Ten years ago, the world of payments and commerce was in a very different place.
ISOs sold terminals and card processing, mostly to brick-and-mortar merchants. Square was a white dongle that turned a smartphone into a point of sale terminal for micro merchants. The Collison brothers had founded Stripe, but it would be a year before it would be in-market. Braintree still belonged to Braintree and was run by its founder. PayPal was part of eBay, reported 100 million active users and was accepted at fewer than 350,000 merchants.
eBay was considered Amazon’s biggest competitor. Amazon surprised analysts by beating earnings with $9 billion in Q4 sales and CEO Jeff Bezos touting the success of its Kindle reader. eCommerce was teeny at $160 billion in sales, and physical retail hadn’t yet felt the impact of the retail apocalypse that would start to punch it in the gut later that year. Facebook was two years away from realizing it really needed a mobile app.
Uber was a San Francisco-based on-demand black car service. Most people were still paying taxi drivers with cash, and if those drivers had POS terminals, they – hmm – weren’t working when you wanted to use a card to fund the ride.
The “Pays” didn’t exist, and it would be a year before the Starbucks mobile app launched nationwide. People started living in iPhone and Android ecosystems, as smartphones were the “it” device and those ecosystems were where more people started getting their apps and services. Speaking of apps, they were pretty clunky and slow, because 4G on those phones wouldn’t be widespread for another couple of years.
It would be a year before Spotify would launch in the U.S., and iTunes was how people consumed music on mobile devices. Netflix had just introduced its streaming service. Amazon Prime was celebrating its fifth birthday, and there was no Amazon Prime Video.
Chatbots were expected to rule the world, and messaging apps, with chatbots, were expected to become the new consumer inbox. Only 1.97 billion of the 6.93 billion people on earth at that time had ever logged onto the internet.
Apple bought the Siri technology in an effort to ignite the notion of a digital virtual assistant, although it would a year before Siri would become an integrated part of the iPhone. Chip cards didn’t exist in the U.S. WeChat Pay didn’t, either, and Alipay had a measly 300 million users who drove five million transactions per day. Paytm was a brand-new prepaid mobile card in India.
POS financing was largely the domain of physical merchants who offered zero interest with hidden interest rate traps when consumers wanted to buy big-ticket items in their stores. Digital identity was the domain of social networks like Facebook, with its Facebook Connect feature.
And so on.
What a difference a decade makes.
The 2020s will experience a dramatic and rapid shift from the app economy the smartphone ignited in the decade we just left behind to one that connects people and businesses with commerce wherever they happen to be, and via any device they happen to be using, in real time – safely, securely and privately.
Mobile devices, fast cellular networks, the cloud, data and new tech – along with investors with capital and incumbents with an appetite for innovation – gave innovators the tools, ideas and capital to disrupt the then-analog sacred cows. And gave them the courage to explore new, otherwise unimaginable ways for people and businesses to connect, along with dynamic business models to monetize those interactions.
Today is the first business day of the first week of a new decade – one that will experience a dramatic and rapid shift from the app economy the smartphone ignited in the decade we just left behind to one that connects people and businesses with commerce wherever they happen to be, and via any device they happen to be using, in real time – safely, securely and privately.
The strategy sessions, investor presentations and conversations with partners and investors that will happen this week, and in the months and years to come, will focus on how every company that touches a person or a business will operate in this new, vibrant, connected economy.
Or they will find themselves on the wrong side of a decade that will move commerce and payments to an entirely new level.
Touching and swiping apps on a screen will give way to other modes of engaging with those brands, like voice, and standards will emerge to make those modes interoperable across devices, as we are already starting to see.
The Connected Economy’s Potential
As we start this new decade and prep for the innovation that will propel it, there are some things we know, for sure, already.
As software platforms and standards make it possible for consumers and businesses to interact in real time anywhere and anytime there is a connected device nearby – which will be almost everywhere – we can assume that the connected economy will see the smartphone, like the PC of the last decade, diminish in importance. Touching and swiping apps on a screen will give way to other modes of engaging with those businesses, like voice, and standards will emerge to make those modes interoperable across devices and ecosystems, as we are already starting to see.
