The Human-Centric Approach to Payments

The international payments landscape is changing as more companies move to SaaS (software as a service) platforms. With this shift, of course, come many challenges, including the need to scale down infrastructure to accommodate smaller markets. MPD CEO Karen Webster recently spoke with Amir Wain, CEO of i2c – an issuer processor and technology provider for a variety of payment solutions – to get his point of view on how companies face these challenges, the value in taking a human-centric, rather than an account-centric, approach to payments, what it takes for mobile to be relevant, and why the fundamentals of program management still matter.

KW:  Let’s get your perspective on the landscape of payments. i2c processes on behalf of consumers in over 200 countries and territories. What’s happening on the international stage with respect to payments these days?

AW:  I think the biggest change that we are seeing is in the service delivery model. And that’s having a larger impact on the payments landscape and the industry.

More and more international organizations are thinking about SaaS. In the U.S., the financial services industry has been using SaaS services for decades. Internationally, enterprises have licensed and operated technology that is run from their in-house data centers. That model has brought limitations around continuous improvements, and other restrictions that come with an in-house managed processing solutions.

While the payments industry is growing internationally, the amount of procurement activity is much higher as enterprises migrate their existing in-house systems to a SaaS-oriented service. And that does a couple of things.

First, it frees up the internal organization from managing infrastructure challenges and lets them focus on the value proposition to their customer. That may sound like a basic change, but it’s significant. You can’t just get yourself away from the demands of infrastructure to run a payments application. As clients move to SaaS, their focus and budgets are shifting towards defining and refining the customer value proposition – which in turn feeds into more competitive products being rolled out and extended.

SaaS is also improving their capability set, because these legacy licensed products just haven’t kept up. Many are still using old Client-Server architecture with yearly update cycles at best. They are not able to benefit from frequent updates  via cloud based infrastructure, nor are they the able to use the latest innovations that are available through some SaaS providers.

i2c is seeing tremendous growth based on our scale-up/scale-down infrastructure architecture We’re able to go into these markets – which are not as large as the U.S.  and provide services in a cost effective manner. so that’s the other element of international business: you need to be able to scale down efficiently and effectively. Many of these markets are smaller, with their own unique sets of requirements, where you can’t take the big-footprint approach that may work in the U.S. It requires a certain type of architecture of the application and the infrastructure. And we’ve seen some interesting developments come out as a result of that.

KW:  What you said about scaling down is a really interesting concept. When people think about scale, they think about having an architecture and a flexible platform that allows them to grow quickly, but people don’t then think about the ability to efficiently ratchet that into markets that may have a smaller footprint and therefore different requirements.

Talk a little bit about some of the challenges: how you overcome them, and perhaps some of the unique experiences you’ve been able to accommodate on an international stage.

AW:  The challenges in scaling down aren’t just around the technology stack. When you talk about the SaaS business, it’s not just the hardware and the software. It’s also the service delivery and all the support that comes with it.

One very obvious thing is that some of these markets have local regulations that require you to do the processing on-site. Scalability, security, reliability – these are basic; you have to have them to be in this business. If I have achieved this through deploying a $50 million technology infrastructure, or even a $10 million infrastructure, it’s pretty difficult for me to deploy that on-site and make it commercially viable for some of these smaller markets. Depending on how your technology stack is architected, you need to find a way that can cost-efficiently deploy secure, redundant, and highly available infrastructure in this type of market.

The second piece is, do you have the organizational agility to manage these integrations into each market? Almost every market would require you to support a local ATM or similar integration; it would require a KYC integration; it would need to have an SMS gateway integration for messaging, and so on. These basic areas typically challenge the engineering side of the organization.

The third thing is, how do you deliver service? How do you implement a client? How do you provide them with account management? How do you provide them with product support? If you have an approach where you need to have two people on the ground as account managers – perhaps your customers pushed you to have this type of local presence and you’ve agreed to it – you’re going to create a very unreliable support infrastructure. You can’t just have 2, 3 or 4 people; you can’t deliver 24/7 service through a small organizational footprint. So how do you create global service organizations that are available around the clock, which are available and responsive in local time zones? That’s another piece that has more to do with processes and service delivery than the software or the hardware architecture.

