My worldview is influenced by card payments, where the most profound changes I’ve witnessed have occurred in retail commerce and crossed over to B2B. The shift to electronic payments followed the proliferation of POS terminals and the ubiquitous card acceptance they supported. The feedback loop has spawned successive innovations in online, contactless and mobile payments.
I see companies like Apple, PayPal, Uber and Airbnb as a portent to a very exciting future. These companies have disrupted their industries by reimagining ecosystems without regard for outdated thinking about how we serve consumers and merchants. Today, incumbents in many industries look over their shoulders in a constant state of anxiety and I don’t see that changing any time soon.
I’m also fascinated by how the blockchain, or distributed ledger, may transform network-based businesses; will it value-add the traditional business models or totally revolutionises them? Many organisations will be hoping to be on the right side of history as this technology evolves.
I recently read a quote in an article that has stayed with me: ‘if you’re gambling on Fintech, as an investor or entrepreneur, you’d be wise to remember that the bank is the house.’
We hear the term Asian Century used to describe the dominance of Asia in the 21st century by any number of economic and demographic measures. Asia is a diverse region with countries at different points of departure in the march toward economic prosperity. Whereas payments innovation left some behind initially, we’re seeing technological leapfrogging taking place, much of it by design. Payments innovation is seen by the governments of many developing nations as a structural imperative to support a stable and growing economy.
In his book ‘The Fourth Industrial Revolution’, Klaus Schwab argues that the confluence of emerging technology breakthroughs, such as Artificial Intelligence, robotics, Internet of Things, nanotechnology, biotechnology, and so on, is unlike anything we have seen before and will fundamentally transform humankind. His caution about the risk to countries that fail to adapt to these changes appears to resonate with the governments across this region.
The challenge is part mindset, partly due to competing priorities. The banking sector has long dithered on the question of whether technology is, or isn’t core to what they do. Meanwhile, they wrestle with a draining compliance agenda - SOX, AML, KYC, the list goes on. Amidst the identity crisis and their compliance fatigue, many have become too internally focussed and taken their eyes off the customer. Fortunately, innovation is not a zero-sum game and we’re seeing many banks are overcoming their inertia by choosing to closely partner with fintech organisations. Companies like Invapay are putting themselves forward to be part of a broader innovation narrative and reaching an untold number of customers in the process.
Supplier enablement is a time old problem. Take card payments for example: whereas a merchant facility is an essential part of an optimal AR strategy when sufficient demand exists; an underutilised facility would create sub-optimal outcomes i.e. fragmented reporting, reconciliation challenges, added risk, process inefficiencies. This is a shortcoming of the conventional payments model. Invapay allows both Buyers and Suppliers to choose their preferred payment method, without imposing their respective preference on one another – that’s the secret!
People I speak to are open minded about innovation and want to hear about "what’s new" to help them resolve their issues and make change as efficient and effortless as possible. Learnings from the more developed nations have been a bonus, allowing us to strip out unnecessary process, cost and risk. I’m now seeing a pan-regional arms race of sorts and there’s a strong belief in this region that we can lead the payments innovation agenda.
There are many clever solutions that focus on the inefficiencies that hide in company finance and procurement processes. Technology is streamlining how companies purchase goods and services, manage their approvals, process their invoices, and make and receipt payments; finding the points within their processes where cash is trapped and unnecessary costs are incurred.
There’s technology, then there’s innovation, and they’re not one and the same. Invapay works on two diametrically opposed objectives, allowing buyers to delay payment to suppliers, while suppliers avail shorter trading terms. That’s technology as a transformative force – true innovation.
One of the more remarkable observations in my short time with Invapay, is the enormous show of goodwill that our company and our CEO enjoy from all quarters. Goodwill earned through years of cooperation with our network partners, Issuers, and fellow Fintechs, across the world. Virtues such as openness and collaboration are hallmarks of Invapay and will guide our business well into the future.
Another key point of difference is that we are innovative, without being disruptive. While our solutions challenge the status quo, they are effective because they value-add traditional relationships; the relationship between Buyer and Supplier, the Buyer and their bank/financier, the interrelationships between finance, treasury and procurement departments.
Too many innovations fall short of their promise because of a lack of industry cooperation. For example, the humble chip card promised unprecedented convenience to cardholders, but this was never fulfilled. Acquirers’ failure to specify their technology to carry the invoice and remittance data so important in the B2B domain, was a lost opportunity. Some cite Apple’s reluctance to provide 3rd party access to their NFC as an example of how mobile payments are presently being throttled. If cash and cheques are the natural enemy of electronic payments, the rising tide may well float all boats if industry participants can be more open minded when they make decisions.
I’ve always loved the entertainment value of futurists. They hold a license to make grandiose predictions, without any accountability for them. So I’ll start with my own incredible claim: The Payments Industry will cease to exist in 10 years!! That’s right, changes currently underway will render Payments totally unremarkable and barely befitting its own industry classification. Electronic payments will still be a thing of course, just that the technology to make and receive payments will be somewhat passé.
Order an Uber, or your favourite pizza at Dominos, and chances are you’re hardly aware of the payment being made. The payment is being embedded in the purchase – effectively removed from human consciousness. Moving money in and out of accounts will not sustain the industry moving forward. The banks are surrendering their sovereignty in the payment value chain to shared real-time payment platforms. Visa and Mastercard are opening their rails to 3rd parties. Why? Because information is a far more valuable commodity and the companies closest to the originating purchase will be the ones that earn the right to process the payment in the future.
Please contact Con if you would like to further the discussion or have any questions.
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