CEO Panels

!!!!!!The!Innovation!Project!2013! !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!Interactive!CEO!Sessions!|...

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!!!!!!The!Innovation!Project!2013! !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!Interactive!CEO!Sessions!|!March!20621,!2013!

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! Over!two!days,!more!than!100!speakers!and!500!senior!members!of!the!payments!industry! will!change!the!way!that!the!payments!and!its!broader!commerce!ecosystem!thinks,!talks,! delivers!and!ignites!innovation.!On!March!20th!and!21st!the!greatest!minds!in!commerce! and!payments!will!assemble!at!Harvard!University!near!Boston!to!kick!the!conversation! about!innovation!up!to!an!entirely!different!level!at!a!program!called!The!Innovation! Project.!Speakers!and!delegates!are!among!the!most!senior!executives!and!eleite!innovators! from!literally!every!established!payments!company!worldwide,!along!with!the!CEOs!of!the! most!innovative!startKups!in!the!space.!! For!one!of!the!event's!five!modules,!we've!arranged!something!quite!special!by!pairing! industry!CEOs!with!external!thought!leaders!to!talk!about!how!they!individually!and! collectively!have!innovated!payments.! Al#Gore#(former!U.S.!VP),#Steve!Levitt#(Freakonomics),#Eric#Reis#(The0Lean0Startup),#Rosie# Rios#(U.S.!Treasurer),#Russell#Simmons#(Rush!Card),#Raj#Date#(CFPB),#and!Josh#Lerner! (Architecture0of0Innovation)0are!among!those!set!to!challenge!the!conventional!wisdom! around!what!it!will!take!to!get!merchants!and!consumers!to!adopt!new!ways!to!shop!and! pay.!! Then,!selected!audience!members!will!have!a!chance!to!interact!with!these!speakers!on! stage!—!in!live!case!sessions.!The!result!is!our!"Up!Close!and!Personal"!Interactive! Keynotes!that!will!entertain,!inform!and!challenge!your!way!of!thinking.# These!powerKpacked!sessions!are!the!“glue”!that!knits!together!our!two!days!at!Harvard.! Each!of!these!sessions!is!designed!to!“set!the!table”!for!a!very!different!kind!of!conversation! about!igniting!innovation!in!payments!–!with!the!innovators!whose!necks!are!on!the!line!to! deliver!paired!with!“celebrity!innovators”!who!know!a!thing!or!two!about!payments!and! innovation!but!work!outside!of!the!sector.! Each!week!we'll!add!another!deep!dive!into!an!Interactive!CEO!Keynote!panel.!

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!!!!!!The!Innovation!Project!2013! !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!Interactive!CEO!Sessions!|!March!20621,!2013!

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! ! The!Future:! How!the!Global!Mind!Will!Transform!Global!Commerce! ! March!20! 9:15!a.m.!–!10:45!a.m.! ! Thought!Leader!and!CEO!Counterparty!! ! Al!Gore!|!Author,!Apple!Board!Member,!Former!VPOTUS!and!Nobel!Peace!Prize!Winner!! Gary!Flood!|!President!of!MasterCard!Global!Products!and!Solutions! CEO!Panel!! ! Roger!Hochschild!|!President!of!Discover!Financial!Services!! Michael!Joseph!|!Vodafone’s!Managing!Director!of!Mobile!Payments,!Former!CEO!of! SafariCom,!MVPesa!mastermind!! Karl!Mehta!|!CEO!of!Visa!Playspan!and!White!House!Technology!Fellow!! Troy!Woods!|!President!of!TSYS!! Jeff!Jordan!|!Andreessen!Horowitz!partner!and!former!President!of!PayPal

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The!Innovation!Project!2013! 1' ''Interactive'CEO'Session'|'How'the'Global'Mind'Will'Transform'Global'Commerce' ! It'Takes'A'Global'Mind' Al!Gore,!Vice!President!turned!entrepreneur,!Apple!Board!member,!Senior!Advisor!to!Google,!and!Nobel! Peace!Prize!winner,!has!something!on!his!mind.!Well,!actually!on!his!Global!Mind.!It’s!a!concept!that!he’s! been!toying!with!for!the!last!eight!years!or!so,!as!he!contemplated!the!answer!to!a!simple!question:! What!drives!global!change?!His!new!book,!“The$Future:$Six$Drivers$of$Global$Change”!answers!that! question!and!lays!out!a!prescription!for!how!to!harness!that!change!to!transform!just!about!every!aspect! of!the!global!village!Gore!calls!Earth,!Inc.!!! And,!we!should!listen!because!the!once!VP!has!been!working!closely,!over!the!last!decade,!with!two!of! the!most!transformative!companies!in!the!world!–!Apple!and!Google.!! One!of!the!six!drivers!Gore!has!identified!has!its!roots!squarely!in!the!payments!and!commerce!corner.! It’s!the!concept!of!The!Global!Mind.!The!Global!Mind!is!what!happens!when!technology!connects!people! and!information!in!ways!that!makes!us,!well,!global!–!and!pretty!much!inseparable.!This!global!network! of!information!and!access!has!the!power!to!transform!just!about!every!aspect!of!our!lives!–!from!being! able!to!see!and!talk!to!relatives!halfway!around!the!world,!to!enabling!a!fisherman!in!Finland!to!sell!his! fish!to!a!restaurant!in!Fiji!–!all!in!a!nanosecond!using!devices!that!are!smaller!than!transistor!radios!were! in!the!1950s.!!! But!to!hear!Gore!describe!this!concept!is!to!also!understand!the!obligation!that!comes!along!with!such! opportunity.!“The!Global!Mind,”!Gore!says,!“represents!what!is!arguably!far!and!away!the!most! powerful!tool!that!human!beings!have!ever!used,![so]!it!should!not!be!surprising!that!it!is!beginning!to! reshape!the!way!we!think!in!ways!both!trivial!and!profound!–!but!sweeping!and!ubiquitous.”!! It!might!just!be!that!it!is!the!notion!of!the!Global!Mind!—!and!all!the!power!and!potential!that!it! represents!—!allows!us!to!ignite!something!in!payments!we!call!the!Second!Internet!Revolution.!This! revolution!rapidly!blends!the!physical!and!virtual!worlds!to!create!new!ideas,!new!businesses,!new! business!models,!and!new!opportunities!for!innovation!in!payments,!commerce!and!beyond.!! The'Global'Mind'|'Create.'Destruct.'Repeat.' We!believe!that!nowhere!is!the!potential!for!the!Global!Mind!to!transform,!disrupt,!and!create!greater! than!in!the!payments!and!commerce.!It’s!the!industry!behind!every!single!exchange!of!value!everywhere! in!the!world!between!people!and!businesses,!and!people!and!people.!It’s!massive!—!$4!Trillion!in! volume!in!2012.!It’s!pervasive.!It’s!critical.! •

The!Global!Mind!is!giving!birth!to!an!entirely!new!class!of!consumer.!According!to!the!OECD,!in!2000,! 83!percent!of!the!world’s!population!—!or!5.1!billion!people!—!lived!in!developing!countries,!but! represented!only!about!18!percent!of!global!private!consumption.!In!2012,!85!percent!of!the!world’s! population!lived!in!developing!countries!but!their!share!of!global!private!consumption!has!jumped! to!nearly!30!percent.!Thanks!to!access!to!the!Internet!—!and!the!mobile!devices!that!connect!to!it!— this!emerging!middle!class!is!accessing,!building,!and!driving!commerce!at!both!the!local!and!global!

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The!Innovation!Project!2013! 2' ''Interactive'CEO'Session'|'How'the'Global'Mind'Will'Transform'Global'Commerce' !







levels!in!ways!that!has!raised!the!standard!of!living!for!everyone!in!those!markets.!!! ! At!the!bottom!of!the!pyramid,!more!than!half!the!world’s!population!lacks!access!to!a!bank!account! –!and!in!many!cases!–!even!a!bank.!And!they!live!on!less!than!$2!a!day.!But,!now!more!than!80! percent!of!the!world’s!population!now!has!access!to!a!mobile!phone!and!nearly!a!third!has!access!to! a!smart!mobile!phone,!thanks!to!the!introduction!of!lowbcost!devices!into!important!global!markets,! which!means!that!these!people!finally!have!access!to!a!bank!–!but!a!bank!without!bricks!and!mortar.! The!result!is!nothing!short!of!transformative.!Over!the!last!decade,!roughly!100!million!people!have! been!given!access!to!a!“bank”!account!thanks!to!mobile!technology!and!analysts!expect!that! number!to!double!to!200!million!by!the!end!of!2013.!The!Global!Mind!has!delivered!not!only!access! to!financial!services!but!the!financial!dignity!that!will!lift!people!and!economies!out!of!poverty.!!! ! In!2012,!mobile!commerce!worldwide!represented!but!a!pin!drop!of!all!commerce!activity!(less!than! onebhalf!of!one!percent)!since!most!of!it!was!actually!done!“online”!and!not!in!a!physical!store.!That! said,!it!managed!to!contribute!about!25!percent!of!all!eCommerce!sales,!and!helped!to!chip!away!at! on/offline!retail!spend!ratio!(7!percent/93!percent).!These!smartphone!and!tablet!shoppers!drove! more!spend!too,!not!surprisingly,!given!the!current!price!points!of!both!and!the!income!levels!that! implies.!But,!over!time,!as!smart!phones!become!more!pervasive!everywhere,!the!combination!of! mobile!devices!and!technology!will!blur!the!distinction!between!mCommerce,!eCommerce!and!retail! commerce!as!people!move!and!transact!seamlessly!from!one!channel!to!another!and!just!conduct! commerce!with!merchants!anytime!and!anywhere.!!! ! The!Global!Mind!is!a!treasure!trove!of!data.!Google!and!others!showed!us!the!power!of!data!a! decade!ago!—!organizing!all!the!information!on!the!web!and!helping!people!find!needles!in!this! gigantic!virtual!haystack!of!information.!!That!has!spawned!innovative!ways!of!using!data!to!help! people!find!things!to!buy!that!will!improve!their!lives!and!to!help!merchants!find!people!who!might! want!their!stuff.!The!Second!Internet!Revolution!though!is!taking!that!to!another!level!as!mobile! devices!bring!the!power!of!search,!and!Big!Data,!into!the!physical!world.!Just!look!at!people!using! their!mobile!phones!in!stores!or!being!served!coupons!based!on!their!physical!location!to!stores! offering!them!—!primitive!ways!of!using!the!Internet!to!power!physical!commerce,!and!only!the!very! beginning.!

Six!captains!of!the!global!payments!industry!will!contribute!to!The!Innovation!Project’s!Global!Mind!on! payments!innovation!by!sharing!their!thoughts,!insights!and!ideas!on!the!future!of!payments!around!the! world!—!as!they!see!it!and!are!doing!it.!They’ll!share!the!tradeoffs!that!they!faced!as!they!said!“hello”!to! innovation!and!“so!long”!to!the!status!quo.!They’ll!tell!us!why!they!did!what!where,!and!what!markets! they!think!have!the!most!to!contribute!to!the!notion!of!the!Global!Mind!and!when.!They’ll!put!in!context! the!opportunities!made!possible!by!the!richness!of!the!technology!that!is!now!available!to!us!and!the! obstacles!inherent!in!this!vast!global!infrastructure!that!never!make!that!journey!as!simple!or!easy!as!it! may!have!looked!at!the!start.!They’ll!respond!to!Vice!President’s!Gore!challenge!to!make!the!Global! Mind!work!for!everyone!by!sharing!just!how!what!they!are!doing!will!democratize!the!commerce! opportunity!for!those!living!in!developed!and!developed!economies.!! MARKET'PLATFORM'DYNAMICS!' ' ' !

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The!Innovation!Project!2013! 3' ''Interactive'CEO'Session'|'How'the'Global'Mind'Will'Transform'Global'Commerce' ! •



Roger&Hochschild,&President&and&COO&of&Discover,!is!squarely!focused!on!the!consumer.!“We! believe!that!consumers!want!something!different!from!a!credit!card!company!–!something!that! addresses!their!specific!needs,!treats!them!fairly!and!gives!them!what!they!deserve,”!he!says.!And,! Discover!has!delivered!on!that!promise,!ranking!#1!in!customer!loyalty!among!credit!cards!for!16! years!in!a!row.!But!its!recent!decision!to!license!its!network!shows!its!commitment!to!something! else!too:!enabling!the!innovation!of!others!to!touch!consumers!well!beyond!the!Discover!brand!and! at!the!same!time,!expanding!the!global!reach!of!commerce.!We’ll!hear!Hochschild!talk!about!how! Discover’s!innovation!ambitions!make!it!easier!for!commerce!to!be!exported!so!that!innovators!in! one!country!are!able!to!see!their!innovations!take!shape!all!over!the!world.!! ! Jeff&Jordan,&Partner&Andreessen&Horowitz&and&former&CEO&of&eBay,!is!pretty!sure!of!one!thing:! physical!retail!is!dying.!“The!piece!of!the!pie!left!over!for!physical!retailers!is!rapidly!shrinking.!And! what’s!worse!for!them,!competition!from!their!online!counterparts!is!starting!to!push!them!towards! suicidal!tactics!like!matching!the!prices!of!competitors!that!have!much!lower!costs.!For!many,![2012]!! might!be!their!last!holiday!season.”!He!chalks!this!up!to!“inefficient!physical!businesses”!saddled! with!bad!business!models.!These!retailers,!one!might!say,!are!ignoring!the!potential!of!the!Global! Mind!and!the!implications!for!the!payments!industry!are!chilling.!Sure,!people!will!still!buy!things,! but!how!they!behave!online!may!be!very!different!then!how!they!behave!when!they!walk!into!a! brickbandbmortar!retailer!—!as!are!the!economics!of!those!transactions.!As!an!investor,!Jordan!and! his!colleagues!also!recognize!how!technology!democratizes!innovation!and!drives!a!explosive! growth!in!the!supply!of!entrepreneurial!talent!as!a!result!of!lowering!the!barriers!to!entry!—!just! witness!the!explosion!in!apps!for!the!Apple!and!Android!platforms.!Jordan!will!share!his!insights!on! how!the!Global!Mind!has!and!will!set!contribute!to!the!creative!destructive!of!commerce!as!we! know!it!today!for!the!benefit!of!Earth,!Inc.!moving!forward.!!



