This past month, I spent some time working with a client on-site, which was a terrific time of being with the smartest people in the room, sharing information, exploring ideas and responding to questions, one of which had to do with – get ready- the FUTURE. Or more precisely, the next big thing (NBT) as in, “So, what is the next big thing we should be looking out for?”.
I’m almost ashamed to say that my answer was probably irritating, or at least, boring as I honestly replied, “Nothing”. Stop looking, you’ll never find it, there is no NBT. Not meta data or blockchain or artificial reality or bots or anything else you can build or buy. Alas, I’m afraid that we have passed through the Age of Disruption in payments and have now entered the Age of Increments.
I propose the years we face will be built on incrementalism. I base my opinion on the evidence piling up that we have already passed through the Age of Disruption. Let’s review:
- Mobile Payments – in flight in varying degrees around the world and in some cases entering a third or fourth iteration (M-Pesa as an example) including the enormous infrastructure changes across the value chain required to support it.
- Big Data – machine learning is being applied to larger swaths of information, pulling in additional segments like human behavior and social interactions, already impacting the industry from rewards to acquisition to risk management. A sleeping giant that required the right algorithms to wake up, now emerging from hibernation.
- Automated Services– purpose-built frameworks, self-service capabilities, omni-channel design and robotics will be improved through artificial intelligence, virtual reality and spurred on by demand for always-on, seamless experiences, competitive market dynamics and a drive for cost-efficiencies.
- Information Management – Use of ISO 20022, first proposed in 2004, is proliferating around the world and along with it, enhanced capabilities to move money in real-time and enable standardized financial messages across borders. Knowledge in the use of blockchain (public and private) for the advancement of decentralized information transfers is improving every day through a variety of consortium and private investment. Information is on the move, becoming increasingly actionable and insightful.
- Market Growth – The dream of a paper cashless society is being realized in large and small initiatives around the world. Some countries (Sweden) are as close as one might get, while others (Germany) still struggle with long-held cultural norms, but new target markets are shrinking. In developed countries, it’s a zero sum game and competition corridors are getting wider all the time.
In summary, the payments industry has got the major building blocks of its next evolutionary cycle under way now and that means the future will be all about incremental changes and incremental expansion. In some ways this kind of environment is even more challenging than the previous Age of Disruption, because as the dust settles, a path must be taken which are much more narrow than the previous roadways.
In the run up to building our modern, electronic payments industry the world was a wide open highway. There was no place to go but up. Fewer stakeholders , risk was localized and there was more demand than supply for a wide variety of payment instruments. Life was good.
Today, even major financial institutions have to pay attention to the start-ups around the corner, fintech investors are getting more particular and net new growth opportunities are harder and more expensive to find. This means industry participants have to pay close attention to the details of their roadmap. Harder questions are being asked by senior management who are looking for some kind of validation to position against risk and are less tolerant of optimistic estimates based on market excitement factors.
As we begin to understand, with more granularity, about cost of acquisition, cost of ownership, and lifetime account value, our focus naturally narrows to ever-more finite bands of accounts or relationships or activities that bring the most profit to a particular business model. The industry is starting to fragment itself into groups of personas; highly specific segments within segments, with pinpoint technologies and services to match each one.
In other words, increments. Incremental account gains, incremental transaction growth, and incremental improvements in profitability. This future made up of tiny steps leaves far less sustainable business for generalists. Lacking a plan built on specifics, organizations run the risk of becoming obsolete much more rapidly.
The time for disruption and the NBT will come again, but for now, I believe the most important work for any stakeholder is to sweat the small stuff.
Happy New Year.