July 2015 marked the opening of the Innovation Wing at the Smithsonian National Museum of American History. Steve Jobs' iPhone, Eli Whitney's cotton gin, Thomas Edison's light bulb and other breakthrough technologies were grouped not by industry, geography or era, but by their interrelated roles in the narrative arc of human progress.
Through the years, the business world has been instrumental in providing the funding, tools and competition for innovation to thrive. "You can't separate American history from business history because business was there from the beginning, and it's what builds the nation," said museum curator Kathleen Franz, Associate Professor at American University.
Taimour Zaman is Chief Digital Officer and co-founder of One Million Acts of Innovation, a Toronto-based social movement established in 2010 aimed at improving Canada's global ranking among developed nations. One Million Acts connects business and government leaders with university students through teleconferences, networking meetings and an interactive online commons where participants can collaborate to transform ideas into projects. In an interview with The Green Sheet, Zaman cited five common challenges clients must overcome to innovate and scale their businesses:
"In payments most people don't think about the long-term need of their company; they are too busy thinking about short-term results," he said. "Most people don't have customer centricity as the focal point of decisions. Costs, quarterly company needs and other factors tend to take over."
Zaman added that the key to innovating in the payment space is having the ability to look at existing technologies in a new way and synthesize them. He noted that Jobs didn't invent the Internet or Global Positioning System; he synthesized these technologies.
"An ideal data collection and analyzing system is customer-driven and customized according to each organization's culture and requirements," he said. "The best data collection models are fully automated and do not require human intervention."
"There are so many platforms in payments that it's critical for companies to figure out how their product or service can be integrated into existing infrastructure," Zaman said. "If I had an analytical tool, I'd need to know how it could be integrated into the customer environment."
Zaman recommended aligning people, process, and technology to deliver a brand promise. He suggested partnering with payments disruptors to create new value and establish new markets.
"Payment executives who ask emotionally driven questions and provide access to live data can overcome objections about limited time and budgets," he said, referring to cloud-based platforms that provide valuable, real-time insights to payment organizations and clients.
Following are five executives who have taken a familiar product or service to a new level by synthesizing existing technologies. Each has brought a raw idea to market, transforming it from a prototype into a tangible product with potential to scale.
Ryder Kessler, DipJar
Many low-wage workers depend on tips to supplement their income. Tip jars have long been a staple in coffee shops, sushi restaurants, salons and concession stands, reminding patrons to leave a gratuity for the wait staff. Ryder Kessler, Chief Executive Officer of DipJar, was visiting a favorite coffee shop when he conceived of the idea for a digital tip jar that could accept credit and debit cards. He realized an increasing number of customers were using electronic forms of payment and not leaving tips in the traditional, cash-only tip jar because they were not receiving change from the cashier and either had no change on them or didn't have time to dig through their pockets to find any.
DipJar looks a bit like an old-fashioned tip jar and even makes the sound of clinking coins when customers dip their credit and debit cards into its card reader. The stand-alone unit uses 3G wireless connectivity and electrical power. Credit and debit card transactions are encrypted at card entry and routed via SSL to DipJar servers. The devices are Payment Card Industry Data Security Standard compliant and routinely updated to keep up to date with evolving credit card processing technology.
Peter Klamka, Bitcoin Brands Inc.
A 2014 survey by the ATM Industry Association and Kahuna ATM Solutions cited three top concerns among independent ATM deployers: declining transactions, a saturated market and changing technology. Despite declining ATM usage, Peter Klamka, owner of Bitcoin Brands Inc., predicted increased demand for easily accessible ATMs that dispense bitcoin, a currency established in 2009 that facilitates digital financial transactions worldwide at no cost.
As an independent ATM operator and distributor, Klamka placed General Bytes Bitcoin ATMs in several states, a number of which are in the New York metropolitan area. The small footprint device is manufactured in Prague, Czech Republic, and is similar to other vending machines, but it dispenses bitcoin instead of cash.
Klamka's bet paid off. Merchants with his ATMs installed have seen customers, many of whom are millennials, come in to buy bitcoin, then use bitcoins for impulse purchases. "There's a huge gap between bitcoin users and other consumer groups, but the movement is gaining momentum, mainly by word of mouth," he said. "More locations are asking for the machines than are currently available."
Bryan Sory, Qwyvr LLC
The 2005 class action suit against Visa Inc. and MasterCard Worldwide by big-box retailers, the 2010 Dodd-Frank Act and a scourge of ongoing, high-profile data security breaches have created an ideal climate for emerging schemes to unseat incumbent payment methods. These defining events have amplified the need for simple, secure and competitively priced payment systems.
Qwyvr LLC co-founders Bryan Sory and David Whitmer noted a high percentage of chargeback fraud and designed a payment system to eliminate chargebacks. "Our desire was to build a payments system on which payments are final and irreversible, at once solving the merchant's cash flow dilemma while delivering end-user convenience," Sory said.