Michael&Joseph,&Director&of&Mobile&Money&at&Vodafone,&is!considered!by!everyone!to!be!the! “father"!of!MbPesa.!After!all,!as!CEO!of!SafariCom,!it!was!he!who!conceived!and!deployed!this!highly! successful!mobile!money!platform!in!Kenya!in!2007.!Today,!more!than!17!million!active!customers! move!$1!billion!a!month!around!the!MbPesa!system!in!that!country.!Success!he!said,!“required! absolute!faith!and!passion!in!the!provision!of!the!service,”!and!“recognizing!that!financial!inclusion! should!be!a!fundamental!right!for!all.”!But!success!has!been!fleeting!by!others!outside!of!Kenya!who! have!tried!to!replicate!this!experiment.!Joseph!will!not!only!help!us!understand!the!value!of!the! Global!Mind!in!developing!countries!but!how!he!plans!to!expand!it!to!37!countries!around!the!world! and!what!you!need!to!know!to!ignite!new!commerce!networks!in!markets!hungry!for!the! opportunity.!!



Karl&Metha,&Former&CEO&of&Visa&PlaySpan&and&White&House&Technology&Fellow,!knows!a!thing!or! two!about!creating!global!economies.!As!the!CEO!of!Playspan,!he!created!the!gaming!industry’s!first! publisherbsponsored!inbgame!commerce!network,!bringing,!he!says,!“aw,!order!and!commerce!to!a! massive!industry”!which!lacked!all!of!the!above.!“The!lifeblood!of!the!online!world!is!a!good!inbgame! economy,”!Metha!says.!“Prior!to!PlaySpan,!gamers!had!to!go!to!various!unsanctioned!sites!to!buy!inb game!items!and!currencies…at!huge!risk!as!the!vast!majority!of!these!sites!are!infested!with!fraud,!

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The!Innovation!Project!2013! 4' ''Interactive'CEO'Session'|'How'the'Global'Mind'Will'Transform'Global'Commerce' !



account!theft,!and!no!guarantee!of!delivery.”!Metha’s!work!is!not!only!the!basis!for!Visa’s!V.me! massive!push!into!the!digital!wallet!world,!but!the!20!percent!Initiative,!a!White!House!program!that! will!transition!"the!last!mile"!of!international!development!assistance!payments!from!cash!to! electronic!methods.!Metha!will!help!us!understand!how!innovating!the!gaming!industry!has! informed!the!largest!payment!network!in!the!world’s!innovations!in!payments!and!the!biggest! economy!in!the!world’s!focus!on!improving!financial!access!while!reducing!costs.!! ! Troy&Woods,&President&and&COO&of&TSYS,!is!a!quiet!guy!from!Columbus,!Georgia!who!plays!pretty! big!on!the!global!payments!stage.!Woods!has!been!a!critical!influence!in!the!company's!strategic! decisions!for!the!past!two!decades,!directing!its!international!expansion!to!Canada,!Mexico,!Europe,! Brazil!and!the!AsiabPacific.!He!also!helped!TSYS!go!where!no!U.S.!payments!company!had!ever!gone! before!—!China,!striking!a!deal!with!China!Union!Pay!in!2005!that!helped!China!Union!Pay!meet!the! needs!of!the!emerging!middle!class!there!who!wanted!to!use!credit!card!products.!Woods!has!seen! innovation’s!ebbs!and!flows!over!the!years,!but!also!the!powerful!impact!on!people!and!economies! when!digital!infrastructures!provide!access!to!commerce.!He’s!also!the!first!to!caution!that! “innovation!will!wait!for!no!one.”!We’ll!hear!Woods!talk!about!why!now!is!the!time!to!step!up!the! pace!in!innovation!and!who!will!suffer!most!if!the!collective!payments!industry!doesn’t.!! !

Gary&Flood,&President&MasterCard&Global&Products&and&Solutions,&is!tasked!with!enabling!the! conversation!between!these!amazing!payments!innovators!and!the!former!Vice!President!of!the!United! States!who!has!a!clear!vision!for!the!future.!Flood!has!been!with!MasterCard!for!25!years!and!has!pretty! much!seen!it!all!when!it!comes!to!innovation!in!payments.!“The!one!thing!about!it!is,!there's!something! new!every!day,”!he!remarked.!“You!wake!up!in!the!morning!and!you!go!online,!and!you!can!see!the! different!types!of!developments!that!are!occurring!around!the!world!–!by!the!banks,!the!networks,!the! innovators.!These!are!people!that!are!developing!technology!solutions,!consumer!driven!solutions,!the! B2B!solutions.!If!you!think!about!the!next!three,!five,!ten!years,!there's!an!awful!lot!that's!going!to! happen.!And!a!lot!of!it!we!don't!really!have!nailed!down!just!yet.”!Flood’s!job!is!to!make!sure!that!if! nothing!else!happens!in!this!90bminute!segment,!that!each!of!these!luminaries!articulate!their!views!on! the!Global!Mind,!its!connection!to!global!commerce,!and!the!call!to!action!to!each!and!every!one!of!The! Innovation!Project!2013!delegates!to!contribute!to!this!common!goal.!! Some!of!the!questions!that!Flood!will!pose!use!to!engage!the!panel!includes:! ! •

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What!can!the!payments!industry!do!b!individually!and!collectively!b!to!increase!prosperity!around!the! world?!Who!will!benefit!the!soonest!and!the!most?! ! How!will!these!developments!change!the!way!you!do!and!think!about!innovation?! ! Who!in!the!ecosystem!has!the!most!to!contribute!and!what!should!they!be!doing?!Is!there!a!leader!–! and!if!so,!who!should!that!be?!If!not,!how!do!we!assure!that!we!move!together!toward!a!common!

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The!Innovation!Project!2013! 5' ''Interactive'CEO'Session'|'How'the'Global'Mind'Will'Transform'Global'Commerce' !





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goal?! ! What!innovation!has!been!entirely!overlooked!in!an!effort!to!create!commerce!opportunities!for! people!who!haven’t!yet!experienced!it?!What!can!be!done!to!move!it!farther!forward!in!the!priority! queue!of!the!payments!ecosystem?! ! What’s!the!role!of!payment!networks!in!making!The!Global!Mind!a!reality?!What’s!the!role!of! alternative!players?! ! How!will!your!organization!respond?!What!will!they!have!to!change!and!can!they?!! ! What!worries!you!most!about!these!changes!and!what’s!your!organization!doing!about!it?! ! What!do!we!have!to!do!in!order!to!assure!that!we!aren’t!talking!about!this!very!same!set!of!issues,! without!any!movement!forward,!this!time!next!year?!

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!!!!!!The!Innovation!Project!2013! !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!Interactive!CEO!Sessions!|!March!20621,!2013!

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! ! Shoponomics!Meets!Freakonomics:! The!Hidden!Side!of!Why!Consumers!Buy!and!How!They!Pay! ! March!20! 11:15!a.m.!–!12:45!p.m.! ! Thought!Leader!and!CEO!Counterparty!! ! Steve!Levitt!|!Economist,!Author,!Freakonomics!! Don!Kingsborough!|!VP!PayPal!POS,!former!CEO!of!Blackhawk!and!! Founder!and!Former!CEO!of!Worlds!of!Wonder! CEO!Panel!! ! Dan!Henry!|!CEO!of!NetSpend!! Ed!McLaughlin!|!CPO!for!MasterCard!! Alex!Rampell!|!CEO!of!TrialPay!! Troy!Carrothers!|!Head!of!Financial!Services!at!Kohl’s! !

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!!!!!!The!Innovation!Project!2013! 1! Interactive*CEO*Session*|*Shoponomics*Meets*Freakonomics*|*March*20,*2013!

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After*Steve*Levitt’s*(Freakonomics)*and*Don*Kingsborough’s*(PayPal)*CEO*panel*on*consumers*and*the* adoption*of*new*payments*and*commerce*innovations,*you’ll*never*believe*anything*you*hear*ever* again*on*what*it*will*take*for*consumers*to*break*their*old*habits*and*make*the*move*to*mobile*(or* whatever*else*you*have*up*your*sleeve).** Payments*101.** Payments!is!a!two8sided!business.!It!requires!the!engagement!of!both!merchants!and!consumers.!So,! anything!that!is!intended!to!“innovate”!payments!better!deliver!enough!value!to!both!sides!so!that!both! merchants!and!consumers!have!the!incentives!to!move!away!from!what!they!know!works!today!to!the! promise!of!something!that!might!work!better!in!the!future.!!! Payments*Innovation*101.* Turns!out,!that’s!a!big!deal!—!otherwise,!the!thousands!of!“payments!innovations”!that!have!been!put! into!the!market!over!the!last!five!or!six!several!years!would!have!gotten!traction,!and!we’d!all!be!living! happily8ever8after!in!our!payments!innovation!nirvana.!! Consumers!and!merchants!have!ingrained!habits!that!dictate!their!behaviors!including!where!they!shop,! how!they!decide!what!to!buy,!and!how!they!pay.!!Some!say!that!those!habits!are!irrational!—!sort!of!like! I!happen!to!think!my!mother’s!budget!envelopes!are!—!but!they!help!people!cope!with!the!complexity! of!their!financial!lives!and!so,!who’s!to!really!judge?! Merchants!have!ingrained!habits!too,!resulting!from!investments!in!training!a!high!turnover!staff!and! point!of!sale!equipment,!and!standards!that!are!expensive!to!swap!out.!! Freakonomics*101.* So,!all!of!the!innovation!that!sounds!so!cool!has!to!actually!interrupt!those!habits!–!and!basically!get! consumers!and!merchants!to!invests!in!creating!a!whole!new!routine!–!and!the!reward!that!makes!all!of! that!time!and!effort!worthwhile.! This!is!where,!in!the!words!of!Steve!Levitt,!author!of!Freakonomics!and!one!of!The!Innovation!Project! 2013’s!interactive!keynote!leaders,!“the!conventional!wisdom!is!often!wrong.”!And!"cool"!doesn’t!solve! any!more!problems!or!create!a!better!value!for!most!consumers!than!implementing!a!new!technology! on!the!merchant!side!solely!because!it!is!cheaper.!! •



Square!wasn’t!about!the!dongle;!it!was!about!a!new!business!model!that!made!it!possible!for!micro! merchants!to!get!a!merchant!account!–!and!use!the!dongle!as!a!way!to!convert!their!phones!into! acceptance!devices.! ! Starbucks’!mobile!app!wasn’t!about!payment!via!mobile;!it!was!about!using!the!phone!to!give! people!better!information!about!their!prepaid!card!balances!–!which!was!then!bundled!with!

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!!!!!!The!Innovation!Project!2013! 2! Interactive*CEO*Session*|*Shoponomics*Meets*Freakonomics*|*March*20,*2013!

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payment.!! ! LevelUp!wasn’t!about!zero!interchange!to!merchants;!it!is!about!giving!consumers!a!credit!pegged! to!the!frequency!of!visits!to!their!favorite!merchants!–!which!created!the!basis!for!a!new!business! model!that,!in!turn,!pegged!merchant!payments!to!a!percentage!of!that!credit.! ! MUPesa!wasn’t!about!replacing!cash!with!the!mobile!phone;!it!is!about!giving!Kenyans!a!safer!way!to! send!money!to!their!relatives!in!the!villages!–!which!in!turn,!increased!the!amount!of!cash! circulating!in!that!economy!as!money!was!transferred!from!person!to!person!in!a!safer,!easier!and! more!reliable!way.!!

