By Dale S. Laszig
The payments industry has produced a long line of products, some more successful than others. In the past, product failures mostly fell into two camps: those that rushed to market and promptly exploded, and those that lingered in the lab, only to be tweaked, debugged and eventually abandoned.
In today's mature payments ecosystem, the fast and sloppy crowd has gained an advantage over slow-moving blunderers for two reasons. First, the industry has moved away from heavy, proprietary systems into mobile, virtual and cloud-based technologies. Second, payments are now interactive, requiring delivery systems to be dynamic and conversational. Occasional tweaks and software patches, in this environment, are no big deal.
Merchant level salespeople (MLSs) who have sold bleeding-edge technologies to merchants bring a healthy degree of flexibility to the new product game. They know electronic transactions will always be a technology play, and like other sports, one that can improve with practice.
For example, MLSs brought their prior experience and knowledge to the U.S. EMV (Europay, Mastercard and Visa) migration, helping merchants and consumers adjust to chip card technology at the POS.
Technology leaders who have pioneered digital payment technologies have also learned from past successes and failures. Failure is a normative concept in the tech world; many engineers see it as a natural part of testing. Even Steve Jobs said, "You've got to be willing to fail, and crash and burn … if you're afraid of failing, you won't get very far."
Among their divergent designs and uses, the same basic STAR qualities exist in most successful products:
Following are examples of how these STAR qualities, by their presence or absence, have affected payment technology companies in their efforts to bring new products to market.
Inventors who have taken products from concept to production have said the process will challenge the best business plans. Starving artists who stay the course win no accolades in Silicon Valley, where ideas are expected to rapidly monetize and scale, and the prevailing wisdom often imparted to hopeful entrepreneurs is, "Go big or fail fast."
If only Softcard, a mobile wallet formerly known as Isis, had failed fast. The company formed an unlikely union with Verizon Wireless, AT&T and T-Mobile in 2010 and spent the next four years trying to bring a mobile wallet to market. Payments industry veteran Amitaabh Malhotra was co-founder and Chief Operations Officer at DeviceFidelity Inc. from 2007 until 2015, when Square Inc. acquired the technology company. The company designed a near field communication (NFC) platform that was later used in Softcard's mobile wallet.
Malhotra noted that the company created an NFC module using a memory CD slot at a time when few NFC products were in the market, and there were ongoing arguments about who would control the secure element.
"Our solution predated Apple Pay, so we created a protective case with NFC functionality to enable iPhones to run the Softcard mobile app," he said. "We worked with Softcard for three years, solved device availability, certified the product and got the card brands ready to do it, but in the end, they just couldn't get their coalition and business model right."
Malhotra said Softcard focused more on making money than on what consumers and merchants wanted. "If you're a payment network competing against Visa and Mastercard, what are you doing that they're not already doing?" he said. "Why would the market need a payment network that charges more and shifts liability for chargebacks and fraud to merchants?" Softcard tried different value propositions, from sharing transaction revenue and charging banks to issue the wallet to charging merchants for coupons and loyalty, but in the end, the moving pieces didn't fit. "Before Google launched their wallet, they offered to partner with Softcard and put the app in every Google phone," Malhotra stated. "Softcard wanted everything and ended up with nothing."
Malhotra moved on to OmnyPay Inc., a San Francisco-based company founded in 2014, with a white-label mobile commerce solution that powers Kohl's Pay and other leading retail apps. Its ability to aggregate reward, loyalty and payments in a simple interface has helped the platform achieve global scale, Malhotra said. As OmnyPay's Chief Marketing Officer, Malhotra looks beyond payments to "all the other stuff that happens in retail." Earlier mobile wallets were too generic and payment-centric, Malhotra noted, citing CurrentC as an example.
CurrentC was developed by Merchant Customer Exchange, a consortium of retailers who couldn't tell each other what they were working on, but were supposed to be a coalition. To make matters worse, they had heavily invested in loyalty and coupon schemes that represented their core tenets and competitive strategies. So why create a coupon that could be used universally across MCX member stores? It would effectively remove the differentiators and business philosophies from the equation, Malhotra said.
Another problem with CurrentC was its dependence on automated clearing house payments. "You'd have to offer a spectacular deal for consumers to change their behavior or expose their banking credentials to a group of retailers," he said. "They'd be just as happy to use private-label store cards or debit cards, which are familiar and pose less risk."
And finally, introducing a new mechanism that is not top of mind for consumers is no easy task. "When I'm shopping at Target, I'm not thinking about Apple; I'm thinking about Target," he said. "When I go to pay, MCX and CurrentC are not top of mind. The store brand experience, not the payment method, is top of mind."
