Payments are Hard

Anonymous Innovation Jury member, USA

Launching an innovative new payment business in 2017 is a particularly thorny proposition, a fact well understood by the Payments Innovation Jury panel members.

Of the payment innovators appearing in recent years, a number have found some success in modernizing the front-end client experience while leveraging existing payment infrastructure. Few, however, have delivered much in the way of new value beyond that, relying heavily on the scale, predictability and operational control inherent in decades-old payment rails – which are far more difficult to disrupt.

It’s no surprise, then, that this year’s report offers a few real-world perspectives on the challenges facing payment innovators.

For example, the jurors’ top reason payment startups fail is a business model that doesn’t scale (see earlier comments). The second most popular reason, however, is just as noteworthy – a lack of clear advantages over existing solutions. An example of this in recent years has been the anemic growth of mobile wallet adoption in developed economies, where existing bank card acceptance is ubiquitous and reliable, offering a relatively painless user experience. Powerful tech firms like Apple and Samsung have struggled to shift payment volume to their respective wallets, a situation the Jury believes likely to continue for some time.

Regulations represent the third most-cited reason payment startups fail, according to the Jury. Regulatory compliance is generally among the most daunting hurdles facing new payment service businesses, and often the least expected. In this year’s report, 39% of the Jury expressed the unsurprising opinion that regulation restricts payment innovation, citing regulatory aspects such as licensing, KYC, and anti-money laundering as the biggest compliance problems facing new payments businesses.

There are, of course, always examples of true payment innovation with the potential to succeed within the potential minefield of the payments landscape. While cryptocurrencies were thought by nearly half the panel as unlikely to achieve much success within five years, many remained somewhat open-minded about its potential if regulated and/or as a niche medium of exchange.

Finally, Blockchain/Digital Ledger Technology was cited as the most currently over-hyped payment innovation – not because it is without value, but in recognition of the years of work yet required to carve out solutions from a variety of perspectives including legal, regulatory, inter-operability and other standards. Because payments are hard.

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