The mash-up of existing technologies into new solutions (i.e. innovation) is something we are seeing a lot in the financial sector, particularly within the payments ecosystem.
A great deal of this payments innovation is coming from outside the traditional financial services industry. A recent Federal Reserve Board survey found that among financial institutions with less than $1 billion in assets, 40% have had no plans to roll out new products or services in the next three years. This lack of drive for exploration threatens the life-sustaining relationships credit unions and banks have enjoyed since their foundations.
Thats because we are operating right now in the Age of the Consumer. Today, everything is driven by consumer demand, behaviors and preferences. With technology at their fingertips, its easy for credit union members and bank customers to share that demand and those preferences. The consumer voice has more power than ever before in history. Bank Transfer Day, for example, inspired hundreds of thousands of consumers to move their financial accounts from a bank to a credit union. The movement was started by a single voice.
The newfound power of the consumer voice has not gone unnoticed by players outside financial services. Here are just a few examples of organizations external to the financial services sector that have reimagined payments to meet shifting consumer attitudes and preferences:
Apple. By combining the existing technologies of biometrics, near-field communication and tokenization, Apples latest innovation, Apple Pay, is disrupting the way consumers pay for everyday items.
Dwolla. Designed to move money for far fewer fees than traditional payment models, this innovation has changed the way consumers pay for everything from a cup of coffee to their taxes and municipal services. Its reminiscent of Henry Fords reimagining of the way people got from place to place. The result? A horseless carriage and eventually, an automobile.
Linqto. Innovating for the financial institutions that are pursuing omni-channel strategies, Linqtos videoconferencing app allows credit unions and community banks to deliver branch-like service from the ATM.
Samsung. Seeing the future of digital payments while seizing the terminal technology of today, Samsung Pay leverages both near-field communication and magnetic secure transmission. The second of these technologies will allow the digital wallet to work at 90 percent of point-of-sale terminals in the U.S. immediately upon launch.
This invasion of ideas from outside an industry is not unique to payments, nor to this particular point in time. A few examples: The Teflon we rely on every day for non-stick cooking was
first developed for use in NASA spacesuits; the protocol used to create the Internet was built by the U.S. military; the joystick BMW used in its iDrive came straight from the video-gaming industry.
Apple, Dwolla, Linqto, Samsung and other innovative companies each share a common evolutionary trait ambidexterity. In business, ambidexterity refers to leveraging an organizations existing strengths while also pushing for the discovering of new strengths. This is also known as exploit and explore.
Just as ambidexterity is rare in humans, its an uncommon trait in business. Yet humans usually the left-handed among us have been known to train themselves to be equally adept in the use of both hands. Similarly, business leaders can become intentional about organizational ambidexterity; in other words, exploiting their strengths while also exploring future possibilities.
To exploit is to master your existing business lines. This is what keeps the lights on. To explore, on the other hand, is to enter uncharted waters. Simply put, exploitation is about mastery; exploration is about discovery. If an organization does not exploit, it cant continue to exist. If it does not explore, it will become irrelevant and obsolete.
In 1920, the average S&P 500 company had a run rate of 67 years. Today, the rate is down to 15 years. At the risk of sounding the alarm, our business species (financial services) is exhibiting all the tell-tale signs of mass extinction. For all organizations to survive in the fast-moving Age of the Consumer, explore and exploit must become the new norm for todays leaders.
Shazia Manus is CEO at TMG (The Members Group).