In!every!single!one!of!these!cases,!trusting!“conventional!wisdom”!would!have!gotten!these!innovators! very!little!and!probably!into!a!heap!of!trouble!(and!debt).!! Innovation*Project*2013*101* Six!of!the!most!dynamic!(and!well,!battle!scared)!innovators!in!payments!will!give!The!Innovation!Project! delegates!a!first8hand!account!of!what!happened!when!they!turned!conventional!wisdom!on!its!keister! and!gave!consumers!something!new!to!use!when!shopping!or!paying.!! •





Dan-Henry,-CEO-of-NetSpend,!says!that!it!“provides!something!that!better!meets!the!financial! services!needs!of!its!customers!than!a!traditional!bank!account”!—!which!is!a!noble!and!valuable! mission!—!yet!prepaid!remains!one!of!the!least!sticky!financial!services!products!on!the!market.! While!most!of!its!competitors!have!had!their!clocks!cleaned!earnings!wise,!NetSpend!has!done! remarkably!well!—!well!recently,!that!is.!NetSpend!may!have!seen!its!share!of!tough!times,!but!may! be!on!to!something,!and!is!definitely!into!the!sort!of!innovation!that!gives!its!customers!a!reason!to! stick!with!it.!Dan!will!share!the!good,!the!bad,!the!ugly!and!the!behavioral!economics!of!the! alternative!banking!product!that!few!have!managed!to!make!pay!(for!themselves)!yet!continue!to! try.!!! ! Alex-Rampell,-CEO-of-TrialPay!kicked!conventional!wisdom!to!the!curb!years!ago,!at!the!ripe!old!age! of!26.!TrialPay!was!born!because!Alex!figured!out!that!many!people!like!to!buy!many!things!but!few! people!like!to!buy!all!things.!TrialPay!is!all!about!getting!people!to!acquire!the!stuff!they!may!want! but!don’t!want!to!pay!for!(or!pay!full!price!for)!like!software!–!by!throwing!it!in!with!stuff!that! people!are!willing!to!pay!for,!like!red!roses!on!Valentines!Day.!I!say!truly!pay!attention!here!to!the! man!behind!the!curtain!whose!ingenious!business!model!has!the!rose!guy!and!the!software!guy! being!compensated!for!sharing!leads,!and!the!consumer!scoring!great!products.!Find!out!how!he!did! that,!and!more,!only!if!you’re!an!Innovation!Project!2013!delegate.! ! Ed-McLaughlin,-CPO-of-MasterCard,!is!all!about!moving!MasterCard!and!its!customers!toward!a! world!“where!the!physical!and!digital!worlds!are!converging”!and!where!“mobile!will!shape!the!way! consumers!shop!for!goods!and!services.”!Except!that!its!consumers!and!merchants!aren’t!quite! ready!to!go!all!the!way!–!shop-and-pay!–!using!their!mobile!devices!–!even!if!that’s!the!yellow!brick!

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!!!!!!The!Innovation!Project!2013! 3! Interactive*CEO*Session*|*Shoponomics*Meets*Freakonomics*|*March*20,*2013!

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road!that!Ed!and!team!would!like!them!to!follow.!As!an!early!adopter!of!NFC!mobile!payments,!P2P,! mobile!prepaid,!offers,!deals!and!other!engagement!experiences,!Ed!and!MasterCard!can!also!attest! to!another!Steve!Levitt!Freaknonomics,truism:!“Information!is!a!beacon,!a!cudgel,!an!olive!branch,!a! deterrent!—!all!depending!on!who!wields!it!and!how.”!Ed!will!share!his!(and!MasterCard’s)!deep! dark!information!pockets!about!how!MasterCard’s!various!pursuits!in!payments!innovation!has!been! all!of!the!above!–!and!more!–!and!helped!to!shape,!reshape!and!recast!MasterCard's!payments! consumer!innovation!agenda.! ! Troy-Carrothers,-Head-of-Financial-Services-at-Kohls,!will!tell!a!very!different!tale.!Kohls,!which!in! 2009!tied!Nordstrom’s!for!the!top!spot!as!retailer!of!the!year,!has!seen!its!powerful!formula!of!price! +!product!quality!+!promotions!stumble!a!bit!since.!The!2012!holiday!season!was!okay,!not! spectacular,!and!its!exclusive!fashion!forward!lines!like!Jennifer!Lopez,!Derek!Lam,!Narcisco! Rodriquez,!and!others!haven’t!really!driven!consumers!to!whip!out!their!Kohl’s!cards!and!rush!to!the! registers.!Nor!has!the!slump!in!JC!Penney!sales!–!Kohl’s!hasn’t!really!seen!many!of!those!customers! come!their!way!either.!Says!Carrothers’!boss,!Kohl’s!CEO,!Kevin!Mansell,!“How!do!we!reconnect!with! the!customers,!so!we!quit!disappointing!her?!We!keep!her!engaged!and!give!her!a!unique! experience.”!Sales!and!coupons!and!promotions!have!been!a!core!part!of!how!Kohls!does!that!and! create!the!demand!for!its!“highly!discretionary”!items!–!but!anything!mobile!seems!like!it!has!taken! a!bit!of!a!back!seat!to!taking!care!of!the!basics!–!giving!consumers!an!incentive!to!make!Kohl’s!their! habit.!How!mobile!and!digital!can!and!will!change!that!is!what!we’ll!hear!first!hand!from!Troy.! ! Don-Kingsborough,-VP-of-POS-at-PayPal,!has!been!in!retail!for!40!years.!Don’t!forget,!before!PayPal! and!even!Blackhawk,!there!was!World!of!Wonders!and!Teddy!Ruxpin.!Kingsborough!is!all!about! “giving!the!consumer!what!she!wants”!and!not!what!they!or!the!merchants!want!them!to!have.!As! the!creator!of!Blackhawk’s!prepaid!network,!Kingsborough!knows!first8hand!the!complexities!of! igniting!a!new!network!of!any!kind.!“Getting!consumers!to!adopt!any!new!thing!and!having!retailers! adopt!at!the!same!time!is!difficult,"!he!says.!But!PayPal!has!a!lot!of!the!chickens!lined!up!with!its! 135+!million!digital!wallets!and!its!recent!deal!with!Discover!gives!it!the!7+!million!merchant!eggs! those!consumers!need!to!use!those!wallets.!But!that’s!not!enough!–!PayPal!still!needs!consumers!to! develop!a!habit!of!using!PayPal!offline!just!as!they!do!off!eBay!today.!Easier!said!than!done.!Not!only! will!Don!share!the!tricks!and!traps!of!cracking!chicken!and!egg!dilemmas!in!a!payments! environment,!he’ll!share!new!brand!new!insights!from!PayPal’s!massive!global!test!and!learn! experiments!related!to!mobile!payments.!We’ll!get!his!take!on!how!much!consumers!like!and!use! mobile,!why!in!the!world!they!are!issuing!plastic!cards,!whether!“empty!hands”!has!been!the! success!they!had!hoped!for!and!why!everyday!spend!is!in!their!sweet!spot!—!and!how!they!plan!to! dominate.!!!

Innovation*Project*2013*Delegate*101* And,!around!all!of!this!insight,!Steve!Levitt!will!push,!prod!and!poke!them!all!to!uncover!the!hidden!clues! for!how!we!can!all!leverage!the!assets!we!have!(or!could!acquire)!to!get!consumers!to!shop!and!pay!the! way!we!all!imagine!it!to!be!–!a!world!where!mobile!makes!it!frictionless,!seamless!and!painless.!! MARKET*PLATFORM*DYNAMICS!* * * !

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!!!!!!The!Innovation!Project!2013! 4! Interactive*CEO*Session*|*Shoponomics*Meets*Freakonomics*|*March*20,*2013!

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Key!questions!–!among!others!will!include:! •









If!consumers!like!plastic!so!much!and!don’t!seem!to!mind!using!their!phones!in!stores!to!look!up! stuff!and!then!walking!to!the!register!to!pay!with!a!plastic!card,!why!do!we?!! ! For!whose!benefit!is!the!mobile!payments!solution!being!pushed!–!the!consumers!or!the!merchants! or!the!networks?!Whose!problem!does!it!really!solve!–!and!if!that!problem!is!so!large,!then!why!is! there!so!much!difficulty!getting!everyone!to!agree!to!move!now?! ! What!is!the!real!value!of!the!deals!and!promotions!and!loyalty!programs!that!all!of!you!seem!to! thrive!on!and!use!with!great!frequency?!Are!the!right!incentives!being!applied!to!the!right!set!of! actors?!How!do!you!know!and!what!should!you!be!doing!instead?! ! What!lessons!can!be!taken!from!the!JC!Penney!experience?!Why!does!everyday!pricing!work!for! Walmart!and!not!JC!Penney?!And,!can!daily!deals!sashay!into!something!else!and!survive!that! transition!in!the!consumers!mind?! ! PayPal!is!an!interesting!poster!child!for!how!consumers!parse!their!loyalty!when!using!a!digital! wallet.!They!chose!the!wallet!–!PayPal!–!and!the!merchant!–!but!not!the!underlying!payment! method.!As!a!merchant!and!as!PayPal,!you!smile,!but!do!you!if!you’re!the!bank,!or!a!competing! network.!How!do!you!break!through!–!and!what!incentives!do!you!need!beyond!the!typical!coupon! and!promotions!menu?!

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! ! Keeping!It!Real:! The!Ultimate!Entrepreneur’s!Challenge! ! March!20! 4:15!p.m.!–!5:45!p.m.! ! Thought!Leader!and!CEO!Counterparty!! Russell!Simmons!|!Rap!Artist,!Music!Mogul,!Fashion!Retailer,!Prepaid!Pioneer!! Rob!Rosenblatt!|!CEO!Rush!card,!Formerly!EVP!at!JPMC!and!Citi! WITH!! 10!hand6picked!entrepreneurs:! ActPay! Corduro! Cortex!MCP! Cube! Digital!Retail!Apps! Leaf! LendUp! Paidpiper! Pangea! Swift!Exchange!

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The$Innovation$Project$2013$ 1$ Interactive*CEO*Session*|*Keeping*it*Real:*The*Entrepreneurs’*Smack*Down*$ * “In$my$experience,$there's$only$one$thing$that$will$always$steer$you$toward$success:$That's$to$have$a$ vision$and$to$stick$with$it.$Once$I$have$a$vision$for$a$new$venture,$I'm$going$to$ride$that$vision$until$the$ wheels$come$off.”** * Sage*advice*from*one*of*the*payments*industry’s*most*creative,*multifaceted*and*successful* entrepreneurs:*Russell*Simmons.*And,*one*with,*perhaps,*one*of*its*most*unusual*profiles.** * Russell*Simmons*is*a*sort*of*modern,*more*urban*version*of*a*Horatio*Alger*story.*Simmons*grew*up*in* Queens,*one*of*three*kids*of*middle*class*parents,*both*of*whom*were*college*graduates.*But*rather* than*following*in*the*footsteps*of*his*Dad,*who*became*a*professor*of*black*history*at*Howard* University,*Simmons*seemed*more*inclined*to*follow*in*those*of*his*older*brother,*who*had*gotten* himself*involved*with*the*wrong*people*and*some*notOsoOsmart*life*choices.**In*Russell*Simmons’*case,*it* was*the*time*he*spent*at*nightclubs*that*inspired*him*to*pursue*what*would*become*the*cornerstone*of* his*entrepreneurial*empire:*the*popularization*of*rap*music.** * ”Zero$in$on$what’s$in$front$of$you$today$and$then$stay$in$that$zone.”*$ * Simmons*saw*how*club*goers*responded*to*a*new*brand*of*music*in*which*street*performers*sang*their* own*lyrics*over*a*classic*music*track.*Simmons*responded*by*organizing*concerts,*discovering*and*then* managing*rap*artists*and*promoting*their*music*via*his*own*record*label,*Def*Jam.*One*of*his*most* famous*“clients”*RunODMC*was*formed*in*1981.*The*“Run”*was*Simmons’*brother*Joseph.*The*“D.M.C.”* was*friend*Darryl*McDaniels,*with*Jason*Mizell*as*“Jam*Master*Jay.”*RunODMC*became*the*most* influential*and*wellOknown*hipOhop*act*of*all*time*and*is*widely*credited*with*defining*the*hipOhop*style.* * Simmons*singleOhandedly*turned*hipOhop*from*a*niche*urban*genre*to*music*for*the*masses.*He*quickly* parlayed*this*powerful*platform,*his*brand*and*entrepreneurial*knowhow*into*an*empire*comprising* clothing,*media/television,*philanthropy*and*payments.*Over*the*decades*in*which*he*has*been*in* business,*Simmons*has*helped*thousands*of*people*and*created*many,*many*stars.*He*teaches*his* protégées*the*importance*of*empowerment,*the*rewards*of*hard*work*and*the*possibilities*that*are* there*for*everyone*to*realize*–*provided*they*work*for*them.*He*isn’t*about*quitters.*He’s*about*focus* and*execution*and*just*getting*it*done.*Ideas,*he*believes*are*“a*dime*a*dozen.”*The*rubber*meets*the* road*when*people*actually*have*the*guts*to*listen*to*their*inner*compasses*and*do*it,*even*if*–*and* especially*if*–*it*is*hard.*Or,*in*his*words*“staying*on*your*grind.”$ If$you$aren't$passionate$about$a$vision,$it's$hard$to$have$faith$in$it.* * Enter*the*Rush*Card.** The*idea*for*the*RushCard*morphed*out*of*an*idea*that*someone*pitched*him*about*a*prepaid*phone* card.*He*rejected*it*quickly,*citing*it*as*a*“rip*off”*for*users.*Never*being*entirely*motivated*by*money,*

