Tuesday, September 06, 2011

Continuous innovation and new start-ups - why radical innovation cannot work for payments

The innovation required to re-do payments is quite complex. The reason for this is that payments is like a multi-tentacle octopus: it is a extremely complex eco-system that is integrated with many other systems. It is therefore unlikely to see a radical innovation changing payments as we know it overnight. Yet, one sees new start-ups all the time with a new angle on how payments can be re-vamped to be more effective, more ubiquitous and more secure.

A case in point is Zunguz (Read here). Zunguz is a payment system where you can pay any other person that is registered on Facebook - merging the world of payments with the world of social networks. This is a great idea of course and probably logical. So I jumped on to Facebook and attempted to register for Zunguz. I gave up when I had to change my Facebook security profile in order to support the security requirements of payments. As an aside, I noticed that twenty people have already registered for Zunguz.

Maybe this is too a radical innovation in a world where continuous innovation is required.


davidmandrews said...

Not sure I agree with the premise. I'd say that there are not enough proof points to support the premise, and you are conflating adoption and innovation.

I think there are plenty of proof points for innovation. Square which allows merchants to accept credit card payment with a smart phone or tablet without a lengthly credit card contract. Or even NFC (near field communication) which provides the simplicity of cash on a phone. And, there are plenty of others out there on the innovation side. Adoption, on the other hand, is a different story.

Adoption in payments is a complex equation that includes channel, value prop, ease of use, competition and a variety of other attributes. A strong value prop such as providing mobile financial services to the unbanked can lead to adoption despite limitations (e.g. feature phone access). mPesa is a good example. In a different field, Microsoft's tablet approach field because of a lack of a strong value prop and a high price point. Yet the iPad succeeded in the same space because it nailed both value prop and price point.

So, I would say that we are in the midst of a lot of innovation in the payments space. Some of it may go the way of betamax or one of the iPod's competitors, and some will be the next Walkman.

Unknown said...

I agree totally with David. At the recent Global MMT/Connected World Forum in Dubai the Google Head of New Business Development in Africa Neil Ahlsten made a statement that actually sums it all up. "The fight is against cash not existing payment mechanisms". With some thinking out of the box innovative new mechanisms will always come up.

Paypal has its own version of Payment on top of Facebook already and while Zungus may be crude for now you cant deny that a platform with 850 Million active users is a massive user-base for a P2P ecosystem

The iPads of payment are on their way and I know a few of them and glad to be working closely with one of thos companies