Innovate or die: the fascinating evolution of payment systems…

…and the secret of great innovators.

by Gavin Reubenson, Group CIO

In the 1960s if you wanted to pay for something you did so with cash or a cheque. If you had to send a remote payment you did so by wire, the old-fashioned equivalent of an EFT though much slower and significantly more cumbersome. From then until now – about 60 years – the world has gone from using just these simple payment methods to consumers having a multitude of different and more sophisticated payment options.

While developers may dream their dreams, the reality is that new payment technologies rarely leapfrog over what already exists. The technologies that succeed are usually those that either leverage existing technologies or easily integrate with them, effectively using them as a stepping stone into digital commerce.

Anything new has to stack up against the attributes that have kept existing payment methods relevant. This means it must be widely accepted by merchants and it must be reliable, trustworthy, easy to use, instant, efficient, universal, and cost-effective.

Can you think of a payment method that has all these attributes? Yes, that is a trick question. The answer is good old-fashioned cash. Here’s a bold statement for you to wrap your head around:

So successful is cash as a payment method that it is entirely possible that we could be cardless before we are cashless.

For any innovator, success depends largely on deciding which technologies to adopt or develop. For us this means that every Paycorp product has to pass the pervasiveness test: can and will it be used by a broad range of people and merchants? It needs to align with one of our most important founding principles: to bring financial services to the un- and under-banked in developing markets.

We love the recent research which shows that:

• Of South Africa’s 54 million people, 67% use banking services today
• At least once a month fully 88% of banked adults draw money from the more than 30,000 ATMs across our country
• There are 66.6 million payment cards (of all types) in use.

Inclusiveness is as important to us now as it ever was. New developments have to go through every stage of our rigorous innovation framework and if they fail, even at the end of the process, we move swiftly along. We pay a lot of attention to the journey users will take through the experience of using our products and we are endlessly fascinated by their behavior, especially as new products come on stream.

Our sector has introduced a multitude of new payment products to the market since 2010 with varying success. Not all of them will stand the test of time and there are many more to come, from contactless payment methods and mobile wallets to authenticated collections and the convergence of mobile and ATM. We watch developments with a keen eye – any innovation is good for everyone in the sector.

Some of the developments that we’re keeping a keen eye on, and that a lot of people are excited about, include Samsung Pay and Apple Pay. We agree they are clever technologies as they are digitizing traditional payments cards and therefore leverage existing technologies to ensure easy adoption in the markets they serve. We’re also excited by blockchain and we think Google Wallet is worth watching as both of these can – and probably will – be widely adopted. Why do we think this? Because, in principle, products that significantly improve the customer experience are the ones that do well.

In other words, put the customer first. All innovators understand this. Great innovators understand it on a deeper level: the secret to real, lasting, and meaningful success is that innovation cannot be a technology, it has to be a culture.