True innovation comes with risk, and experiencing some failure is an inevitable part of the process.
In the 2017 Innovation Jury Report, we explored the most likely reasons payment startups fail and how they can they be avoided.
This year, the Jury cited the main reason payment startups fail is due to business models that don’t scale. There are too many endeavours that reach a point where the addressable market is too small to make a profitable business, or they struggle to expand into multiple geographies.
The second standout reason identified by the Jury for startup business failure is that many new companies do not offer any significant advantages over existing solutions. Arguably these two factors may be linked.
Many jurors commented that frequently they see B2C payments solutions that are ‘solutions in search of problems’. Some early adopters may like a new solution but the broader market frequently has no real desire to change from established payment solutions. It is true that apathy has always stood in the path of change in financial services.
The Jury feel that partnerships with established payments firms is one way for startups to overcome these challenges – particularly the first one.
Larger firms in the industry, which already possess the infrastructure, assets and an understanding of the necessary regulatory requirements, can help navigate the challenges facing startups and turbo-charge their growth. There is widespread support in the industry for collaborative relationships because they bring benefits to both parties.
In return for the operations expertise, funding and access to customers that an established payments firm can offer, startups can help larger firms overcome their own challenges to create and deliver more innovative solutions to their customers. Perhaps as a consequence of this win:win outcome, partnerships are on the rise. Three quarters (75 percent) of the Jury state that there is a higher level of collaboration in the payments industry compared to three years ago.
With increased funding activity and more and more startups competing to succeed in the lucrative payments industry, entrepreneurs will do well to ensure that they are embarking on a business that presents a strong viable future. Rather than go it alone, some of the best opportunities may well lie in collaborating with the very companies that they at first thought they would compete against.
You can find more about these topics in this year’s Global Innovation Jury Report [Here]