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The$Innovation$Project$2013$ 2$ Interactive*CEO*Session*|*Keeping*it*Real:*The*Entrepreneurs’*Smack*Down*$ * Simmons,*when*telling*this*story,*remarked*that*"making*money*is*a*pedestrian*activity.*The*challenge*is* in*creating*a*product*or*service*that*the*world*really*needs."* * Simmons*felt*that*he*could*do*for*prepaid*cards*what*he*did*for*rap*music*–*use*his*brand*to*embrace* the*underserved*and*disenfranchised.**RushCard*was*launched*in*2003*as*one*of*the*first*prepaid*Visa* debit*cards*to*hit*the*market.*Its*stated*ambition*is*to*offer*financial*empowerment*to*the*60+*million*of* underbanked*Americans*who*have*no*financial*services*alternative.*Its*customer*base*is*extremely* diverse:*RushCard*garners*strong*acceptance*among*not*only*the*African*American*community,*but* across*the*full*spectrum*of*“un”*and*“underbanked”*Americans.*Today,*RushCard*boasts*that*its* customers*are*among*the*stickiest*in*the*prepaid*business,*in*terms*of*customer*retention,**overcoming* one*of*the*big*challenges*that*keep*these*products*from*being*successful.*In*fact,*RushCard*customers* have*the*highest*direct*deposit*rates*in*the*industry,*a*harbinger*of*longOterm*retention*and*usage.** Recently,*RushCard*has*evolved*to*include*personal*financial*tools,*tips*to*become*financially* responsible*and*provides*incentives*when*financial*goals*are*met.*For*Simmons,*RushCard*isn’t*just* about*new*product*features,*it*is*about*“improving*the*overall*financial*wellObeing*of*our*members,"*and* allowing*them*to*use*it*to*“take*control*over*their*financial*lives.”* * RushCard*has*hit*its*share*of*speed*bumps.*The*prepaid*industry*is*a*notoriously*tough*one*in*which*to* make*money*given*the*nature*of*the*customer*base*it*serves*–*one*that*doesn’t*always*value*and*use* financial*services.*And*like*many*emerging*new*industries,*the*fast*past*of*change*effects*everything* from*regulation*to*technology.*As*an*investor,*Simmons*poured*millions*into*the*product,*with* absolutely*no*path*to*even*marginal*profitability*in*the*early*years.*Today*RushCard*is*a*thriving,*fastO growing*member*of*the*broad*suite*of*prepaid*providers,*continuing*to*invest*in*the*acquisition*of*its* unique*blend*of*loyal*customers.*****

“The$world$loves$people$who$work$hard$at$everything$they$do.”* * Enter*Rob*Rosenblatt.** Rosenblatt*is*a*seasoned*payments*industry*player,*having*worked*in*the*business*for*25*years.**Some* might*characterize*him*as*having*cut*his*teeth*at*some*of*the*industry’s*most*“blueOblooded”* institutions.*As*a*senior*exec*at*Chase,*he*developed*and*launched*Ultimate*Rewards,*one*of*the*card* industry's*largest*and*most*successful*customer*rewards*programs.*While*an*executive*at*Citi*Cards,*he* put*a*number*of*innovations*in*place*to*recast*its*online*financial*services*business*and*when*at* American*Express,*he*was*credited*with*launching*its*first*coObranded*card*program.*He’s*a*Harvard* MBA*who*marches*to*the*beat*of*balance*sheets*and*proformas*and*scenario*plans.** But*like*Simmons,*he*has*a*passion*for*the*underserved.*Rosenblatt’s*life*hasn’t*just*been*about*the*blue* bloods*and*the*boardroom.*Always*a*good*student,*he*was*the*oldest*of*3*children*raised*in*a*single* parent*household*in*a*neighborhood*not*far*from*where*Simmons*was*raised.**His*mother,*who*worked* multiple*jobs*and*returned*to*school*to*receive*her*undergrad*and*grad*degrees,*kept*him*on*the* straight*and*narrow.**An*entrepreneur*at*heart,*Rosenblatt*brought*a*spirit*of*innovation*to*every* PYMNTS.COM***

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The$Innovation$Project$2013$ 3$ Interactive*CEO*Session*|*Keeping*it*Real:*The*Entrepreneurs’*Smack*Down*$ * corporate*job*he*had,*even*trying*his*hand*at*launching*his*own*startup*inObetween*corporate*stints* back*in*the*early*2000s.*Never*forgetting*his*roots,*he’s*always*had*a*passion*for*helping*those*who*need* a*helping*hand.*The*RushCard*opportunity*has*given*him*the*best*of*all*worlds*–*the*ability*to*mashOup* his*book*smarts,*innovation*expertise*and*interest*in*helping*the*underserved.*"I*have*long*admired* RushCard's*laser*focus*on*developing*products*and*features*that*its*members*really*need*in*order*to* gain*control*over*their*finances,”*Rosenblatt*said*upon*taking*the*reins*as*CEO*in*September*of*2011.** “If$you$learn$late,$you$pass$it$on$to$people$so$they$can$learn$early.$It`s$a$step$process.”*$ * So*now*you*see*why*the*combination*of*Simmons*and*Rosenblatt*couldn’t*be*more*perfect*to*provide* feedback*to*the*10*handOpicked*entrepreneurs*who*will*participate*in*this*session.*Each*is*driven*by*a* passion*for*payments,*the*opportunity*to*change*the*lives*of*those*who*will*use*their*product*and*the* entrepreneurial*DNA*that*is*a*part*of*who*they*are.**And*Simmons*and*Rosenblatt*are*excited*to*have* the*opportunity*to*offer*a*few*lessons*in*payment*innovation*to*the*10*entrepreneurs*selected,*although* Rosenblatt*is*very*clear*in*stating*that*the*real*expert*in*“keeping*it*real”*is*Simmons.* * So,*let’s*just*say*that*in*this*session,*Simmons*and*Rosenblatt*will*reinvent*the*concept*of*mentoring.* * Innovators*have*a*just*few*minutes*to*give*the*Simmons/Rosenblatt*combo*an*overview*of*what*they* are*doing*–*in*a*way*that*is*entertaining,*interesting*and*also*informative.*That’s*when*Simmons*and* Rosenblatt*take*over,*giving*feedback*in*realOtime*on*what*they’ve*just*seen*and*heard.*Simmons*is* known*for*his*direct*and*authentic*advice,*and*for*making*those*who*take*his*advice,*successful.* Rosenblatt*has*launched*successful*startups*in*and*outside*of*some*of*the*biggest*companies*in* payments*and*knows*what*will*and*won’t*fly.*So,*we*can’t*imagine*a*more*interesting*duo*to*provide* feedback*that*blends*street*smarts*and*book*smarts*specifically*around*igniting*innovation*in*payments,* can*you?* * To*kick*it*up*a*notch*or*two,*we’re*also*adding*a*little*competitive*flair*into*the*session.*After*all*of*the* presentations*and*discussions,*Simmons*and*Rosenblatt*are*going*pick*their*favorite*who’ll*win*a*prize.* What*prize?*Well,*you’ll*have*to*just*be*there*to*find*out*now,*won’t*you?* * “In$the$end,$the$overriding$factor$in$whether$or$not$you$realize$your$dreams$is$going$to$be$you.$Not$the$ world.$YOU.$”*$ * So,*let’s*now*meet*the*lineup.* * ActPay:$ActPay,*Inc.,*led*by*mobile*commerce*pioneer*Will*Graylin*and*payment*point*of*sale*(POS)* pioneer*George*Wallner*along*with*an*experienced*team*of*industry*veterans,*is*planning*to*launch*a* never*beforeOseen*payment*and*marketing*platform*that*allow*merchants*to*better*interact*and* transact*with*consumers,*and*allow*consumers*to*more*conveniently*pay*and*save*on*their*mobile* devices.**The*company*and*its*proprietary*technology*manage*risk*of*mobile*payments*between*

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The$Innovation$Project$2013$ 4$ Interactive*CEO*Session*|*Keeping*it*Real:*The*Entrepreneurs’*Smack*Down*$ * merchants*and*consumers*while*facilitating*relevant*and*compelling*offers*that*are*actionable.**It*will* provide*the*simplest*way*for*merchants*to*promote*and*sell*to*mobile*consumers*and*enable*the* consumers*to*pay*with*their*mobile*wallet*from*virtually*anywhere.*** Corduro:$Founded*by*CEO*Robert*Ziegler,*Corduro*is*a*leading*OMNIOChannel*platform*driving*the* mobilization*of*Enterprises*into*the*cloud,*delivering*leastOcost*routing,*preservation*of*existing* investments,*secure*online*payments,*and*the*next*generation*of*mobile*capability.*Corduro’s*mobile* products*provide*merchant*and*3rd*party*acceptance,*consumer*payments,*social*network*integration,* open*wallet,*multiOstore*and*multiOdepartment*among*numerous*other*features.*Corduro*features*over* 2,000*brands*including*Dignity*Health,*TechCU,*LowT,*AYSO*and*many*more.*** Cortex$MCP:*Cortex*MCP*is*developing*a*new*IPOprotected*Mobile*Payment*and*Wallet*Platform,* focused*on*both*a*new*Secure*Payment*Methodology*and*ID/Credential*Storage*and*Verification.*The* Cortex™*platform*can*be*adopted*and*accelerated*by*all*–*across*any*device*with*inherent*consumer* security*and*control.**Cortex*MCP’s*CEO,*Shaunt*Sarkissian,*knows*a*thing*or*two*about*the*space.**He’s* a*former*executive*at*ROAM*Data*and*is*thrilled*to*introduce*the*Cortex™*platform*to*the*world*at*the* Innovation*Project.* Cube:$Cube*was*coOfounded*in*2012*by*COO*Charlie*Pinto*with*the*mission*to*be*the*platform*that* powers*retail*business.*The*result*is*a*complete*cloudObased*point*of*sale*solution*that*instantly*adapts* to*any*size*business*OO*from*the*small*artisan*store*to*the*large,*multiOunit*franchise*concept.*Cube*offers* businesses*a*complete*suite*of*powerful*products*including*a*point*of*sale*application,*credit*card* terminal,*backOoffice*tools,*a*kitchen*display*system,*and*integrated*card*processing.*Cube*is*based*in* Mountain*View,*CA*and*investors*include*YOCombinator,*Yuri*Milner,*Data*Collective,*and*an*impressive* group*of*startup*angels*and*founders.* Digital$Retail$Apps:*Digital*Retail*Apps*focus*is*to*create*a*consumer*driven*platform*for*retail*shopping* that*better*matches*the*way*consumers*prefer*to*shop;*without*any*friction*or*barriers*across*retailer,* channel,*device*or*mode*of*payment.*Digital*Retails*Apps’*flagship*product*is*SelfPay,*an*app*that*allows* for*consumerOcontrolled*inOaisle*payments*directly*from*their*own*mobile*device*together*with*a*patent* pending*retailer*payment*verification*system.*The*SelfPay*platform*includes*dynamic*inOstore*item* suggestions*and*promotions*based*on*consumers’*real*time*browsing*and*buying*data.*Wendy* MacKinnon*Keith,*a*former*faculty*member*at*HBS,*founded*Digital*Retail*Apps*in*March*2012*and* spearheaded*the*company’s*partnership*with*Chase*Paymentech.* Leaf:*Leaf*revives*the*most*important*aspect*of*commerce*O*the*relationship*between*a*business*and*its* customers.*Leaf’s*Level*1*PCI*compliant*technology*aims*to*make*the*experience*of*paying*in*a*brick*&* mortar*shop*more*modern*with*paperless*receipts*for*customers,*mobile*checkout,*and*robust* transaction*data*analytics*capabilities*that*give*merchants*the*tools*they*need*to*better*interact*with* their*customers*–*even*when*they’re*not*in*the*store.*A*true*lean*startOup,*Leaf*was*coOfounded*by* BostonOarea*graduates*Aron*Schwarzkopf**and*Sebastián*Castro*Galnares*and*operates*from*the*coO working*space*Intrepid*Labs*in*Cambridge,*Massachusetts,*a*leading*hub*of*innovation*and*technology.* * LendUp:*LendUp*is*a*San*FranciscoObased*socially*responsible*company*funded*by*Silicon*Valley's*