It’s a combination of all of these things, and asking if these systems are able to scale down in a commercially economical and viable way, based on the size of the market.

KW:  I think also to accommodate some of the really interesting deployments that we’re seeing in developing markets, where the identity card becomes also a prepaid product that consumers can then use to conduct their financial services and banking activities; those are interesting use cases that are very particular to developing markets. They certainly are not globally deployable, but quite important in these smaller markets, as you point out.

You talked about unlocking value. What everyone wants to unlock value around these days is mobile. Could you speak to your particular perspective on mobile, and how you’re accommodating that within your business?

AW:  Mobile, in isolation, still does not deliver any tangible value yet. Take the example of mobile being used for NFC. If you’re Apple, and you can launch a product that has been in market from competitors for two years – such as a large screen phone, or a watch – and still get away with it, I can see Apple making some noise about payments. But I could use a keychain or a wristband to make contactless payments 4 years ago, so there’s really nothing new just in being able to apply mobile phones to contactless payments. We have yet to see what other things Apple can rollout. How would they change that experience for me, as a consumer? How do they do things that I couldn’t do with my existing set of tools?

Internationally, what we’re seeing is that we’re not really competing with an existing benchmark. The existing benchmark is cash and extremely inefficient payment infrastructures – which helps the case for mobile a bit more.

In the U.S., I struggle to make a case for just replacing contactless payments using phones, because payments isn’t a significant point of friction there. In some other markets I am competing against a complete lack of payment infrastructure. The benchmark that I’m competing against is so low that it’s easier to make a case for a basic mobile payment application.

From an acceptance point of view, I’m not going in and telling the merchant to replace the infrastructure. I am basically including an additional revenue stream for them; they’re not able to accept those electronic payments today, and this is a net-net add-on. But in the U.S., the perspective is: “I’m receiving those payments anyway; now you’re telling me to receive them through a different form factor?” That’s a fundamental difference between the business cases.

I also see some mobile companies being able to address these markets more effectively than we have seen. For example, Softcard and some others have not been able to do this in a market like the U.S. That again goes back to the question: what are they competing against?

We are working on a project across 14 different markets, and it’s all through cellular operators in those markets. And they are just competing against cash. So it’s easier for them. If you look at the successes – whether they’re in Kenya, or the Philippines, or so on – cellular operators have really been the drivers of the projects.

KW:  You make a good point; we’re kindred spirits on that one, Amir. I agree with you that there has to be a problem – a big pain point – that the move to mobile solves for consumers and merchants. In developing markets, the pain point is enormous, and the operators really do provide such a robust and compelling solution for consumers in those markets.

In developed economies, it’s a whole different thing because the pain point isn’t whipping out a card and swiping it at a point of sale, it’s all the stuff that leads up to that moment in time. And that’s, I think, the great opportunity – to unlock value around mobile from that perspective.

How do you think about value around mobile in the developed markets like the U.S.? And how are you prepared to accommodate some of those value-added activities?

AW:  At the highest level, we are looking at the prepayment, payment, and post-payment event as three different pieces of the journey. Our goal in the payment piece is to make it as frictionless and as invisible as possible –but still extremely flexible.

The real value addition is in the pre- and post-payment areas. If you want to start creating value in those areas, you have to move your focus away from an account-centric approach and more towards a human-centric approach. If I just focus on the payment piece, and I get hung up on debit and credit, it’s difficult for me to really set myself up for innovation that is broader and at a higher level.

What we’re building is an underlying infrastructure. Think of it as an enabler of app-store-type innovation, pre- and post-event, that brings in a common set of elements which can then unite those different pieces for the consumer.

Those are the high-level, sort of generic concepts; one could get into the specifics of what all could be done in the pre- and the post-payment environments. Our goal really isn’t to define all of the innovation required. We’re starting out with certain things that we think can be done, and then our goal is to have others participate in the ecosystem and build upon that. The extensibility of the platform is what we are focusing on, and then really trying to bring in the underlying framework, which will help bring everything together.

KW:  Let’s talk about something that I know is really central to the i2c platform, and that is prepaid. You recently launched some things in market around the banner  ‘The Seven Laws of Prepaid Success’. That’s intriguing.

Of the seven, can you give me an example of one that you think people underestimate or overlook?

