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What drives disruption and

innovation in payments?

concert or show, everyone left the theatre at the same time,
and there were never enough taxis to take everybody.

This seems obvious today, but apparently it wasn't obvious
before Uber. The founders mapped the consumer value
chain, classified activities by value and found out where
consumers were not fully satisfied. The result is decoupling,
as defined by Teixeira. The same thing happened with
Airbnb. When a big event came to town, there were never
enough hotel rooms. It didn't take a fintech to solve this
problem.

Not all fintech offerings have been as successful as these
two. For instance, Facebook's Libra "currency" doesn't solve
By Brandes Elitch any problems for those with a bank account and a credit
card. And the unbanked aren't served at all. Libra cannot
CrossCheck Inc. be purchased without a credit card or a bank account
because Facebook doesn't take cash.
any people working in the payments industry
sense that disruption is everywhere, and it can This looks less like something revolutionary and more like
be overwhelming. They see it in platforms, an attempt by Facebook to circumvent regulatory oversight.
M marketplaces and ecosystems. Examples You could say this much hyped "innovation" is a case of
include proliferating fintechs, real-time payments, P2P "big hat, no cattle," as they say in Texas.
payments, POS credit, the gig economy, on-demand retail,
mobile transactions, cardless credit transactions using non- Contrast this with the GAFA firms (Google, Apple,
bank mobile apps, biometrics, conversational commerce, Facebook and Amazon) that are integral to the payments
digital money, and more. landscape because they can close the loop between what is
advertised and what is sold, and at what price point. This
Recently, I heard a podcast with Harvard Professor Thales allows them to price and improve marketing, as well as
Teixeira that provides a new way to look at disruption (see build a payments profile for buying patterns, credit scoring
the Knowledge@Wharton show on SiriusXM). He feels and returns management – valuable information for their
it's not the emergence of a new technology that creates clients. No radical new technology is involved, just new
disruption in business. ways of mining, routing and using data.

"In the vast majority of cases, these startups have the same Fintech winners and losers
technologies as the incumbents that they are fighting," he
said. "They disrupt established companies by decoupling Fintech (the joining of financial services and information
the customer value chain, picking one aspect of the technology) probably started back in 1867, when Edward
business and doing it better than the incumbent." Calahan invented the tickertape machine. But in the last
10 years, new players have been changing how to deliver
A focus on dissatisfaction financial services and products. Some people have called
this "disruptive innovation."
Disruptors find something that users are extremely
dissatisfied with, and they reduce one of three parameters: New entrants have focused on nontraditional concepts such
monetary (what it costs), the effort necessary to buy and as distributed ledger technology (including blockchain);
use it, and the time it takes to buy and use it. cryptocurrency and virtual currency; artificial intelligence
and deep learning; digital identity and biometrics;
Teixeira mentioned Uber as an example. When the founders cybersecurity and fraud prevention; fintech for social
launched the company, all the technology they had was a good; banking and personal finance; next-gen commerce
mobile phone and GPS. Consumers called a central number and retail; alternative lending and credit; payments and
and someone answered the phone, and then placed an platforms; digital marketing and consumer experience
outbound call to find a black car to pick them up. It worked robots; and, of course, regtech.
because they saw a situation they could improve: after a

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