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The$Innovation$Project$2013$ 5$ Interactive*CEO*Session*|*Keeping*it*Real:*The*Entrepreneurs’*Smack*Down*$ * premier*investors*including*YOCombinator,*Kleiner*Perkins,*Andreessen*Horowitz,*and*Google*Ventures.* LendUp*believes*there*are*two*types*of*financial*products:*chutes*and*ladders.*Ladders*help*people*up,* chutes*push*people*down.*Every*product*offered*at*LendUp*is*a*ladder,*measured*by*the*longOterm* financial*wellbeing*of*their*customers.*LendUp*loans*are*a*steppingOstone*towards*better*credit*and*to* getting*their*customers*to*a*better*financial*state.*LendUp*is*led*by*Sasha*Orloff,*who*was*previously*SVP* at*Citi*Ventures.**It*has*been*profiled*in*respected*publications*such*as*Time,*CNN,*Inc.,*Wired,*NPR,* TechCrunch,*AllThingsD,*and*the*Financial*Times.* Paidpiper:$Paidpiper*was*founded*on*the*belief*that*our*smartphone*is*personal,*is*an*extension*of* ourselves,*and*that*our*addressObook*gives*us*pocketOready*access*to*the*"Super*Power"*of*social* networks.**By*building*a*payments*service*on*top*of*this*network,*Paidpiper*empowers*each*node,*aka* the*consumer,*to*securely*ask*for,*send*or*receive*cash*to*make*purchases*in*the*massive*offline*brick*&* mortar*world.*Paidpiper*has*achieved*this*realOtime*feat*without*the*merchant/retailer*requiring*any* hardware*or*software*changes*at*their*PoS*Terminals*resulting*in*transactions*that*are*simple,*secure,* and*seamless.**Paidpiper*is*led*by*former*Nokia*Exec,*Atif*Hussein*and*is*headquartered*in*San*Francisco.* Pangea:*Pangea*is*disrupting*the*global*money*transfer*space,*one*in*which*globally*over*215*million* people*send*more*than*$500*billion*in*money*transfers*annually.*Pangea*has*found*an*innovative*way*to* make*money*transfer*more*convenient,*costOeffective,*and*secure*for*consumers*via*a*multiOplatform* offering*that*includes*web,*mobile*and*retail*connectivity*as*well*as*global*prepaid*networks*that*power* the*activation*of*prepaid*products.*Its*proprietary*integration*software*enables*these*disparate* networks*to*speak*to*each*other,*making*money*transfer*possible*across*millions*of*retail*locations.* Headquartered*from*Chicago’s*1871*Project,*Pangea*launched*in*September*2012*as*one*of*the*eight* companies*selected*to*join*The*Impact*Engine,*a*venture*accelerator*led*by*Chuck*Templeton,*the* founder*of*Open*Table.*It*is*led*by*a*management*team*including*CEO*Rahier*Rahman.** Swift$Exchange:*Swift*Exchange*has*developed*a*firstOofOits*kind*electronic*commerce*ecosystem* utilizing*its*patentOprotected*technology*that*blends*points*and*miles*from*different*reward*programs*to* make*them*as*easy*to*spend*as*cash.*Swift*Exchange’s*first*deployment*includes*a*multiOtender*payment* mechanism*that*easily*embeds*into*eOcommerce*sites*and*at*pointOofOsale.*Reward*program*issuers*now* have*a*way*to*expand*the*utility*of*their*reward*currency*for*customers*and*merchants*have*a*way*to* accept*reward*currencies*for*payment.*Swift*Exchange’s*COO*Nancy*Gordon,*is*a*former*EVP*at*Citi*and* is*best*known*for*having*pioneered*its*“ThankYou*Rewards”*network.** $ Keeping$it$Real$ $ Simmons,*a*yoga*enthusiast*and*strong*believer*in*mediation*and*the*power*of*spirituality,*was*once* asked*what*advice*he*would*give*entrepreneurs*who*were*just*getting*started.*Here’s*his*advice*for* keeping*it*real*in*payments*and*in*any*entrepreneurial*venture.**$ “Just$have$faith$in$your$idea$and$you$ain’t$gonna$starve.$You$have$to$have$a$little$courage.$You$have$to$ take$your$thoughts$and$put$them$into$a$business$plan—then$you$are$on$your$way.$But$you$gotta$do$ PYMNTS.COM***

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The$Innovation$Project$2013$ 6$ Interactive*CEO*Session*|*Keeping*it*Real:*The*Entrepreneurs’*Smack*Down*$ * the$work.$A$lot$of$people$have$ideas,$but$ideas$without$effort$are$worthless.$Resilience,$hard$work$and$ dedication$is$what$makes$those$ideas$reality.$You$have$to$start,$have$courage,$continue$down$the$path$ and$you$can’t$quit.$There$is$no$reason$why$an$imagined$idea$doesn’t$come$to$work$except$that$you$ don’t$come$to$work.”*$ We*cant*wait*to*hear*what*he*and*Rob*Rosenblatt*have*to*say*to*these*10*extraordinary*entrepreneurs* on*March*20th!* *All$quotes$are$attributed$to$Russell$Simmons$and$used$with$his$permission$$

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!!!!!!The!Innovation!Project!2013! !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!Interactive!CEO!Sessions!|!March!20621,!2013!

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! ! Lessons!From!Lean!Startups:! How!Six!Innovators!Went!From!Lean!To!Mean!In!Payments! ! March!21! 8:30!a.m.!–!10:00!a.m.! ! Thought!Leader!and!CEO!Counterparty!! Eric!Ries!|!Author,!The$Lean$Start$up!! Mark!Lavelle!|!SVP!PayPal!and!CoDFounder!Bill!Me!Later! CEO!Panel!! Ken!Paull!|!CEO!of!ROAM!! Eric!Remer!|!Founder!and!CEO!of!PaySimple!! Scott!Thompson!|!CEO!of!ShopRunner!! Bill!Weingart!|!CPO!of!Vantiv!! Jacob!deGeer!|!Founder!and!CEO!of!iZettle!

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The!Innovation!Project!2013! 1' Interactive'CEO'Session'|'Eric'Ries'and'The'Lean'Startup'in'Payments' ! There!probably!isn’t!one!person!in!payments!(or!on!the!planet)!who!hasn’t!heard!of!Eric!Ries!and!his! Lean%Startup!techniques.!It!seems!like!eons!ago!now!that!his!book!(by!the!same!name)!first!came!onto! the!scene!(It!was!really!only!about!two!years!ago!now.)!and!his!“Minimum!Viable!Product”!definition! took!the!startup!crowd!by!storm.!At!the!time,!Ries!and!his!new!innovation!mantra!sort!of!shook!the! traditional!product!development!purists!to!their!core.!In!just!284!pages,!he!literally!turned!on!its!ear!the! product!development!principles!that!defined!classic!product!development!for!decades.!Don’t!listen!to! customers!but!give!them!what!they!want.!Build!great!products!but!don’t!make!them!too!perfect.!Bad! news!is!more!important!than!good!news.!Measure!everything!but!don’t!waste!time!on!plans!and! forecasts.!Zero!is!better!than!something!small.!Stealth!mode!is!overrated.! While!entrepreneurs!(quite!naturally)!regarded!these!tenets!as!manna!from!heaven,!most!of!what!Ries! advocated!had!investors!scratching!their!heads,!and!corporate!innovators!tied!in!knots.!Don’t!listen!to! customers?!Isn’t!that!what!good!market!research!is!supposed!to!inform?!Release!a!bad!product!and!ruin! my!brand!(and!my!reputation)?!Suicide.!Deliver!bad!news!–!to!my!board!(or!investors?)!–!not!if!I!want!to! keep!my!job!!Zero!revenue!or!clients!–!yeah,!right!!And!go!public!before!it’s!baked!–!how!will!I!keep!my! competitive!advantage?!!! “All!innovation!starts!with!a!vision,!“!says!Ries.!“But!it!is!what!happens!next!that!is!critical.”!Ries! attributes!the!interest!in!Lean%Startup!techniques!to!the!incredibly!fast!pace!innovation!cycles!that! characterize!just!about!every!industry!sector.!“The!amount!of!time!a!company!can!count!on!holding!on! to!market!leadership!to!exploit!its!earlier!innovations!is!shrinking,”!Ries!concludes,!forcing!even!the! largest!and!most!established!players!to!think!very!differently!about!how!it!innovates!and!why.!! And!nowhere!does!the!sentiment!ring!truer!than!in!payments.!Today,!incumbents!and!challengers!duke! it!out!in!an!ecosystem!that!is!being!reshaped!by!the!forces!of!technology,!the!imaginations!of! entrepreneurs!everywhere!and!the!investors!willing!to!fund!lean!startups!with!a!vision!for!how! payments!and!commerce!should!look!in!the!future.!But!as!Ries!points!out,!that!isn’t!enough.!And,!we! agree.!Igniting!those!ideas!is!critical,!and!in!payments,!that!is!complicated!by!the!many!stakeholders! who!have!to!find!value!in!—!and!adopt!—!the!“next!big!thing.”!Many!more!payments!ventures!fail!than! succeed.!Could!those!odds!be!increased!if!those!ventures!were!more!“lean"?! The'Ries'Recipe'for'Innovation! The!Ries!recipe!for!successful!innovation!is!the!sound!bite!that!most!associate!with!the!Lean%Startup! principles!–!Build,!Measure,!Learn.!He!advocates!that!getting!to!market!quickly!with!a!Minimum!Viable! Product!(MVP)!and!learning!from!that!experience!is!wildly!more!effective!than!the!conventional! "Strategy,!Research,!Design,!Launch"!strategy!could!ever!be.!“The!problem!with!most!entrepreneurs’! plans!is!generally!not!that!they!don’t!follow!sound!strategic!principles,!but!that!the!facts!upon!which! they!are!based!are!wrong,”!Ries!argues.!“They!cannot!be!detected!at!a!whiteboard!since!they!require! subtle!interactions!between!customers!and!products.”!Interactions!and!subtleties,!he!asserts,!that!can! only!be!detected!by!executing!a!series!of!experiments!based!on!carefully!designed!hypotheses!that! produce!validated!learnings!that!inform!the!next!move.!Ivy!tower!strategists!need!not!apply!!

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The!Innovation!Project!2013! 2' Interactive'CEO'Session'|'Eric'Ries'and'The'Lean'Startup'in'Payments' ! “Planning!and!forecasting!are!only!accurate!when!based!on!a!long,!stable,!operative!history!and!a! relatively!static!environment.!Startups!have!neither,”!Ries!adds.!Making!certainty!out!of!that!uncertainty! means!knowing!where!to!invest!time!and!money!–!startups!don’t!have!the!luxury!of!being!able!to!waste! either.!And!that!starts!with!getting!very!clear!about!what!Ries!calls!“leap!of!faith”!assumptions!upon! which!everything,!absolutely!everything,!about!that!idea!rests:!its!value&to!customers!and!how!the! product,!once!accepted!by!customers,!can!grow.!Lean!startups!shouldn’t!focus!initially!on!how!a!product! should!look!or!function,!but!whether!it!should!exist!at!all.!Put!your!rose_colored!glasses!away!!!! It’s!also!why!in!the!early!days!of!a!startup,!Ries!dismisses!a!lot!of!the!stuff!that!might!be!characterized!as! the!entrepreneur’s!version!of!old!wives!tales.!Such!as:! •









Don’t'listen'to'the'customer.'They!really!don’t!know!what!they!want!so!they!won’t!be!able!to!tell! you.!Most!startups!build!products!or!solutions!that!don’t!exist!anyway!so!customers!have!no!frame! of!reference!for!responding!to!their!descriptions!in!traditional!market!research.!Solve!customers’! problems!or!give!them!new!opportunities!instead!and!watch!their!reaction!to!what!you!present.!! No'revenue,'no'sweat,!Ries!says.!Having!zero!—!zero!revenue,!even!zero!customers!—!is!better! telling!the!world!(or!even!investors)!that!you!have!something!small.!Small!only!raises!both!eyebrows! and!questions!about!whether!big!numbers!will!ever!follow!and!distracts!entrepreneurs!from!their! real!mission!–!providing!value!and!driving!growth.!It!also!sucks!entrepreneurs!into!responding!to! what!Ries!calls!“vanity!metrics”!the!stuff!that!makes!investors!and!managers!happy!but!don’t!mean! a!hoot!about!market!success.!And!those!overnight!sensations!you!hear!about?!Well,!Ries!says!that! they!aren’t!overnight!at!all,!but!only!seem!that!way!because!results!were!only!made!public!once! they!were!“enough”!to!create!momentum.!! On'time,'on'budget,'metrics'–'fuhgettaboutit.!Since!startups!end!up!creating!solutions!that!are! vastly!different!then!their!original!concepts,!they!won’t!be!on!time!and!they!won’t!be!on!budget!but! will!be!what!customers!value.!And,!if!the!startup!is!building!something!that!customers!don’t!want,!it! doesn’t!much!matter!that!it!be!on!time!or!on!budget.!These!conventional!metrics!just!further!fan! the!flames!of!the!vanity!metrics!that!get!everyone!off!focus.!Learning!milestones!that!hold! entrepreneurs!accountable!and!measure!the!things!that!are!relevant!to!creating!value!and!driving! growth!are!the!lean!startup!ticket.!! Perfection'is'the'enemy'of'the'good.!Early!adopters!like!the!rough!edges!of!a!new!product!and!may! even!distrust!stuff!that!looks!too!good!or!works!too!well!right!out!of!the!gate.!Remember!the!first! version!of!the!iPhone!and!what!we!all!put!up!with?!Any!additional!work!beyond!what!is!absolutely! essential!to!creating!the!MVP!is!a!waste!of!time!and!money!—!the!startups!and!its!investors!and! stakeholders.!That’s!pretty!tough!to!take!though!if!you’re!a!big!company!releasing!a!new!product!or! an!engineer!obsessed!with!the!details,!but!Ries!says!to!just!suck!it!up!and!do!it.!! As'for'staying'in'stealth?!Ries!says!that!if!a!company!is!so!nervous!that!the!instant!it!releases! something!its!competitors!will!one_up!them,!they!probably!don’t!have!much!to!begin!with.!In!Lean% Startup!land,!the!winner!isn’t!necessarily!the!first!to!market!but!the!one!who!can!learn!the!fastest! from!the!experiments!that!have!been!put!into!the!market!and!then!to!implement!those!learnings! before!anyone!else!can.!!!

