Payments Mafia or Innovative Tribes? Are Payment Ecosystems Lacking Diversity?

Greetings from Charlotte, North Carolina! It’s great to get back to the Sunday PM musings after a few weeks off. Let's pick it up from where we left off the last time...

Wikipedia describes Mafia as a term used to describe certain clan- or culturally-based organized crime enterprises. So, how would we describe Payments Mafia? My friends at some leading US retailers (and their coalitions) might not see any difference between ‘Mafia’ and ‘Payments Mafia’, but there’s definitely some PayPal-specific DNA that seems to have percolated abundantly through the emerging payments ecosystem. Judging by the number of ex-PayPal executives who are now involved in payments startups, one would think that they went to PayPal University to get a degree in OTT Payments Innovation (and a few vested stock options too). Of course, not every ex-PayPal employee graduates with distinction, but they do seem to look at payments innovations very similarly.

So, perhaps Seth Godin’s description of a Tribe is more appropriate to describe what's going on here: A Tribe is a group of people connected to one another, connected to a leader, and connected to an idea. Tribes are about Faith, about the belief in an idea and in the community. Tribes stress on relationship building. Compared to the ordinary group or community, a Tribe has a strength that oftentimes becomes a movement that will seriously impact the world in some way.

Now, Tribe is bit more flattering than Mafia, but I think the effect is the same…a certain way of solving for friction, a certain network of relationships, a certain comfort with the key technology enablers that make new propositions possible…that's evolutionary not revolutionary. To be clear, I am not referring to just the PayPal mafia; I am referring to the Payments mafia...they all look, think and act quite alike!

Now why is that a problem? Well, because we haven’t really solved many problems! To paraphrase another PayPal exec, there had been only 3 true innovations in consumer payments before PayPal since the beginning of time - coins, paper and plastic - or may be 4 if you also count cowrie shells which preceded coins. That’s fewer than the number of new sensors that Samsung adds in every new version of its Android phone! Admittedly, it's a high bar to classify something as a true consumer payments problem: coins jingle in pockets and are too heavy; bills get dirty and carry germs; credentials on plastic can be compromised, etc. We should not take these 'problems' lightly - they had to be identified and solved for consumers to change habits, which was a huge hurdle in every case.

Actually, I don’t really have a problem with the Payments Mafia. After all, it feeds an entire ecosystem of entrepreneurs, investors and reporters who have thrived for many years in the afterglow of the PayPal explosion. To be sure, many of them have created great new value and catalyzed the industry into experimenting with new business models and helping startups believe and have the faith that Godin refers to...and these tribes exist in other parts of the world as well. E.g., in India, mChek, an early Mobile payments company, gave birth to several startups. Alums from these companies graduated & created various firms such as Ezetap, Fortune Pay, etc.

However, here’s what I think is the broader problem: we haven’t had enough tribes cross-pollinating in the payments ecosystem for a long enough period just yet. We need mobile tribes and retail tribes and banking tribes and advertising tribes and supply-chain tribes and big data tribes - all cross-connecting and forming relationships and propositions that were not possible before they met. We need more than 4 innovations in 20,000 years and the only way to ensure that is diversity of thought. Diversity of thought will only come from diversity in backgrounds. Diversity leads to innovation; innovation creates value. (Pardon the pedantic tone here.)

The good news is that we are definitely seeing this today. Even a newcomer to payments like me is seeing more cross-pollination today than 5 years ago. This makes me optimistic that we might actually get to that fifth innovation after plastic soon; given my other DNA, I hope that’s mobile!