Blog: Convergence is the Real Non-Payment Payment Story
As an analyst, I earn my living answering the question: “What’s happening in payments?” At risk of destroying my primary source of income, I’m going to tell all of the people asking that question a little secret: “You’re asking the wrong question!” There is, in fact, a much better and more important question you should be asking and that will have a much bigger impact on payments than anything actually happening in payments. That question is: “What is happening outside of payments that will affect the payments industry?”
|Believing in a payments-driven transformation is believing in the tail wagging the dog.|
The answer to this question is convergence. The convergence of communications of all types into online and mobile technologies is the single biggest thing happening in every industry. This trend already has revolutionized many industries and will continue to revolutionize many more, and each revolution will take a little piece of the payments industry along.
So why is this convergence of communications such a big deal? Because historically communications had separate and distinct channels. There were channels for marketing communications (billboards, catalogs, direct mail, print, radio, telephone, television, etc.). There were also channels for customer service communications (in-store, mail, telephone) and channels for sales and fulfillment (door to door, in-store, mail).
But all that has changed. Beginning with the popularization of the Internet in the late 1990s and further accelerated by mobile devices starting in 2009, leading companies that merged marketing, servicing and fulfillment into comprehensive online solutions assaulted and transformed their respective industries and/or consolidated multiple industries into massive online marketplaces. Industries that were turned completely upside down include advertising, brokerage, music, photography, publishing, travel and video rental. Competing executives will sleep fitfully for years thinking about Amazon, eBay, eTrade, Google, iTunes, NetFlix, Shutterfly, Travelocity and others.
Traditional Industries in the Crosshairs
This is just the beginning. Mobile technologies have dramatically expanded the reach and applicability of online solutions, and a whole new set of companies are aggressively merging marketing, servicing and fulfillment to transform a whole new set of industries. Amazon, Apple, eBay, Google, Groupon and Square get tons of focus for their potential assaults on retail. Amazon’s planned launch of the Amazon Fire Phone on July 25 will take convergence to a whole new level, integrating the device itself directly with Amazon’s sales, marketing and fulfillment engine to encourage, facilitate and redirect purchases. Other industries clearly in the crosshairs include cable and satellite TV, transportation, shipping and delivery, venture capital plus many more. Many future executive nightmares will be brought to you not only by Amazon, Apple, eBay, Google, Groupon and Square but also courtesy of thousands of rising companies, such as Hulu, Kickstarter, Mindbody, Shopify, Shopkeep, Uber, Zaarly and Zipments. The common thread between these firms is that they are all convergence companies that seek to simplify complicated and fragmented customer experiences by using technology to create a unified customer experience through a single communications channel.
If you’re a payments executive, you need to keep a few things in mind:
- Payment is merely a part of the fulfillment process: Believing in a payments-driven transformation is believing in the tail wagging the dog. Payments will indeed transform, but it will do so only within the transformation of the industries that accept payment, as has been the case since the late 1990s.
- The key, monetizable value brought by today’s technological evolution results from the convergence of marketing, servicing and fulfillment.
- The payments companies that in recent years have had the fastest growth and attracted the highest valuations are not doing so because they are great payments companies. They are doing so because they are great convergence companies that are well positioned to play a role in the convergence of other industries. (See Braintree, CyberSource, Mercury Payment Solutions, Stripe, Square and others).
So the key question of the day is not “how can I maintain/grow my share?” but rather, “How can I best play a role in supporting convergence outside of payments?”