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The!Innovation!Project!2013! 3' Interactive'CEO'Session'|'Eric'Ries'and'The'Lean'Startup'in'Payments' ! Sort!of!sounds!like!the!startup!world’s!version!of!tough!love,!doesn’t!it?! It’s!also!not!hard!to!understand!why!Ries!describes!much!of!what!goes!on!in!startup!innovation!land!(in! both!companies!and!new!ventures)!as!“success!theatre”!where!smart!and!well_meaning!entrepreneurs! engage!in!tactics!that!produce!the!appearance!of!success!or!find!data!that!rationalizes!their!vision!rather! than!creating!products!that!are!value_producing!or!conducting!experiments!that!respond!to!well_ structured!hypotheses.!Ries!doesn’t!entirely!blame!the!entrepreneur,!but!rather!their!need!to!work! within!existing!mechanisms!to!get!access!to!funding!and!other!resources,!which!just!underscores!the! great!paradox!of!startups!that!Ries!is!trying!to!quash:!start!something!entirely!new,!but!burden!it!with! existing!success!paradigms!and!metrics!and!expect!it!to!be!successful.!!! When!applied,!lean!startups!deliver!tremendous!value!to!consumers,!businesses!and!their!stakeholders.!! They!get!to!market!faster!(or!pull!the!plug!faster),!and!do!it!efficiently.!They!save!time!and!money.!Using! Lean%Startup!techniques,!Intuit!has!gone!from!having!a!5.5!year!average!product!lifecycle!for!a!product! to!start!generating!$50!million!in!revenues!to!an!environment!where!$50!million!in!revenues!were! derived!in!12!months!from!a!portfolio!of!initiatives!that!didn’t!exist!the!year!prior.!Dropbox’s!MVP! wasn’t!a!prototype!of!the!product!that!its!team!of!sophisticated!engineers!had!spent!years!to!develop! (and!that!all!of!us!are!addicted!to!today)!but!rather!a!video!that!described!what!it!did!and!how!it!was! better!than!the!alternative.!Overnight,!its!beta!list!went!from!5,000!to!75,000.!Today,!it!is!valued!at!$4! billion.!!!! The'Other'Side'of'Lean'Startups! But!not!everyone!drinks!the!Lean%Startup!kool_aid.!Marc!Andreessen,!Silicon!Valley!royalty!and!founder! of!the!VC!firm!that!bears!his!name,!recently!expressed!his!concerns!over!how!some!of!the!Lean%Startup! principles!are!being!used.!He!senses!that!some!are!using!it!as!a!cover!for!underinvesting!in!what!is! required!to!get!a!product!to!market!once!it!has!proven!to!have!value!–!buying!into!that!build_it_and_ they_will!come!fallacy!of!the!early!dot!com!bubble.!He!also!says!that!some!ideas!are!just!too!big!or!too! complicated!to!start!with!a!small!MVP!(that!actually!could!be!true!in!payments!where!scale!and!ignition! is!critical).!Another!of!his!criticisms!is!of!the!Lean%Startup!“pivot,"!which!is!the!quick!course!correction! that!lean!startups!are!advised!to!take!based!on!market!feedback!–!something!that!Ries!advocates!versus! the!stick_to_it_ness!that!was!once!heralded!as!startup!dogma.!In!a!debate!with!Ries!in!December!2012,! Andreessen!referred!to!the!pivot!by!a!slightly!different!name!–!a!hyphenated!six!letter!word!beginning! with!“f”!and!ending!with!“up.”!His!concern!is!that!the!pivot!has!taken!some!of!the!stigma!away!from! failure!at!the!expense!of!rewarding!the!persistence!of!those!who!just!continue!to!beaver!away!at!a! concept!until!they!get!market!traction!(or!fail).!! Then!there’s!what!happens!once!a!lean!startup,!well,!starts!up,!and!is!confronted!with!how!to!scale!the! business.!Ries!makes!the!point!that!early!adopters,!those!who!give!credence!to!the!value!of!an!idea,! aren’t!exactly!the!customer!segment!that!will!turn!the!profit!flywheel!–!there!aren’t!enough!of!them!to! do!that.!Mainstream!customers!are!—!and!they!are!different.!They!are!risk!averse!(or!else!they!would!be! early!adopters)!and!will!have!different!expectations!of!the!product.!They!can’t!be!counted!on!to! evangelize!the!product!or!refer!it!to!their!friends!or!colleagues.!Scaling!the!business!requires!a!growth! hypothesis!that!assures!that!there!is!enough!value!for!customers!to!try!the!product!and!stick!with!it.!! MARKET'PLATFORM'DYNAMICS!' '' ' ' !

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'''''''''''''theinnovationproject2013.com'

The!Innovation!Project!2013! 4' Interactive'CEO'Session'|'Eric'Ries'and'The'Lean'Startup'in'Payments' ! Our!vocabulary!work!for!this!activity!is!ignition!–!and!in!payments,!this!is!truly!where!the!rubber!meets! the!road.!It’s!Lean%Startup!to!the!max.!! Igniting!innovation!in!payments!is!a!ton!more!complicated!than!devising!a!growth!strategy!or!a!value! hypothesis!because!a!startup!isn’t!just!doing!it!for!their!startup!and!one!customer!segment,!they!are! doing!it!on!behalf!of!the!platform!that!they!are!either!creating!or!plugging!into.!So,!in!payments,!it!isn’t! enough!to!have!a!value!hypothesis!for!consumers!or!a!business,!there!has!to!be!a!value!hypothesis!for! merchants!too.!And!then,!scaling!that!set!of!platform!interactions,!well,!that!is!where!the!cream!literally! rises!to!the!top.!It!involves!a!business!model!design!that!creates!an!incentive!for!a!side!of!the!platform! that!really!values!having!access!to!the!other,!that!of!course!has!to!be!convinced!to!jump!on!board.!Many! a!startup!in!payments!and!commerce!has!followed!the!Lean%Startup!principles!to!the!letter,!only!to!see! its!masterpiece!flounder!and!flop.!All!because!it!miscalculated!which!side!of!the!platform!needed!to! really!see!the!value!in!its!MVP!enough!to!jump!on!board!and!subsidize!the!other!side!that!was!essential! to!have!on!board!too.!!! And!that!Lean%Startup!conundrum!is!exactly!what!Eric!Ries!and!this!panel!of!entrepreneurs!will!tackle!at! The!Innovation!Project!2013.!Most!of!these!entrepreneurs!were!lean!and!mean!before!it!was!in!fashion,! others!figured!it!out!along!the!way!by!enrolling!in!entrepreneur’s!school!of!hard!knocks.!Several!have! done!the!startup!thing!more!than!once!–!successfully!–!while!others!are!doing!it!in!the!confines!of!big! companies!who!are!sort!of!the!antithesis!!of!lean!startups!with!thousands!of!employees!and!millions!in! revenue.!! Jacob&de&Geer,&CEO&and&founder&of&Sweden’s&iZettle,!is!pretty!used!to!the!inevitable!comparisons!to! Jack!Dorsey!and!Square.!Like!Square,!iZettle!is!a!“dongle”!that!converts!smartphones!to!merchant! acceptance!devices.!Like!Square,!his!idea!was!borne!out!of!solving!the!problem!of!card!acceptance! because!someone!close!to!them!complained!about!not!being!able!to!do!so!(in!de!Geer’s!case,!it!was!his! wife!who!designs!and!sells!eyeglasses).!And!like!Dorsey,!de!Geer!is!a!serial!entrepreneur!—!and!a! successful!one.!He’s!also!put!into!practice!Lean%Startup!practices!–!like!putting!a!MVP!in!the!market!that! adds!value!to!his!merchants!and!keeps!them!sticky!–!even!if!it!upsets!one!of!its!key!platform!customers.! de!Geer’s!decision!to!launch!iZettle!in!Europe!without!a!Chip!and!PIN!reader!(its!solution!is!Chip!and! Signature)!“would!really!defeat!the!whole!purpose!of!wanting!to!serve!a!segment!of!the!market!not! being!served!well!today,”!de!Geer!remarked!after!being!asked!why!Visa!Europe!refused!to!process!his! transactions.!(They!finally!relented!in!the!winter!of!2012).!iZettle!operates!today!in!a!handful!of!markets! in!Europe!and!plans!to!stay!there!for!a!while!because!that!is!where!iZettle!can!hone!its!growth! hypothesis!of!serving!100!markets!where!a!chip_card!base!is!dominant.!But!that!market!is!also!one!that! is!now!rife!with!competition!as!Square!and!iZettle!knock_offs!enter!the!market!with!great!speed.!We’ll! hear!de!Geer!describe!how!iZettle!has!mastered!the!Lean%Startup!art!of!continuous!innovation!and!how! it!applies!those!learnings!to!keep!its!leading!market!position!in!tact.!!! Ken&Paull,&CEO&of&ROAM,!the!leading!mobile!commerce!platform,!has!been!on!all!sides!of!startups.!As!a! top!executive!in!the!acquiring!business,!he!bought!some!and!worked!to!assimilate!their!technologies! and!teams!into!the!parent.!As!an!entrepreneur,!he!was!brought!in!to!help!turnaround!and!scale!aspiring! MARKET'PLATFORM'DYNAMICS!' '' ' ' !

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'''''''''''''theinnovationproject2013.com'

The!Innovation!Project!2013! 5' Interactive'CEO'Session'|'Eric'Ries'and'The'Lean'Startup'in'Payments' ! businesses.!As!a!Board!member,!he!helps!advise!executive!teams!on!key!strategies.!Now,!as!CEO!of! ROAM,!he!operates!a!startup!inside!of!a!huge!multinational!—!Ingenico!—!which!holds!a!sizeable! majority!stake!in!ROAM.!“It’s!great!to!have!the!strength!and!resources!of!Ingenico!to!help!build!our! presence!in!the!marketplace,”!says!Paull,!who!has!held!the!CEO!position!for!about!six!months!after! being!with!them!for!about!13!months.!“They!treat!us!like!any!other!investor!would.!We!have!our!own! autonomy!but!are!accountable!for!results!–!something!that!is!pretty!important!to!them!as!a!public! company.”!ROAM!is!right!smack!dab!in!the!middle!of!the!hottest!payments!industry!phenomenon!there! is!–!mobile!point!of!sale!–!which!has!become!the!calling!card!for!retailers!of!all!sizes!and!categories.!And,! ROAM,!with!Ingenico’s!sizeable!merchant!base,!has!a!built_in!sales!prospecting!pool!for!its!upmarket! pursuits.!But,!having!a!global!parent!in!the!same!business,!so!to!speak,!puts!the!notion!of!creative! destruction!—!typically!the!goal!of!a!lean!startup!—!front!and!center!for!both!companies.!ROAM!has! evolved!its!solution!from!being!the!most!secure!“dongle”!on!the!market!to!a!robust!mobile!commerce! platform!that!powers!many!of!the!mobile!POS!players!in!the!market!including!those!that!serve!upmarket! retailers.!Paull!will!offer!his!take!on!the!challenges!of!maintaining!a!Lean%Startup!culture!inside!a!three_ decade!old!business!that!could!find!itself!competing!with!the!very!mouth!that!feeds!them,!so!to!speak,! as!the!market!for!mobile!evolves.!! Eric&Remer,&Founder&and&CEO&of&Paysimple,!is!sort!of!the!poster!child!for!lean!startups.!Except!that!his! MVP!was!an!existing!business!that!was!throwing!off!revenue!in!a!totally!different!space.!The!year!was! 2005!and!Remer!had!already!created!and!sold!one!startup!and!was!into!his!second,!a!business!that! published!ads!for!property!managers.!In!the!course!of!being!all!lean!startup_y,!he!started!asking!his! clients!what!he!could!do!to!make!their!lives!easier.!They!all!had!one!wish:!help!them!collect!their!rent! easier!and!faster!!His!customers!were!living!(and!hating)!the!paper_life:!sending!bills,!following!up!on! payments,!reconciling!their!books.!The!wheels!started!turning.!“When!I!researched!the!market,!I!found! that!most!products!for!small!businesses!were!just!subsets!of!enterprise_level!business!offerings,!so!they! did!not!meet!the!needs!of!how!small!businesses!manage!their!receivables.!I!saw!an!opportunity!to!fill!in! the!gap!in!the!marketplace,!and!so!the!idea!of!PaySimple!was!born,”!says!Remer.!Today,!PaySimple! offers!products!directly!to!small!business!merchants,!and!also!partners!with!organizations!to!provide!the! technology!and!support!for!white_labeled!products,!like!AcceptPay!for!American!Express!and!Zip!for!Ink! from!Chase!cardmembers.!Remer,!though!is!also!the!first!one!to!admit!how!hard!it!has!been,!joking!that! it!has!“taken!him!six!years!to!become!an!overnight!success.”!Remer!will!describe!the!challenges!of! scaling!a!platform!in!payments!even!when!the!value!proposition!is!abundantly!clear!and!where!a!key! growth!hypothesis!involved!working!with!large!strategic!investors!who!still!embrace!traditional!product! development!principles.!! Scott&Thompson,&CEO&of&ShopRunner,!has!a!pretty!indisputable!claim!to!fame.!As!President!of!PayPal!he! placed!a!bunch!of!big!bets!to!move!PayPal!out!of!eBay!and!into!retail!payments!to!become!the!eBay! money!machine!that!it!is!today.!So,!it’s!fair!to!say!that!Thompson!knows!a!thing!or!two!about!how!to! create!value!and!growth!hypotheses!for!merchants!and!consumers!on!a!payments!platform.!PayPal’s! acquisition!of!Bill!Me!Later!was!one!of!those!bets,!giving!PayPal!access!to!a!bevy!of!online!retailers!–!and! a!risk!engine!–!that!helped!give!PayPal!accountholders!the!means!and!the!incentives!to!parlay!their!

