Innovation drivers, growth of payments, sources of innovation, mexico, tony craddock 2016

Advancing Payments InnovationTony Craddock

Director General, EPA

EPA Lead Benefactor

EPA Benefactors

What qualifies me to be here?

The EPA’s focus

Emerging paymentsNew and innovative ways to move value

between people and organisations

Payments Innovation

1. What is driving innovation in payments?

2. How is global payments growing?

3. Where should you search for the next innovation breakthrough?

What is driving innovation in payments?Top drivers

1. Changing regulations

2. New technology

3. Growing and changing consumer demand1. Demographic shift – millennials, digital natives

2. Negative trust in banks

3. More use cases

4. Ubiquity of mobile devices

5. Government support

6. Profit potential in transaction origination • 22% ROCE v 6% ROCE on credit

7. Entrepreneurial talent

8. Investment

And investment is rising Global investment in Fintech, US$

• $23 billion of

venture capital and

growth equity has

been deployed to

Fintechs over the

past five years

• 50% of this was

deployed in 2014

alone

• Source: Cutting through the noise around

financial technology, McKinsey & Co, 2016

Largest part of Fintech is ‘Paytech’

• Source: Cutting through the noise around financial technology, McKinsey & Co, 2016 – 350 companies, not necessarily representative

47%

Payments Innovation

1. What is driving innovation in payments?

2. How is global payments growing?

3. Where should you search for the next innovation breakthrough?

40% of global banking revenues $105bn revenue

$30bn profit

McKinsey & Co, Global Payments 2015: A Healthy Industry Confronts Disruption

7% CAGR through 2019

CAGR to 2019 in EMEA 9%

“Payments growth is truly a

global phenomenon”

“Modernization of domestic payments infrastructures is under way”

“Cross-border payments inefficiencies are

opening doors for new players”

“Digitization in retail banking has important implications

for transaction bankers”

McKinsey & Co, Global Payments 2015: A Healthy Industry Confronts Disruption

“Fintech will take between

10% and 40% of banks’ profits in the next five years”

Source: Cutting through the noise around financial technology, McKinsey & Co, 2016

Payments Innovation

1. What is driving innovation in payments?

2. How is global payments growing?

3. Where should you search for the next innovation breakthrough?

The strategic approach to payments innovation

Ambition• State that innovation-led growth is critical and set targets that

reflect this

Investment• Invest in a coherent, time and risk-balanced portfolio of initiatives

with sufficent resources to win

Insights• Generate insights about your business, market and technology that

translate into winning value propositions

Business models • Create new business models that generate defensible profit streams

Speed• Accelerate the speed of innovation by developing and launching

innovations quickly

Scale • Launch innovations that can achieve scale

Networks • Create and capitalise on external networks

People • Motivate, reward and organise to innovate

Where do innovations really come from?

The greatest innovations come from . . . somewhere else

Do

nke

y + Ho

rseNature

= Mule

HistorySp

oo

n + Fork

= Spork

1874 2016

SportLi

ghti

ng

+ Cam

era

= Fly6

IndustryTe

xtile

s+ C

on

tactless

= Project Jacquard

PaymentsPa

ymen

ts+ Lo

gistics

= Collect+

From paymentsPayments and logistics

+37%

$36,000,000

PaymentsC

on

tact

less

+ Fashio

n

= KERV

MobilePa

ymen

tsTim

epiece

= Apple Pay

eCommercePa

ymen

ts+ M

ob

ile

= Judo

Incentive marketingG

ifti

ng

+ Mo

bile

= Givvit

GivvitCombines mobile and gifting

• Easy to use, intuitive smart phone application

• Enables sending of tangible, every day, low cost treats • Coffees, cakes, drinks, meals, flowers, cinema tickets, chocolates

• Amazon vouchers

• Treats are redeemed in-store at well-known brands

26

Our conclusion

The greatest innovations come from . . . somewhere else

To find the next innovation I recommend you . . .

Go somewhere else

Some ideas for where to goThe Five ‘C’s

1. Customers

2. Countries

3. Consultancies

4. Communities

• Free library, www.emergingpayments.org

5. Conferences • PayExpo, June 2016, UK

• EPA’s Pay360 Digital Payments, June 2016, UK

www.emergingpayments.org

www.emergingpaymentsawards.com

Advancing Payments

InnovationTony CraddockDirector General, [email protected]+44 7803 203 405