Let’s take a long-term macro view:
Has business model innovation always trumped technology innovation? Not necessarily.
Does technology innovation usually enable business model innovation? Absolutely.
Now, let’s look at these questions in the context of the Payments Industry.
The first one has been true for most of recent history - most of the innovation in payments was related to making markets, changing habits, protecting sovereign mandates, sometimes just following the law of the land.
The second one is often derided as “technology looking for a problem”. NFC Secure elements, dynamic magstripe, etc.
So, is the payments industry different from other industries? It seems so. Payments innovations have been closely related to big, top-down, country-wide, deep-pockets-enabled initiatives. We have previously discussed the plethora of joint ventures looking to perpetuate that paradigm. Regulatory regimes provide financial institutions an unfair advantage. The consumer’s emotional apprehension about everything money-related gives the banks undeserved stickiness.
Yet, there are signs that things are going to be different.
LetsTalkPayments.com is itself a great illustration. If there weren’t so many grass-roots, ground-up, technology-enabled innovations happening in the industry today, there wouldn’t have been a need for us to exist.
I really like the way Ycharts shows creative disruption. In a few years there could be some payment startups on this chart as well. We have discussed the only economic beneficiaries in the NFC ecosystem - the chipmakers. Despite the existence of all the heavyweights in financial services, technology companies are the ones taking it to the bank.
It’s also not just about the disruptions. “Outsider” service providers like mobile operators have failed to make any headway. It’s the technology companies, either consumer facing or on the infrastructure side, who will continue to gain economically because they are the ones who are in control of the roadmaps, the requirements, the OS integrations, the synchronization with monetizable applications/services, in fact the very destiny of the payments experience and the industry!
Just look at the number of executive migrations between the financial services world and the technology world. A flow in either direction is a leading indicator of the technology industry strengthening its hand. The writing is on the wall.
The coup is not happening overnight, but it’s brewing in the ranks. Today’s smartest new graduates don’t want to work for the phone company or the big banks (except for the IT shops of the big banks); they want to work for options in studios and basements where it’s cool to be a nerd!
This will be the true legacy of Bill Gates and Steve Jobs for the payments industry. The technology industry is calling the shots, and the trend is irreversible; the payments industry is slowly but surely falling in line with the macro view.