We can also be sure that the definition of “connected device” will expand well beyond what we see today, to include what are perhaps just threads of an idea on the drawing boards of companies that don’t even exist yet – or ideas from others whose efforts are today being pooh-poohed as too far-fetched to succeed.
Let’s not forget how hard many laughed at the Amazon Dash buttons, which were introduced in 2015 and were brushed off as an April Fool’s joke. Look who’s laughing now. Those Dash buttons were just the warm-up act for what has, in five short years, become an enormous subscription business for Amazon and the commerce engine that connects its portfolio of connected devices to payment.
We can also be certain that the impact of the connected economy will be profound and eight powerful cornerstones of this economy, worldwide, will see rapid innovation:
- Work: How and where people work
- Pay: How people are paid and pay others
- Eat: How and where people eat
- Shop: How and where people find things to buy and buy them
- Live: How people find, buy and use their homes
- Travel: How and where people travel for work and for pleasure
- Bank: How and where people save, store and access their money
- Be well: How people consume healthcare services to stay healthy
These cornerstones are the end points for the innovations that will connect people and businesses across the economy. All the time. Everywhere in the world. And faster than we think.
Let the Games Begin: The Class of 2020 and the Connected Economy
What we don’t yet know is who will be playing the game, how and where they might play, who will be left on the sidelines as tacit observers or who will come out of nowhere to shake things up.
We do know there will be a lot of players vying for their shot at the connected economy prize.
The entering class of 2020 will be big, it will be global, and players will come and go. The class of 2020 will consist of those who don’t yet exist, as well as those who’ve been around for decades (or more). It will consist of innovators who seek to transform one of the eight cornerstones and the interactions between them, as well as those who desire to be the connective tissue that creates entirely new connected ecosystems uniting many or all of them.
We also know that the efforts inside of those discrete, but connected, cornerstones will both shape what happens within it and unlock opportunities to innovate across the supply chains that support them.
It’s been reported that car sales are slowing in the U.S. and in China.
Part of that slowdown is attributed to the cost of cars – they are expensive, so consumers can’t buy a new car every two or three years like their dads and granddads once did.
Part of it is related to the quality of the car – cars are made better, so they last longer. Cars that don’t break down as often don’t need to be replaced as often.
Consumers also aren’t driving cars as often as they once did. That means these more expensive, better-quality cars last longer now, too. Access to the internet, cloud-based business tools and collaboration software make it possible for businesses to support a remote workforce, reducing how often consumers commute to the office. Ride-hailing platforms make it easier for some consumers in urban areas to be without a car entirely, or to use the ones they have less often.
Driving less has implications for gas stations and convenience stores, which may not get visited as often and need to figure out how to replace that revenue. Same goes for parking garages and QSRs if more remote workers go to the fridge for last night’s leftovers instead of the QSR next to the office. Or AM coffee runs to the local coffee shop are replaced by the coffee machine on the kitchen counter.
Reduced driving is also forcing insurance carriers to rethink how they price the risk associated with owning a car since drivers who aren’t behind the wheel as often are less likely to be in an accident.
At the same time, car OEMs want to give consumers more of a reason to buy new cars – as newish as the “old” ones sitting in their garages may be – and are examining new channels and business models to create more efficient distribution and more flexible financing options.
And car owners want to find new ways to monetize their investment. Getting behind the wheel of those cars for a couple of hours a day to and from work or while the kids are in school gives consumers a way to earn a few bucks by using their own cars to serve consumers who may not want to use theirs. And digital payments and eWallets makes it easier for those drivers to be paid for those rides.
The shift to electric vehicle technology will spur demand for charging stations, and for ways to find and pay for a charge. Turning cars into voice-activated, self-driving software platforms will transform the driving experience and reshape the in-car experience in entirely new ways. When PYMNTS last did a study on the Digital Drive and the connected car experience and asked consumers what they would do if they didn’t have to drive a car, right after checking their email and social network, they overwhelmingly said they would shop.
