Quotes from the Innovation Roundtable

Quotes from the Innovation Roundtable
They said it couldn’t be done, but we held the latest installment in Celent’s series of innovation roundtables in Tokyo recently. Our innovation roundtables put the focus squarely on interactive discussion among the participants. This is a relatively untried model in Japan, where events typically take the form of conventional conferences with presentations. We’re glad we tried it though, because we got a very interesting line-up of firms. Participants included the whole spectrum: banks, capital markets firms, and insurers; Japanese and foreign firms; traditional mega-institutions and alternative new entrants. The discussion was lively; below are some quick notes I took of some of the more interesting comments made, to capture a bit of the flavor of the day. Why Innovate? “Innovation is not the goal, it is a method and a tactic.” “We need to innovate because it has become difficult to differentiate us from our competitors.” “In today’s environment, innovation is necessary if you want to stay profitable.” Paths to Innovation “Incremental innovation is an axymoron. You can’t innovate by increments; innovation requires a big bang change.” “It might be possible to rearrange existing elements to create something new.” “When to innovate? If our clients think a new service is interesting, we try and create it for them and see if it succeeds.” “Innovation needs to be business driven.” “Financial institutions need to have an innovation division; an incubation unit that accumulates ideas from throughout the company.” IT and Innovation “IT is not the impetus for innovation, but because IT inevitably evolves, that creates need for innovation.” “Legacy is a barrier: it is hard to throw things away.” Cultural Challenges “We need to justify ROI on any investment each fiscal year. It is hard to show this on an innovation project.” “If you think about it, financial institutions don’t even have R&D departments.” Quote of the Day “Changing company culture is really about changing oneself. I personally enjoy innovation and change. Innovative culture is about getting a bunch of people together who enjoy change.”

Looking Eastwards for Payments Opportunities

Looking Eastwards for Payments Opportunities
Last week I published a new report called “Retail Payments Market in Japan: A Land of Contrasts and Opportunity” – an overview aimed primarily at those seeking to get an introduction to payments in Japan. Our clients know that we don’t publish country-specific reports that often; instead, we tend to focus on themes and topics that have relevance in multiple markets. However, I had the opportunity to take a closer look at the Japanese retail payments market as part of a consulting engagement last year. Given how different and interesting the market is, I couldn’t resist the temptation to share the findings with our clients. It really is a land of contrasts. Despite Japan’s deserved reputation as an advanced payments market, it remains a cash-heavy society. Credit cards are popular, although the numbers have remained flat in recent years. On the other hand, transactions on debit cards are virtually non-existent. Credit cards are issued by a broad range of companies, not just banks, and most serve as both issuers and acquirers. The e-commerce market is large and fast growing, and it has a number of unique payment methods, such as konbini. Japan is often presented as an advanced case of mobile contactless payments, but those have been based on a proprietary standard (Sony Felica) and only now the country is starting to migrate to NFC payments. The report explores all these and other trends in much more detail. It’s also a land of opportunities. Based on our analysis, we see opportunities falling into three categories with different risk and investment profiles:
  1. A mobile app with sophisticated capabilities for cardholders to manage their cards and engage with their finances should be a “no regret” move for nearly all issuers.
  2. Some opportunities require a clear business case decision. Examples include card-based money transfer services, m-POS services, and targeted offers, coupons and rewards.
  3. Finally, Japanese issuers and their partners should make careful decisions where to place their bets and what kind of business model to pursue in mobile payments, as those opportunities represent relatively high investment and risk.
Japan is a mature payments market and may be overshadowed by the growth of China, India and other emerging markets, but it certainly represents opportunities for players both inside and outside the country.

The Swiss (well, Japanese) Army Knife of Cards

The Swiss (well, Japanese) Army Knife of Cards
I was in Japan on vacation last week, and saw a payment card that would likely make any U.S. card expert’s head explode — allow me to explain. I’ll start with the easy stuff. This is a Visa-branded credit card, issued by Mizuho Bank of Japan. As such, it functions like any other Visa-branded credit card. Getting a wee bit trickier, the card is for “Electronic Use Only”, a fancy way of saying that it’s not embossed. So far, so good, right? Now things get really interesting… The card has a mileage points program, which can be used to automatically load a Suica e-money purse, which can be used at numerous public transportation systems around Japan (mainly Japan Railways) and merchants such as convenience stores and station kiosks. In the U.S., the only card that is similar is the Starbucks Duetto Card, with second purse use limited to one merchant (i.e., Starbucks). http___wwwmizuhobankco1 As Celent SVP Bart Narter often says, “But wait, there’s more…” The card is a chip-enabled for greater security at POS and ATMs. Very importantly, the Suica e-money purse is supported by contactless technology, an absolute necessity for use at railway turnstyles during morning and evening commutes. Also, the Suica purse can be auto-loaded from the credit purse once the balance drops below a certain threshold. No such combo payment-transit card has yet to take off here in the U.S. Finally, when used at certain merchants (i.e., Japan Railways stations and agents), the card functions as a View Card, a private-label credit card which offers more favorable merchant discount rates than Visa-branded transactions. There are very few, if any viable examples of dual branded-private label cards available in the U.S. today (I do seem to recall that Brooks Brothers once co-branded a similar type of card with GE Money). All of this without an annual fee — don’t hold your breath for a U.S. equivalent.