Achieving The Elusive “10x Factor” In Payments Innovation

With startups galore, how will new innovations gain traction? And who is leading them?

Originally published May 6, 2014 in TSYS n>genuity Journal

With 73 mobile payment startups launched in the first three months of 2014, it’s obvious that mobile payments are a hot topic. But the problem with mobile payments is a perennial one: New payment types hardly ever succeed. Our industry’s history is littered with new payment technologies ─ including Pay by Touch, Mondex and contactless cards ─ that never gained traction in consumer adoption.

And the jury is still out on today’s mobile wallets, including ISIS (the mobile wallet founded by three large U.S. telephone companies), Google Wallet and Merchant Customer Exchange (MCX, a wallet founded by a group of large U.S. merchants). It’s just a plain fact that the well-established legacy payment infrastructure that we enjoy in North America is hard to beat.

Displacing cards is a tough proposition

It’s very hard to improve the speed and convenience of swiping a payment card. Ironically, mobile technology has even prolonged the life of 300-year old paper checks by making them easier to deposit through the use of cell phone cameras.

According to Andy Grove, former Intel CEO, for new technology to achieve mass adoption by consumers, it must provide an experience that is at least 10 times better than consumers’ current one — something Grove referred to as the “10x factor.”  How have payments innovators achieved the 10x factor? Looking at some successful recent payment innovations reveals the common denominators for payments innovation success ─ the “Three E’s:”

  1. Easing checkout
  2. Eliminating friction
  3. Enabling marketplace

This trend is evidenced by the latest research. For example, according to Capgemini’s World Payments Report 2013, origination players ─ those that enlist customers while they go about their daily life ─ are embedding value propositions to trigger commercial transactions from any location.

It’s just a plain fact that the well-established legacy payment infrastructure that we enjoy in North America is hard to beat.

Achieving one or more of the Three E’s ensures that the payment approach meets an unmet consumer need, or improves the experience enough to drive behavioral change. This helps ensure that people will want to use the service.

Let’s look at some of the more successful payment innovators and see how they have made progress with the elusive Three E’s:

Easing checkout


Starbucks: More than 14 percent of all Starbucks transactions in the U.S. are now made with a mobile device. Starbucks achieved this phenomenal level of adoption with an intuitive, easy-to-use mobile app that is faster than fumbling for cash, and is coupled with Starbucks’ loyalty card.

Loop: Loop solves the “fat wallet” problem by allowing users to store payment, loyalty and identity magnetic stripe cards in a mobile app. They then can interact with almost any point-of-sale (POS) device via patented Magnetic Secure Transmission technology (non-swipe), which sends a burst of data that “tricks” POS terminals into thinking a card has been swiped. The Loop fob passes along the same card data that swiping a magnetic stripe card would, but users can carry a single device to replace almost every card in their wallets.



OpenTable: OpenTable provides demonstrable value to restaurants with its tool allowing potential diners to search for and rate restaurants, and also make reservations. Now consumers can also use OpenTable to pay their bill. With the new OpenTable payments feature, you can tap to pay and be on your way.

Eliminating friction


M-Pesa: The Kenyan mobile money system is the most successful and arguably most famous system of its type in the world. A textbook example of eliminating friction, M-Pesa was initially conceived to solve the problem of domestic person-to-person funds transfer. Before the creation of M-Pesa, the most common way a worker could send money home to his village was by bus service.1 M-Pesa re-shaped payments, and in so doing, literally saved people from highway robbery. After a successful launch including the positioning of thousands of cash-in and cash-out agents, M-Pesa rapidly expanded into point-of-sale proximity and other person-to-person payments, such as taxi payments. M-Pesa is now used by more than two-thirds of Kenya’s adult population.

Amazon 1-Click Payment: What’s worse than typing 23 digits, your name and address onto a tiny screen, pressing “go” and then having to type it all over again because you made a keying error? Not much. Amazon 1-Click eliminates this problem securely through its patented and highly secure 1-Click Payment method.




Jamba Juice and PayPal Order Ahead: PayPal is always on the look-out for ways to eliminate commerce friction with mobile technology. Its Order Ahead service, first deployed with Jamba Juice, embeds payment into the experience of ordering your favorite drink before arriving at the store. The customer can then pick up their drink without standing in line.




Enabling marketplace


PayPal and eBay: One of the most exciting recent payments industry movements is creating trust in marketplaces. PayPal with eBay is the poster child for this movement. PayPal has achieved a viral level of success by enabling commerce between two strangers who never meet face to face – a type of commerce that had been impossible previously.



Uber: This car service mobile ordering system is a more recent phenomenon, which creates trust in a different kind of marketplace by incorporating best practices like rating systems and frictionless payment. Uber users are more likely to use a car service because they don’t have to have cash and because of the system’s reliability in timely pick-ups.



Airbnb: This service for people renting lodging is successful because it leverages social media and community ratings in a manner similar to Amazon and eBay.




Don’t expect a mobile slow-down

There will continue to be a proliferation of new alternative payments approaches. The winners will be chosen by consumers from among the payment options that merchants offer.

A successful new payment method has to satisfy an unmet need, or offer an improved experience that has enough value to drive behavioral change. These will be the game-changers that drive innovation. Being mindful of the Three E’s will be vital to the success of any new payments innovation.

1. “Mobile Banking for the Unbanked,” Harvard Business School, June, 2011