We’ll see early on the role everyone has in igniting this connected economy, who is essential for ignition and who becomes an interchangeable feature or function within someone else’s ecosystem.
The cornerstone is mobility – and how software plus technology is changing how consumers get from point A to point B as a part of their day to day routines. But the constant thread that runs across it is payments and commerce – and how Big Tech, FinTech and FinServ players are adapting their platforms and business models to enable new ways of doing business for all of the players who operate within in.
Let the 2020 Games Begin
We start this new decade with more certainty, perhaps, of how innovation will evolve than we had last decade, although who will ultimately survive and thrive is yet to be determined.
The last decade’s investments in software and digital technology – in securing and scale it – laid the tracks upon which new products and services could be created and new channels of access for people and businesses in this connected economy. The work to be done over the decade – work that starts in earnest today – will leverage those investments to fast-track its reality and the value it promises to deliver. The pace of this next decade will be swift.
We’ll watch as the members of the entering class of 2020 use their assets to protect the beachheads they’ve put in place today, and to acquire others to expand their presence and redraw ecosystem lines across products, markets and geographies. We’ll watch competitors become partners in some cases and, in others, watch partners become competitors. We’ll see early who plays what role in creating and igniting this connected economy, who’s essential for getting it off the ground, who becomes an interchangeable feature or function within someone’s else’s ecosystem.
Consumers, of course, eagerly anticipate this future even though they may not know what’s on the horizon. What they have experienced over the last decade is a demonstrable change in how technology has made going about their day to day better, easier, less friction-filled – and they want more, regardless of where they are in the world. The consumer will be our touchstone for how we measure who of the class of 2020 is delivering that experience.
We’ll all watch as digitally adept consumers across all age groups and demographics, everywhere in the world, provide real-time feedback about what they like and what they don’t like, and what is likely to ignite. They are consumers who have grown more than comfortable integrating technology into their lives – whether they are six, 16 or 86 years old – increasingly, everywhere in the world.
The Connected Economy and Changing the World
The entering class of 2020 isn’t the class of companies that will graduate at the end of this year, or even at the end of this decade, but those whose innovations will shape how people and businesses connect with each other in new and meaningful ways today and in the years and decades to come.
The potential that is before us – for innovation to demonstrably improve the eight cornerstones of the connected economy – brings to mind an anecdote in one of the most inspiring books I’ve ever read.
"Make Your Bed: Little Things That Can Change Your Life … And Maybe The World" is written by Admiral William H. McRaven and was published in the spring of 2017. The book is about McCraven’s experience going through Navy SEAL training and the 10 life lessons that came out of it.
McRaven is now retired from a long and distinguished career as a highly decorated Navy SEAL and four-star admiral who served as the ninth commander of the U.S. Special Ops. The book is short – 144 pages – and was adapted from a commencement speech he gave to the University of Texas graduating class in 2014 shortly after his retirement.
I’ll bet that if you haven’t read the book, you might have been one of the more than 10 million people who watched him deliver it on You Tube. It’s worth 19 minutes of your time.
The title of the book, “Make Your Bed,” is the first lesson he learned: a simple task that he says sets the tone for the day.
But it’s the preamble to that speech and those ten lessons that speaks to our work as payments and commerce innovators so far, and our potential to do even more as we step into this new decade.
McRaven issued a call to action to the graduating class that day. He made the point that if each member of the graduating class that year changed the lives of just 10 people, and if each of those 10 people changed the lives of just 10 people, over the course of a generation, the lives of 800 million people would have been changed.
It’s humbling to think about just how many lives the payments and financial services innovators have already changed by putting the power of tech and creative new thinking to work for people everywhere in the world. And the potential we have to build on the great progress to improve the future of the billions people living on Planet Earth.
Inspiring words for the entering class of 2020. Now, let the 2020 games begin!
And don’t forget to make your bed.