Innovations in Card Acceptance
What Drives Innovation?
More often than not, the successful innovations that surprise us come from disrupters who focus in a laser-like way on unserved market opportunities. In doing so, they are able to successfully fly below the radar of the incumbents (to use Christensen’s familiar terminology). The incumbents, after all, have a laser-like focus on their primary customers, not on the unserved. Frankly, the incumbents typically poo-poo the disruptive innovators – “what do they know?, etc.”
In our world of payments, there’s been a lot of recent interest in mobile payments – a very broad category that’s frankly ill-defined and mostly misunderstood. But there is disruptive innovation happening – especially on the card acceptance side. A leading example is Square, Jack Dorsey’s startup focused on enabling iPhones and iPads for use as merchant POS devices.
Square’s cool iPhone/iPad app technology is part of the magic – but the other part is business model innovation. Much like what PayPal did a decade ago, Square’s focusing on the unserved – folks like you and I who have iPhones in our pockets and/or iPads in our backpacks – but who can’t get traditional merchant accounts. Square’s willing to take us in and allow us to accept credit/debit cards on our mobile devices. Voila, suddenly things begin to happen.
The lethargic incumbents, who could have been innovating in this unserved acceptance market for years but haven’t (because they’re chasing bigger fish instead) suddenly realize that wow, there just might be a market here. After all, why are the VCs willing to write big checks at high valuations to Jack otherwise?
Slowly, the payments incumbents have become sensitized to how this kind of innovation has happened. After all, they’ve had a decade to study PayPal’s success! Maybe they too need to have an iPhone/iPad mobile POS application in their kit bag? Maybe they need to re-examine the gauntlet of traditional merchant underwriting they currently impose and try to find a more streamlined approach that doesn’t either turn us all off in terms of the experience or end up disappointing us in underwriting? They’re restless, aroused and seem to have begun converging on the target of the unserved they had previously ignored.
Meanwhile, it seems like we may be on the cusp of a pivot in the acceptance market. Is the real market for this kind of mobile POS acceptance innovation with the unserved – where Square started – or, instead, might it just be with the big customers? Or both?
Have you bought anything at an Apple retail store lately? Were you impressed by the experience? Did you notice how the consummation of payment for your purchase was almost seamless? No standing in line in front of some “cash register” – you just paid the person who’s been serving you the whole time. Paper or email receipt? Email PLEASE! You’re done. It’s a delight!
If you’re the head of marketing for any significant retail chain, you have to be in awe of this shopping experience Apple has created in-store. All enabled by mobile POS acceptance devices that bring the payment interface to the consumer in the right place at exactly the right time.
So, we’re talking about at least two market opportunities here – the unserved market who would like to be enabled for card acceptance – how big do you think that market is? – and a redefinition of the checkout experience for larger merchants who value a high touch customer relationship – how big might that market be?
Think about the multiple innovations happening here. This isn’t just about developing a mobile acceptance app for iOS devices – there’s more to it than that (receipts, etc.).
This is going to be fun to watch! What do you think? Share your comments below!