By Marc Winitz, i2c Inc.
Innovation is a key ingredient to growth, especially in an environment defined by changing consumer behavior, evolving expectations and rapid technology adoption. Financial institutions are struggling to find the right strategy to stay ahead of the future, which is why innovation labs are all the rage today in the banking industry. The main purpose of innovation labs is to come up with the next big thing, addressing future market needs and competition with new solutions and business models.
The obvious problem, of course, is that the future is nearly impossible to predict. Even if you are fortunate enough to catch the right trend, it may just be a passing fad, and the risk of being disrupted down the road still exists. Moreover, the lab model isn’t designed for speed. It’s difficult to move an innovation into production or take market feedback and make changes to keep pace with market changes and expectations.
There is also a high overall failure rate. Given the high costs and long time frames required to go from idea to proof-of-concept to market, the potential for great rewards comes at a great cost—of risk and time.
Cathy Bessant, a global technology and operations executive at Bank of America, framed the problem well in an interview with Fortune: “I’m not a believer personally, in innovation labs—the whole idea of innovation for innovation’s sake and the idea of one success for every 10 tries. Banking is a thinly margined business … The whole idea that we would devote a tremendous amount of money to something with a 10 percent hit rate is not, in my view, economically viable.”
For financial institutions lacking the deep pockets of the biggest competitors, investing their limited resources to develop disruptive payments solutions isn’t a viable option. Stated simply, you can never outspend the big guys. What you really need is a more effective weapon to level the playing field.
Incremental Innovation Is a Necessity
A more effective approach is incremental innovation. Incremental innovation is not about sweeping changes that require big investments of time and resources. The focus is on quickly and regularly rolling out improvements and feature additions to products and services in response to immediate market feedback. This dynamic cycle and continual improvement puts innovation on the leading edge of the market.
One of the best examples of incremental innovation is Gmail. When Google first launched Gmail, it had a limited feature set but did one thing very well: delivered emails. Over time, Google released more features and made the service better, faster and easier to use. Google has used the same incremental innovation approach multiple times with other new products, from its Maps service to the Chrome browser.
This very same principal used by tech innovators can be now be applied to the payments ecosystem.
Making Incremental Innovation in Payments a Reality
Central to incremental innovation for card issuers is agility, control and flexibility, and the payments processing technology issuers rely on is a key piece of this puzzle. Issuers need the right tools to execute their unique payments vision, and to quickly and regularly introduce new features and solutions in response to changing customer needs and market trends as they evolve.
By taking an incremental innovation approach using a “sandbox” methodology, payments providers can trial new products and services with little risk. New card features and solutions can be created in a sandbox, tested in a market segment, adjusted based on consumer feedback and introduced at scale to the broader market. Solutions tailored for different geographical markets and customer segments can be adjusted and scaled quickly to leverage opportunities at speed.
This methodology is in stark contrast to working with an innovation lab over many months to roll out a new business model or solution. It is also very different than how issuers work with inflexible legacy processing solutions. Legacy technology simply is not designed to give them the control to quickly test and roll out incremental innovations on a regular basis.
Sandbox-to-Scale Payments Solutions
i2c streamlines the incremental innovation process by having a sandbox or UAT (User Acceptance Testing) environment built in to its Agile Processing platform. All new and existing clients have access to a UAT environment, where they can test-run product features on a limited basis to a defined customer sub-segment, gather feedback on the product, make the necessary adjustments based on market input, and then switch on new the functionality to release the product features to cardholders in their production environment.
This approach has helped many i2c customers create new solutions and add new, innovative features to existing products. For instance, Kiwibank and Banco de Brasil introduced multicurrency and multipurse functionality to their existing prepaid travel card products after initial test runs in the UAT environment. After making adjustments based on customer feedback, the full launches to their respective customer bases were very successful. Cardholders appreciated the addition of innovative new functionality tailored to their specific needs. Banco do Brasil cardholders can use multicurrency purse features and lock in exchange rates, and Kiwibank customers can travel with up to 11 currencies loaded on one travel card that comes with a back-up companion card.
Agile Processing is designed around the concept of control and composition and requires no customized coding. Similar to LEGO bricks, the Agile Processing platform provides a vast library of interlocking blocks of payments functionality (e.g., digital coupons, multicurrency purses, advanced card control and alerts, etc.) that can be rapidly assembled to create new solutions. i2c pioneered this approach, which effectively bakes agility into its platform. Issuers can compose new products and solutions unique to them and use the sandbox environment to test and refine new features and innovations. Concepts can be created and implemented very quickly; what used to take months can now typically be done within 30 days or less.
What’s more, we regularly improve our platform with 12 new releases per year. All changes, including new features, improvements and custom solutions are first released to all clients in the sandbox environment. The sandbox provides real-time access to resources for easy platform customization per program needs. Sophisticated and automated testing scripts ensure easy transition to production environment from the sandbox.
Innovation in the payments arena is best achieved in a real-world sandbox–where issuers can compose and perfect new ideas with a library of building blocks of payments functionality. Having the tools to innovate the right solution at any moment in the future is a far safer bet than trying build the next big thing.
Marc Winitz is the CMO of i2c, a Silicon Valley-based issuer processor and technology infrastructure provider. Marc has more than 20 years of leadership experience in marketing, sales and business development at innovative mobile and financial services technology companies. You can reach him at email@example.com.
In Viewpoints, payments technology professionals share their perspectives on the industry. Paybefore presents many points of view to offer readers new insights and information. The opinions expressed in Viewpoints are not necessarily those of Paybefore.