AW:  I’ve seen a lot of enterprises overlook the value added component that disciplined program management serves in building and maintain profitable portfolios. They are so focused on fees and interchange and the more established revenue items that they tend to overlook some of the opportunities, which may just be so easy to add on. For example, driving card usage behavior at the POS with targeted messaging, both increases revenues and reduces costs. But you have to have the right platform components to do that. On the upside, I think people sometimes overlook the opportunity to monetize the additional things that are available. So this is where things like human centric payments with targeted offers that are behaviorally based come in.

KW:  I think that’s a good point, because I think as you create more utility around the product and bring people into the habit of using it more, through adding more value, you can think about a different business model underpinning the product, which I think works well for everyone.

AW:  Exactly. So don’t try to dial the same knobs more and more; look for other opportunities. I think people sometimes get too focused on what’s the norm. That’s where program management coupled with a regular evaluation of your portfolio operations can have a positive impact.

The second thing I’ve seen happen a lot is, if you were to divide your portfolio and look at the best performers, good performers, and poor performers. Many times enterprises spend a lot of money on the poor performing group, trying to improve their performance. And one of the things we’ve learned is it’s probably best to cut your losses, get rid of that part of the portfolio. Take the so-so piece of the portfolio and really invest there, and try to move them into a better performing part of the portfolio.

Where you deploy your resources, how you spend your time, I think finding the right group within your portfolio is important, and we see enterprises missing that quite often. Again, a great reason to employ a disciplined program management approach coupled with a regular evaluation using standard KPIs.

KW:  In wrapping up… You teased a little bit earlier in our conversation that there were good things to come. I know you’re not ready to talk about all of it, but maybe give a sense of what’s next for i2c and drop a few breadcrumbs for us to follow for that announcement.

AW:  As I said, think about human-centric payments. Without any disrespect to the existing processing systems, if you forget the fancy words, you’re talking about a general ledger. It’s account-based; you post debits, and you post credits. The debits come through Visa or MasterCard or some other way – you may have another transaction set – but it’s really just a general ledger.

What we have built and what we are adding to is the next generation, or I would say just a completely different architecture that is not account-based.

Human beings don’t have one account, and they don’t have one type of account. When you have a human-centric architecture, when you talk about contact-sensitive, and when you talk about personalized those are the areas where the next generation of commerce is headed and what the new customers of these services are looking for. That’s where i2c is going.

I want to be clear: We want to be a platform. We don’t want to be a consumer brand. Our goal is to be the “Intel inside” of the next generation of commerce.

KW:  Amir, you never cease to disappoint. And we’re all now sitting on the edges of our seats, waiting for the announcement of how you’re going to bring a human-centric approach to payments, which I think is a really interesting concept – because you’re right: Human beings have multiple relationships, multiple accounts, and don’t really care how complicated it is for anyone to keep track of it on the backend. They just want someone to help them simplify it on the front end.

It sounds very compelling, very intriguing, and we’re looking forward to hearing more when you’re ready.

AW:  Sure. It’s always a pleasure, Karen, and you know you’ll be one of the first to find out.

i2c is offering access to their “7 Laws of Prepaid Success” Expert Series to PYMNTS.com readers. The Expert Series provides best practices, worksheets, infographics and white papers that help card issuer and program managers a roadmap for effective program management. The series can be accessed by clicking here.

Amir Wain, CEO, i2c

As founder and CEO of i2c, Amir is responsible for defining a clear vision and setting strategic direction for the company. Recognized as a pioneer in the prepaid/stored value industry, Amir founded software development firm Innovative Private Limited in 1987 and led the global launch of the transaction processing platform FastCash. Propelled by the success of Innovative, he founded i2c, Inc. in 2001 to bring next-generation processing solutions to the payments industry. Contributing to the company’s expansive growth curve, under Amir’s guidance, i2c has introduced a number of industry firsts, including card-linked offers, event-driven account holder communications and gift card voice personalization.

Today, as market opportunities for payments and emerging commerce continue to expand at a dramatic rate, Amir is leading i2c’s continued push to innovate the enabling infrastructure and solutions that transform commerce. Today’s consumers want choices, and Amir’s vision is to build the flexible solutions they seek in an increasingly mobile and global world.