two years between 1958 to 1965, he said. Diamandis noted that transistors have since seen a 100 billion-fold improvement in just 40 years, working nearly 10K times faster and costing roughly $10 million cheaper.

Technology is getting smaller, cheaper and faster –  something that is evident, he explained, in the explosion of sensors that are enabling a variety of new experiences for consumers and businesses. There are today, some 15 billion to 20 billion connected IoT devices available today, with he said, the expectation that the number will reach 100 billion connected devices in just four short years.

“We are heading towards a trillion sensor economy. A world in which we will be able to know anything we want, any time we want, anywhere we want,” Diamandis asserted.


From robotics to 3-D printing, virtual reality to artificial intelligence, it’s clear that the results of faster and cheaper computing power will significantly alter a myriad of industries – and payments and financial services may even be at the top of the list.

Diamandis called on advancements in robotics specifically around autonomous cars, which he said “will change everything.” With nearly every major car company in the market building and banking on full or partial autonomy, the day may come when people don’t even need to learn how to drive.

The concept of car-as-a-service may be closer than we think, he said, eliminating the need for personal car insurance or even owning a car at all.

Virtual and augmented reality is another field that Diamandis believes will “change every aspect about how we interact with our clients, the consumer marketplace and retail,” by truly blending the digital world with the real world in ways we haven’t seen before.

The new technologies coming online right now have the power to change where we consume and how we consume, and Diamandis explained that all of these technologies are in turn driving unexpected convergent consequences.

According to Diamandis’ exponential framework, whatever becomes digitized – finance and payments being prime examples – subsequently goes through a period of deceptive growth and disruptive growth, and then dematerializes, demonetizes and democratizes industries.

Dematerializing is a result of the shrinking of technology and the consolidation of features and functions into a single device – a concept that makes it possible to carry a device like a smartphone in a consumer’s hand that less than 20 years ago were all popular stand-alone products, such as typewriters, handheld radios, walkmans, calculators, etc.

"If you as a CEO are not dematerializing your products and services, someone else will do it to you, because once you do that you demonetize those industries," Diamandis told the crowd of innovators.

"Craigslist took the money out of the pockets of newspapers and put it into the consumers' pockets," he added, by taking classifieds out of print publications and putting it online.

Once products and services are demonetized, they can then be democratized – presenting a huge opportunity as the world’s population now just crossed the 7 billion mark. And in four years, it is expected that nearly 5 billion people will be connected to the Internet, bringing 3 billion new people to the market for commerce and financial services – 3 billion who will be someone’s customer.

And that, he contends, will create the potential for tens of trillions of dollars to enter the global economy. Diamandis’ challenge to the assembled at The Innovation Project is exactly how they will accommodate those customers, all of whom will want payment capabilities and all of whom will want banking. The question he left the audience with is, "Will you be the disruptors or disrupted?" The good news, sort of, is that there is still time to sort things out – and be in control of how that question gets answered.



Banks, corporates and even regulators now recognize the imperative to modernize — not just digitize —the infrastructures and workflows that move money and data between businesses domestically and cross-border.

Together with Visa, PYMNTS invites you to a month-long series of livestreamed programs on these issues as they reshape B2B payments. Masters of modernization share insights and answer questions during a mix of intimate fireside chats and vibrant virtual roundtables.

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