The Qwyvr network uses an analytics-driven advertising model that rewards users for loyalty. The system is free to peer-to-peer users; merchants pay a flat transaction fee. The cloud-based, closed-loop system leverages facial recognition technology and Square POS software. When paired with beacon technology, merchants' tablet screens can identify users who can approve cash-like transactions with one click. The system is in pilot in the Atlanta area.
Farshad Tafazzoli, TouchSuite
The National Retail Federation 2014 Gift Card Spending Survey found that gift cards have been the most requested gift item in the United States for eight consecutive years, and buyers spend an average of $48 per gift card. Gift card recipients can convert unwanted gift cards at gift card exchanges and kiosks, but a large number don't use these exchanges.
When perusing online gift card exchanges one day, Farshad Tafazzoli, Chief Product Officer at ISO and technology provider TouchSuite, came up with an idea for a new type of exchange. This led to TouchSuite's introduction of TouchSuite Gift Card Exchange in March 2015. It enables merchants using TouchSuite's Lightning Payments POS systems to accept gift cards from 100 big-box retailers as payment for goods and services in their stores.
"We have three components to our strategy: increase customers' foot traffic, transact efficiently by enabling gift card redemption while eliminating friction, and increase wallet share by getting more customers into your store and getting them to spend more," Tafazzoli said.
Taimour Zaman, One Million Acts of Education
One Million Acts of Innovation launched One Million Acts of Education, part of a series of targeted, vertically focused initiatives conceived to "create, record and count one million acts of innovation" across multiple business segments. Various curricula share a core of team leaders who strive to inspire participants to "think differently and innovate collaboratively to create a better future."
Zaman said the organization is results-driven with "no time for think tank rhetoric." Instructors, who are vetted as leaders in their respective areas of expertise, provide individuals and organizations with conceptual frameworks and resources designed to help them align digital transformation projects with their unique organizational cultures.
Programs ranging from hours to days to weeks explore innovation's five challenges and ways for individuals and teams to spark cultural transformation. A "digital gap analysis" provides a snapshot of where participants are now compared to where they want to go.
Innovators solve problems and create meaningful change. While they face similar challenges, no use cases are completely alike. Here are two questions with answers from five distinct playbooks:
Ryder Kessler: "Ultimately, we see DipJar as only a minor behavioral change: take the payment mechanism you have in your pocket, a credit card, and use it for something you've done forever with cash, like dropping a dollar in a tip jar."
Peter Klamka: "Bitcoin ATMs are following a similar adoption cycle to traditional ATMs. Twenty-year-olds are using bitcoins. It may take longer for older generations to embrace the technology. We offer merchants a 60 day trial so they can try it without making a long-term commitment."
Bryan Sory: "Yes, we're hyper-conscious of the fact that MasterCard and Visa own a larger monopoly in payments than Google owns in search. Typically, in any two-sided marketplace, there will emerge one or two victors who drive out everyone else. That's certainly true in payments."
Farshad Tafazzoli: "There's a basic conditioning that occurs to us as consumers that as long as you're not too far outside the process, you can get products adopted and used. We simply made a gift card in someone's wallet into a new payment source. Nothing changed inherently."
Taimour Zaman: "Yes, we observed that people and groups make decisions based on 'personal relative priority,' not on how well something is performing. So we created the Expectation Gap Index, which could be applied to all types of relationships: employees, suppliers, resellers, partner channel partners, etc."
Ryder Kessler: "It was important to us and to our customers that DipJar be a completely modular product: we don't want to replace any POS infrastructure or processing relationships that a counter-service restaurant, salon, hotel, or museum might already have."
Peter Klamka: "Bitcoin ATMs are standalone units with small footprints that can be wall-mounted or placed on merchant countertops. Some restaurateurs are seeing an increase in foot traffic as consumers come into their store to buy bitcoins and stay for a meal or order take-out."
Bryan Sory: "Servers and bartenders have complained about employers taking card interchange out of their tips. Our system employs beacons that track consumers on a merchant tablet as long as their Bluetooth is on. When the user pays, the tips go directly into the servers' Qwyvr wallet."
Farshad Tafazzoli: "Coinstar Exchange enables consumers to insert a gift card and get cash. We wanted to get a step ahead by letting consumers use the gift cards in their wallets as a new payment source. This enables us to ride the same rails as other gift card exchange platforms while creating a new payments mechanism."
Taimour Zaman: "The ugly middle for many corporations might be figuring how to leverage mobile technologies (smartphones) to effectively interact with customers, employees and other stakeholders. It might also be merging data from social media platforms that have different and incompatible algorithmic and data structures.
"With the help of our programmers we can transform raw data into advanced information systems with predictive analytics. Working together we can solve innovation challenges and evolve the payment ecosystem."
When conditions are ripe and uncommon leaders are on the scene, innovation is impossible to repress. Such is the case now in payments and is likely to continue for the foreseeable future.