Payments Innovation: making money

In a previous post, entitled Payments Innovation: a discussion of the future, I attempted to make the case that “innovation” (particularly) in the payments market is oft misunderstood…and, perhaps, over-complicated.

In my daily reading, I happened across a research report published by Celent that ties to the key theme of that post. There is, I admit, some satisfaction in having an assertion substantiated (albeit inadvertently).

The Celent report is entitled Payments Opportunities: Finding the White Space. The abstract, linked above, is worth the read and I’ve pulled a few quotes out for greater commentary.

Electronic payments remain an area of high growth, with a 10% to 20% CAGR around the world.

As I’ve mentioned in other written materials, in particular the slideshare presentation Understanding Electronic Commerce, the 2007 Federal Reserve Payments Study indicated a 4.6% CAGR between 2003 and 2006 in all non-cash payments. Interestingly, this includes the category of “Checks (paid)” which was the only non-cash payment that decreased over the period. Arguably, this check payment is likely not electronic (although check guarantee and conversion flows would consist of a small percentage of the flow. In sum…yeah…payments are growing.

In each case, [various opportunities for new payments plays], the payments concentrated on a specific type of customer, with a specific payment need and created a value proposition that resonated across the payment value chain.

According to the BAI Small Business Payments Study, there are 24+ million businesses in the United States that represent 69.3% of all payments. Due to the sheer number of these businesses, they are the ones who are plagued with the “one size fits all” approach to payment acceptance. As a result, focusing on a vertical (i.e. customer segment) and a need (i.e. payment integration in the workflow) represents a substantive business opportunity for the Software Company to capture.

“To focus on a winning solution, the best way forward now is to spot frictions in a particular payment flow, geography, or customer group and to develop tailored payment propositions to remove those frictions,” adds Zilvinas Bareisis, coauthor of the report.

I’m not sure that I could say it any better…

The Celent report is focused, as you would expect, on large scale payment plays. However, the logic and reasoning is fully applicable to the world of the Software Company investing in developing targeted acceptance workflows for their customers.

What’s your perspective? Agree? Disagree? Anything to add? Critiques? The comment form is below…

August 27, 2009

Leave a Reply

Your email address will not be published. Required fields are marked *