Malhotra would like to see solutions aimed at improving the retail experience by moving payments into the background. He recalled the first version of the Starbucks app; it was just the basics and it worked. It moved gift to a barcode; that was it. Over the years, Starbucks added more features, like topping up electronically, and ordering ahead.
"Loyalty and coupons were the main friction point, so they addressed that first and added features later," he noted. "The beauty of the age we live in is that we can continue to add new features every month."
Malhotra pointed out that Uber also made it easy for consumers. Open the app and a taxi shows up, with no third party involved. Just begin with the most minimal solution and a sound underlying value proposition, he said.
Darrin Ginsberg, Chief Executive Officer at Super G Funding LLC, a Newport Beach, Calif.-based small business lender, concurred. "My suggestion is test on a small scale first, before developing a full-blown marketing plan," he said. "Scale it back as a small test at tradeshows or swap meets to validate that the market is interested in your product."
Ginsberg also proposed crowdfunding campaigns as a low-cost way to test a product's viability. "Kickstarter and Indiegogo are great ways to validate people's interest in your product," he said. "If people sign up, you know they're interested."
Mitchell Cobrin, founder and Chief Catalyst at AnywhereCommerce, a mobile commerce technology provider, described his company as dexterous, nimble, open-minded and ready to pivot when necessary. In 2006, he led an initiative designed to provide card-present transactions and PIN debit to ecommerce.
"We assumed we'd be well received in the ecommerce marketplace, but met with skepticism and ultimately pivoted, turning our attention to mobile merchants," he said. "Fortunately, we found a receptive audience for our omnichannel solution."
Cobrin attributes the company's continued success to a talented team and problem-solving mindset. "Our clients and ISO channel partners are happy to actively participate in driving solutions," he said. "Our business development team appreciates the opportunity to work with clients on viable product strategies that are not off the shelf." Cobrin added that "off-the-rack" problems are rare and recommended keeping an eye on the market. "If you recognize a problem, propose a solution," he said. "Prepare to do a lot of listening. Some of your best opportunities could be an outgrowth of your experience as a customer."
Todd Lawrence is CEO of Just Cash, a mobile money company currently in pilot with plans to launch nationwide in 2017. The company is working with leading ATM manufacturers on a mobile app that enables users to send and receive cash and digital currency and withdraw cash at ATMs without using credit or debit cards.
Lawrence has found his investment banking background advantageous in all stages of planning. Many technology startups don't realize the time and effort involved in fundraising, he stated. "Series A fundraising can be a five to 10-year process, and getting funded doesn't mean your financial worries go away," he said. "The funding may allow you to focus more on the company and less on how you pay bills, but you won't be getting a salary."
Lawrence has observed some technology startups are not fully aware of the differences between funding and liquidity. "When investors put $5 million into your company, you can't access that money; that's not a new car or house," he said. He further described the following stages to illustrate a typical product investment cycle:
In some situations, people receive larger sums sooner, and they usually put the money back into the company, Lawrence noted. He advised anyone preparing to launch a new product to be prepared to spend their own money for at least five years.
"Make sure you have a solid foundation to build on, with the right partners and team members," he said. "Stakeholders will ideally share a common vision and work ethic and be willing to step out of traditional roles to move the company forward."
EMV and other emerging payment technologies have measurably changed traditional product lifecycles. Mark Bergner, Director, Product Strategy for Worldpay, noted virtual terminals have become more sophisticated because of EMV. "They are no longer just browser-based POS, but virtual solutions designed to interact with smart card technology," he said. "They create a fully PA-DSS compliant EMV solution that offers a robust, secure environment for merchants."
The digital world has created a friendlier environment for new product experimentation, with an array of advanced software developer toolkits and application program interfaces. Digital technologies and 3D printers have introduced faster, more efficient methods of fabrication, prototype design and manufacturing. Cloud and mobile technologies have caused the industry to embrace bring-your-own-device payments, moving the POS into the hands of individual consumers.
"The younger generations are the walking mobile POS," Bergner said. "They can't get their noses away from their phones, and they carry them 24/7. Some app developers and independent software vendors (ISVs) are catching that wave and capturing that audience."
Digital technologies with real-time connectivity provide instant feedback, an added benefit during all stages of app development, Bergner noted. "Some of my experience has been you don't have to entirely understand how it will impact your current environment," he said. "Instead, you can experiment and tweak a platform as you learn how efficiently it works in your current system."
In the vibrant, ever-changing world of merchant services, solutions may have shorter lifespans and merchants may have shorter attention spans, but the rules for launching new products have hardly changed. MLSs who follow the playbook, by applying best practices and lessons learned from direct experience, will maintain a competitive advantage.
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