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The!Innovation!Project!2013! 6' Interactive'CEO'Session'|'Eric'Ries'and'The'Lean'Startup'in'Payments' ! accounts!at!other!shopping!destinations!on!the!web!and!merchants!the!incentive!to!accept.!Now,!he’s! working!that!magic!at!ShopRunner,!an!Amazon!Prime_like!service!that!offers!free!shipping!to!consumers! in!exchange!for!an!annual!membership!fee.!ShopRunner!has!a!built_in!base!of!merchants!from!its!GSI! Commerce!days!(when!it!was!acquired!by!PayPal!it!spun!off!ShopRunner!but!was!able!to!leverage!those! important!GSI!relationships),!a!universal!checkout!service!called!PayRunner!and!an!online!service!that! helps!consumers!track!orders!and!aggregate!receipts!across!retailers.!Thompson!says,!“While!PayPal!and! ShopRunner!are!fundamentally!different!businesses,!there!are!similarities!in!each!of!their!success.!Both! companies!are!focused!on!building!the!broadest!network!of!satisfied!merchants!by!providing!the!value! that!creates!a!large!and!loyal!customer!community,!creating!a!virtuous!circle.”!Hmm.!We’ll!hear! Thompson!describe!how!Lean%Startup!principles!apply!(or!not)!in!a!startup!that!spun!out!of!a!startup!and! is!acquiring!lots!of!them!on!its!way!to!creating!a!new!online/offline!commerce!experience!for!its! merchant!and!consumer!network.!!! Bill&Weingart,&Chief&Product&Officer&at&Vantiv,!is!a!Lean%Startup!disciple,!and!his!copy!of!Ries’!book!is! dog_eared,!highlighted!and!underlined.!Since!taking!the!reins!at!Vantiv!(then!FTPS)!nearly!three!years! ago,!Weingart!has!been!methodical!about!developing!and!executing!a!roadmap!that!is!all!about!MVPs,! learning!milestones!and!value!and!growth!hypotheses!to!ignite!its!merchant!acquiring!platform.!“In!the! U.S.,!the!current!dynamic!changes!in!the!payments!ecosystem!incites!us!to!take!a!proactive!approach!in! order!to!stay!on!the!cutting!edge!of!industry!trends!and!provid[ing]!our!customers!with!the!best_in_class,! most!secure!technologies!that!are!available!in!the!market,”!remarks!Weingart.!Determined!to!leverage! FTPS’!asset!base!from!the!start,!under!Weingart’s!leadership,!FTPS!has!fortified!its!position!in!the!hotly! competitive!acquiring!space!while!introducing!new!products!at!a!rapid!clip!in!the!mobile,!prepaid,! healthcare,!government,!B2B!and!POS!space.!It!also!moved!Vantiv!to!open!its!platform!(a!pretty!big!deal! in!payments),!make!two!acquisitions,!and!IPO!in!2011.!All!of!this!under!the!watchful!eyes!of!its!bank! parent!and!a!private!equity!investor.!Talk!about!pressure.!Weingart!will!share!how!he!and!his!Lean% Startup!principles!helped!transform!a!Midwest!processor!into!a!dominant!force!in!the!acquiring!space.!! ! Ries!will!bring!this!discussion!alive!with!Mark&Lavelle,&SVP&of&Strategy&at&PayPal,!and!one!of!the!four!co_ founders!of!Bill!Me!Later.!BML!was!acquired!by!PayPal!the!Monday!before!the!bottom!literally!fell!out!of! the!financial!markets!in!2008!for!a!roughly!$1!billion.!Its!story!was!six!long!years!in!the!making,!and!as! Lavelle!tells!it,!one!made!a!bit!more!scary!as!the!markets!for!credit!tightened!the!closer!the!world!came! to!the!financial!crisis.!Lavelle!characterized!the!acquisition!–!done!while!Thompson!was!in!charge!–!as! one!in!which!“eBay!represents!a!large!balance!sheet!with!a!tremendous!amount!of!liquidity!in!cash!that! will!enable!us!to!grow!well!into!the!future."!Lavelle’s!—!and!the!team’s!—!strategy!while!at!BML!was!to! create!a!familiar!and!frictionless!experience!on!the!web!for!consumers!–!something!akin!to!the!familiar! experience!of!shopping!at!a!place!that!recognized!you!when!you!entered,!completed!your!transaction! without!asking!for!the!same!information!over!and!over!again,!and!maybe!even!offered!you!–! unprompted!–!the!chance!to!buy!one!of!your!favorite!items!at!checkout.!Now!as!PayPal’s!strategic!chief,! he’s!masterminding!its!many!moves!on!that!road,!one!that!invites!the!inevitable!comparisons!to!creating! the!bona!fide!5th!payments!network.!That!road!has!included!a!variety!of!acquisitions,!including!Zong,! which!included!something!he!didn’t!know!he’d!be!doing!at!the!time!—!hiring!his!new!boss,!PayPal’s!CEO!

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The!Innovation!Project!2013! 7' Interactive'CEO'Session'|'Eric'Ries'and'The'Lean'Startup'in'Payments' ! David!Marcus.!But!what’s!most!interesting!about!PayPal!is!that!it!doesn’t!think!of!itself!as!a!payments! company!but!rather!a!technology!company,!which!helps!keep!its!Lean%Startup_esque!personality!in! check.!For!instance,!most!payments!companies!have!a!12_month!product!cycle,!PayPal’s!is!one!—! making!it!easier!and!faster!for!PayPal!to!field!a!bunch!of!experiments!in!market,!and!to!continuously! learn!from!them!and!adapt!its!product!accordingly.!! So,!here!are!a!few!of!the!conversation!starters!that!Ries!and!Lavelle!will!use!to!challenge!this!group!of! Lean%Startup!aficionados:! • •









What!was!the!leanest!thing!you!did!and!what!were!the!results?!! ! A!number!of!companies!are!taking!different!approaches!to!igniting!mobile!payments!—!from! LevelUp!here!in!Boston!to!the!Google!across!country.!Any!early!insights!on!who!is!following!the!Lean% Startup!principles!more!closely!and!whether!it!looks!like!that!is!helping!them!succeed?! ! Ok,!I!get!the!idea!you!have!to!experiment.!But!don’t!consumers!eventually!get!tired!of!you!when!you! keep!shipping!them!half_baked!products?! ! Microsoft!sort!of!took!the!lean!startup!approach!in!releasing!buggy!versions!of!its!software.!In!fact! the!general!take!on!them!was!that!it!took!three!releases!before!they!got!it!right.!Isn’t!there!a!risk! though!that!saying!you’re!lean!is!just!making!excuses!for!not!being!able!to!produce!good!products?!! And!how!do!you!get!your!team!to!create!great!products!when!you!tell!them!its!more!important!to! get!things!out!quickly?!! ! How!can!you!experiment!with!starting!up!a!platform!business!where!you!don’t!really!know!which!is! the!money!side!or!the!subsidy!side?! ! I!get!Lean%Startup!for!software_based!products!where!you!can!make!constant!adjustments!and! create!new!releases;!and!especially!for!ones!where!people!are!dabbling!in!the!latest!way!to!waste! time!like!tweeting,!pinning,!posting,!or!whatever.!But!how!about!payments!which!has!a!lot!more! dependencies!and!faces!a!lot!more!risks!from!badly!designed!products?!For!instance,!taking!Bill!Me! Later,!if!you!messed!up!on!your!risk!algorithms,!you!would!go!bankrupt;!and!if!you!made!them!too! strict!they’d!have!no!customers.!Ditto!on!the!security!side!–!too!much!and!customers!get!frustrated! and!don’t!bother!and!too!loose!and!the!bad!guys!have!a!field!day.!How!does!MVP!work,!practically,! in!payments!or!does!it?!

! ! ! ! MARKET'PLATFORM'DYNAMICS!' '' ' ' !

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!!!!!!The!Innovation!Project!2013! !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!Interactive!CEO!Sessions!|!March!20621,!2013!

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! ! Innovators!To!The!Rescue:! Filling!in!the!Cracks!For!New!Foundations!for!Financial!Services! ! March!21! 12:40!p.m.!–!2:10!p.m.! ! Thought!Leader!and!CEO!Counterparty!! Raj!Date!|!Deputy!Director!of!the!CFPB!! Tim!Attinger!|!Head!of!Strategy!and!Corp!Dev!at!Blackhawk!Network! CEO!Panel!! ! Gordon!Baird!|!CEO!of!Independence!Bancshares!! Dan!O’Malley!|!CEO!of!PerkStreet!! Mark!Troughton!|!President!of!Wonga’s!Americas!operation!! Peter!Gordon!|!GM!of!FIS!Paynet!! Hank!Uberoi!|!CEO!of!Earthport!! BC!Krishna!|!CEO!of!MineralTree!

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The$Innovation$Project$2013$ Interactive*CEO*Session*|*Innovators*to*the*Rescue*

$ Innovators*To*The*Rescue:*Filling*in*the*Cracks*For*New*Foundations*for*Financial*Services$$

The$financial$crisis$has$made$lots$of$people$question$whether$bankers$and$other$financial$service$ providers$were$doing$a$good$job$for$consumers.$As$Warren$Buffett$put$it,$“After$all,$you$only$find$out$ who$is$swimming$naked$when$the$tide$goes$out.”$There$are$complaints$that$mortgage$brokers$were$out$ looking$for$their$commissions$and$didn’t$care$about$luring$gullible$consumers$into$loans$they$couldn’t$ pay$back.$$Some$credit$card$companies$were$accused$of$using$tricks$to$get$consumers$to$pay$for$ expensive$and$often$useless$addRons$like$payment$protection.$$At$the$same$time,$many$consumers$ haven’t$been$able$to$get$credit$from$traditional$sources$and$have$been$forced$to$rely$on$alternative$ source$of$financial$such$as$payday$lending;$those$alternatives$have$been$accused$to$exploiting$often$ desperate$consumers.$$ Whether$you$agree$with$these$complaints$or$not$one$thing$is$very$clear.$$In$the$United$States,$despite$ ranking$14th$in$GDP$per$capita,$there$are$still$a$very$high$proportion$of$people$who$can’t$get$basic$ banking$services.$The$FDIC$found$that$about$a$quarter$of$Americans$were$“underbanked”$and$almost$a$ tenth$didn’t$have$a$bank$account$—$either$because$they$couldn’t$get$one,$couldn’t$afford$one,$or$ wanted$to$remain$under$the$radar$screen.$ One$could$point$to$lots$of$reasons$for$the$dissatisfaction$with$traditional$financial$services.$$It$could$be$ that$traditional$banks$just$haven’t$kept$up$with$the$times.$They$wouldn’t$be$the$first$industry$that$got$ too$set$in$their$ways$and$need$to$be$shaken$up$by$the$forces$of$creative$destruction.$Banks$and$other$ financial$services$firms$are$tightly$regulated$and$while$regulation$is$surely$needed$regulation$has$seldom$ been$a$spur$to$innovation.$Who$can$innovate$when$you’re$spending$your$time$filling$out$paperwork$and$ meeting$with$compliance$officers?$Or$maybe,$to$take$a$more$cynical$view,$when$they’re$spending$too$ much$time$focusing$on$massive$profits$from$trading$that$they$don’t$invest$enough$in$consumer$banking.$$ Perhaps$the$consumer$banking$teams$have$focused$too$much$on$“innovative”$marketing$and$pricing$ programs$rather$than$making$better$products$and$services.$ Finding*the*White*Spaces* $ What’s$clear$is$that$there’s$a$lot$of$“white$space”$in$consumer$financial$services.$And$many$new$tools$ and$enabling$technologies$–$such$as$the$mobile$phone$that$provide$access$to$the$internet$and$ alternative$delivery$channels$R$that$make$the$delivery$of$those$services$easier$and$cheaper$than$ever$ before.$That$white$space$provides$opportunities$for$innovators$to$enter$and$provide$value.$Maybe$that$ will$lead$to$filling$in$some$cracks$in$a$system$that$otherwise$works$well.$Or$maybe$it$will$provide$a$new$ foundation$for$the$financial$services$industry.$And,$maybe$the$bankers$themselves$will$get$the$innovator$ fire$in$their$bellies.$ And,$then$there’s$data.$Credit$and$debit$card$transactions$generate$a$lot$of$it$and$lots$of$traditional$and$ emerging$players$want$to$mash$up$that$data$with$other$sources$and$convert$it$to$offers$and$ads.$As$ traditional$business$models$in$payments$are$challenged,$the$monetization$of$that$data$will$become$ever$ more$$relevant$–$and$likely$essential.$Consumers,$on$the$other$hand,$don’t$like$their$data,$especially$ financial$data,$$exposed$willyRnilly$and$made$available$to$anyone$who$wants$access$–$they’re$worried$ PYMNTS.COM$$$ $

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The$Innovation$Project$2013$ Interactive*CEO*Session*|*Innovators*to*the*Rescue*

$ about$their$privacy$and$the$security$of$that$data$and$rightfully$so.$As$a$result,$consumer$groups$are$ pressing$very$so$strongly$for$clearer$parameters$around$data$privacy,$security,$and$protection.$$$ Regulation*and*Innovation:*Can*They*Leave*Happily*Ever*After*in*Peace?* $ Regulation$can$play$two$opposing$roles$in$the$reinvention$of$financial$services.$$*

The$CFPB$is$watching$bank$and$nonbank$financial$service$providers$closely.$Maybe$through$the$force$of$ regulation$it$could$make$the$industry$not$only$stop$bad$practices$but$also$introduce$innovative$new$ ones.$Early$versions$of$CFPB$legislation$even$had$the$agency$in$the$position$of$designing$default$ products.$That$got$quashed$but$the$bureau$still$has$a$lot$of$clout$in$making$the$industry$bend$to$its$ wishes.$ But$regulation$can$also$stand$in$the$way$of$innovation.$In$the$interest$of$protecting$consumers,$and$the$ economy,$there$are$many$regulations$that$make$it$difficult$for$entrepreneurs$to$offer$bankingRlike$ services$without$basically$becoming$a$bank$and$carrying$the$baggage$of$being$a$bank.$Legitimate$money$ laundering$concerns$have$resulted$in$a$complex$and$nearly$impenetrable$web$of$national$and$state$ regulations$concerning$money$transmittal.$And$then$the$CFPB$has$authority$over$pretty$much$ everything.$$Big$innovators$like$WalRMart$have$been$blocked$from$getting$into$banking$and$many$smaller$ ones$have$found$that$getting$a$money$transmittal$license$can$be$expensive$and$sometimes$not$even$ possible.$ So,$how$can$innovators$help$fix$what’s$broken$in$consumer$financial$services$and$perhaps$even$lay$a$ new$foundation$for$the$consumer$financial$services$industry?$$And$what$should$the$role$of$regulation$be$ in$this$process?$ The*CEO*Roundtable* $ Raj$Date$and$Tim$Attinger$are$going$to$lead$a$discussion$of$these$issues$with$some$of$the$innovators$who$ are$shaking$up$this$sector$as$we$speak.$Raj$and$Tim$are$in$the$perfect$position$to$mix$things$up.$ Up$until$a$few$days$ago,$Raj$was$the$second$in$command$at$the$CFPB$and$was$in$charge,$for$a$time,$ before$the$current$director$was$put$in$place$by$President$Obama.$Raj$has$helped$build$this$new$bureau$ from$the$ground$up.$His$and$his$colleague’s$efforts$have$been$applauded.$It’s$not$often$that$any$ government$agency$is$called$a$“lean$startup”$but$that$fact$is$what$one$the$world’s$leading$experts$on$ Lean$Startups,$Eric$Ries$(another$Innovation$Project$2013$CEO$keynoter)$has$called$it.$But$this$isn’t$Raj’s$ first$stab$at$entrepreneurship.$At$the$start$of$the$financial$crisis,$he$founded$Cambridge$Winter—a$think$ tank$that$played$a$significant$role$in$the$changing$the$conversation$over$financial$reform.$Raj$comes$to$ regulation$after$a$long$career$in$financial$services,$including$some$time$at$Cap$One.$ Tim$is$leading$strategy$at$Blackhawk$Networks.They,$of$course,$are$one$of$the$leading$prepaid$card$ platforms$that$have$brought$gift$cards$to$the$masses$via$grocery$stores,$convenience$stores,$pharmacies$ and$even$online.$But,$for$most$of$his$career$Tim$has$been$pushing$innovation$with$the$big$guys.$$He$had$ a$long$career$at$Visa$International$where$he$ran$strategy$and$in$fact,$was$part$of$the$team$that$devised$ PYMNTS.COM$$$ $

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The$Innovation$Project$2013$ Interactive*CEO*Session*|*Innovators*to*the*Rescue*

$ the$innovation$roadmap$that$was$at$the$core$of$Visa’s$IPO.$While$there,$he$was$also$on$the$firing$lines$ when$the$interchange$fee$litigation$was$at$its$peak,$so$has$a$perspective$or$two$on$the$impact$of$ regulation$on$the$sector.$ Joining$them$are$6$CEOs$who$each$bring$a$very$different$perspective$to$the$conversation.$$ •







Gordon&Baird,&President&and&Chief&Executive&Officer&of&Independence&Bancshares,$is$building$a$new$ kind$of$bank.$Yes,$it’s$digital$and,$yes,$it$is$targeted$to$consumers.$But$there’s$a$slight$twist$in$all$of$ this$too.$This$digital$bank$will$also$cater$to$SMBs$and$will$leverage$some$interesting$and$creative$ delivery$channels.$Baird$knows$a$thing$or$two$about$banking$since$he$had$a$front$row$seat$during$ the$recent$financial$crisis$as$a$part$of$the$TALF$finance$program$created$by$the$U.S.$Federal$Reserve$ to$spur$consumer$lending$activity$and$recovery$efforts.$$Baird$will$tell$us$why$he$thinks$old$school$ banking$needs$innovating$and$how$new$technologies$and$some$new$thinking$about$old$regulation$ will$improve$the$delivery$of$much$needed$financial$services$to$consumers$and$businesses.$$ $ Peter&Gordon,&GM&of&PayNet,$FIS’$real$time$global$$payment$network$describes$what$FIS$has$built$as$ being$like$“strapping$a$cheetah$to$grandma’s$back.”$The$“grandma”$in$this$case$is$the$existing$ACH$ network.$And$while$he$goes$on$to$say$that$there$“are$lots$of$payments$options$around$there$aren’t$ any$affordable$realRtime$solutions.”$PayNet$fills$that$gap$by$leveraging$the$ACH$system$that$FIs$have$ been$using$for$eons$and$making$it$open$with$connections$to$core$systems$that$connect$FIs$with$the$ consumers$and$businesses$that$are$transacting$with$each$other.$Gordon$is$also$the$first$to$say$that$ the$“secret$sauce”$isn’t$technology$–$good$grief,$the$ACH$network$is$grandma,$after$all,$but$the$ network$rules$that$determine$just$how$banks$will$handle$the$real$time$messaging$to$create$the$realR time$good$funds$model.$And,$he$should$know$–$he$wrote$them!$$Gordon$will$tell$us$what$it’s$like$to$ basically$rewrite$the$rules$of$a$payment$network$that$has$been$around$for$decades$while$clearing$ existing$regulatory$hurdles.$$$ $ BC&Krishna,*CEO&of&MineralTree,*uses$new$technology$to$help$banks$solve$an$old$problem:$$deliver$ secure,$online$payments$solutions$to$their$small$and$medium$business$customers.$Krishna$ understands$that$paying$customers$and$receiving$payment$is$a$chore$for$most$businesses,$especially$ the$small$ones.$So,$rather$than$solve$this$problem$by$going$direct$to$SMBs,$Krishna$and$team$ decided$to$create$a$solution$that$those$closest$to$those$SMBs$could$use$to$enhance$their$ relationship$–$the$FIs.$Enter$MineralTree.$This$online$solution$provides$a$simple,$streamlined$ approach$that$brings$new$efficiency,$security,$and$convenience$to$the$payments$and$cash$ management$needs$of$SMBs$while$helping$to$enhance$the$bank’s$customer$relationships.$Krishna$ and$team$have$a$long$track$record$of$creating$innovative$solutions$to$longRstanding$problems$in$ banking$and$financial$services$and$share$how$new$technology$can$make$it$possible$for$FIs$to$deliver$ innovation$without$the$heavy$lift$of$doing$it$all$themselves.$$ $ Dan&O’Malley,&CEO&of&PerkStreet,$has$something$in$common$with$Raj$–$Capital$One.$Dan$actually$coR founded$the$payments$division$there.$But$the$itch$he$wanted$to$scratch$was$to$“remake$the$ relationship$between$Americans$and$their$bank.”$Enter$PerkStreet,$an$online$debit$product$that$

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The$Innovation$Project$2013$ Interactive*CEO*Session*|*Innovators*to*the*Rescue*

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rewards$people$with$cash$back$when$they$use$it$to$pay$and$with$a$better$overall$banking$experience.$ O’Malley$cites$PerkStreet$as$being$all$about$“empower[ing]$people$to$make$better$choices$—$to$ create$their$own$financial$road$maps$and$be$more$successful$at$managing$their$own$money.”$When$ it$launched$about$two$years$ago,$O’Malley$and$PerkStreet$were$clearly$bucking$a$trend,$debit$ rewards$were$buzzRsawed$by$Durbin,$and$more$banks$were$dumping$debit$rewards$than$offering$ them.$$O’Malley$claimed$that$its$internetRbased$delivery$model$and$operating$efficiencies$give$them$ a$few$more$degrees$of$freedom$to$put$money$into$Perks$instead$of$Bricks$(and$mortar$facilities)$and$ offered$2%$cash$back,$at$least$for$a$while.$That$all$changed$in$May$of$2012$when$2%$cash$back$(a$ perk$given$to$customers$with$$5k$balances)$was$rolled$back$to$1%,$leaving$many$questioning$ whether$the$online$debit$model$is$really$sustainable.$O’Malley$will$share$his$views$on$that$question$ and$the$impact$of$regulation$on$his$little$corner$of$the$financial$services$world.$$$$ $ Mark&Troughton,&President&of&&Wonga’s&Americas&operation,$is$pretty$experienced$at$working$at$ the$intersection$of$innovation$and$regulation.$As$the$head$of$GreenDot’s$Cards$and$Network$ operation$for$eight$years$he$moved$them$from$regulatory$grey$space$to$fullRfledged$banking$ operation.$Now,$at$Wonga,$he$is$tasked$with$bringing$its$vision$to$the$U.S.:$using$the$Internet$to$ create$new$underwriting$models$that$will$reinvent$lending.$For$consumers$and$businesses,$this$is$like$ manna$from$heaven.$The$worldwide$financial$crisis$has$put$a$whole$new$perspective$on$the$ necessity$for$alternative$financing$$and$Wonga$and$players$like$them,$have$filled$that$gap.$Wonga,$a$ UK$company,$took$a$page$out$of$Eric$Ries’$playbook,$too,$when$it$launched.$It’s$MVP$(minimum$ viable$product)$was$to$test$these$new$models$in$an$environment$that$had$the$shortest$duration$ possible$–$shortRterm$consumer$lending.$That$proved$successful$enough$to$scale$and$expand$their$ focus$into$loans$of$longer$durations$and,$more$recently,$the$business$sector.$Wonga$also$seems$to$ be$right$where$the$regulators$in$the$UK$want$them$–$in$their$crosshairs.$British$lawmakers$have$ raised$concerns$over$the$rate$of$interest$charged$on$their$loans,$but$if$banks$won’t$lend$money,$then$ what$alternatives$do$consumers$have?$And$if$there$are$lenders$willing$to$offer$alternative$financing$ to,$in$some$cases,$higher$risk$borrowers,$isn’t$it$right$that$they$should$be$compensated$for$taking$on$ that$risk$and$providing$that$service?$$Troughton,$will$share$his$views$on$the$right$model$for$ alternative$financing$in$the$US$and$abroad$and$what$regulators$need$to$do$(or$not$do)$to$keep$the$ lending$spigot$running.$$ & Hank&Uberoi,&is&the&CEO&of&Earthport,$a$platform$that$provides$low$cost,$local$and$crossR$border$ payments$in$200$countries$worldwide.$It$does$this$through$established$global$banking$relationships$ but$Uberoi$is$the$first$one$to$admit$that$Earthport$is$a$pretty$regulated$financial$services$company$R$ as$it$should$be.$Unfortunately,$the$world$in$which$we$live$requires$that$we$keep$a$close$tab$on$who$ is$sending$money$to$whom$to$keep$us$safe.$But,$where$do$we$draw$the$line$between$worrying$about$ drug$dealers$and$terrorists$laundering$money$and$making$sure$that$often$impoverished$relatives$ thousands$of$miles$away$can$put$food$on$the$table?$$Innovation$can$help$meet$both$worthy$goals$ and$Uberoi$will$give$us$his$take$on$solving$this$complicated$conundrum.$$ $

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The$Innovation$Project$2013$ Interactive*CEO*Session*|*Innovators*to*the*Rescue*

$ Date$and$Attinger$will$keep$the$conversation$flowing$across$all$of$these$fascinating$players$by$asking$the$ panelists$to$respond$to$these$and$other$questions.$$$ • •

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Aren’t$“status$quo”$financial$services$really$working$just$fine?$ $ Why$aren’t$entrepreneurs$just$dreaming$when$they$think$they$can$provide$better$products$and$ services$than$banks$that$have$been$working$at$this$for$a$few$hundred$years$(and$with$plenty$of$ bricks$and$mortar$locations$to$interact$with$customers)?$ $ What$are$the$big$openings$for$innovation$–$and$why?$ $ How$will$new$technologies$reinvent$service$delivery$to$traditional$underbanked$and$the$newly$ disenfranchised$banked$who$are$opting$out$of$traditional$banking$relationships?$ $ Bank$regulation$has$stood$in$the$way$of$getting$more$mobile$banking$alternatives$like$MRPesa$off$the$ ground.$Should$bank$regulators$stand$down$more$to$help$spur$innovation?$ $ What$are$the$regulatory$“nonRnegotiables”$and$what$could$we$relax$without$causing$harm$to$the$ system$or$to$consumers?$ $ What$is$the$role$of$the$CFPB$and$other$regulators$to$help$spur$innovation?$ $ Lots$of$innovators$seem$to$be$riding$on$ACH$because$it$is$low$cost.$And$it’s$low$cost$because$it$lacks$ certain$features$that$are$helpful$to$consumers$and$service$providers.$Is$this$a$good$thing?$What$are$ the$risks?$$ $ Will$mobile$disrupt$banking$or$will$banking$disrupt$mobile?$ $ It’s$fair$to$say$that,$at$least$in$the$US,$banks$have$been$anything$but$innovative$since$the$financial$ crisis.$What$is$the$best$way$to$make$banks$themselves$more$innovative?$

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! ! The!Architecture!of!Innovation:! How!Big!Companies!Can!Innovate!Like!Little!Companies! ! March!21! 2:30!p.m.!–!4:00!p.m.! ! Thought!Leader!and!CEO!Counterparty!! ! Josh!Lerner!|!HBS!Professor!and!Author!of!The$Architecture$of$Innovation!! Diane!Offereins!|!President,!Discover!Network! CEO!Panel!! ! Mike!Kennedy!|!Founder!and!Chairman!of!ClearExchange!and!EVP!of!Wells!Fargo! Strategy!and!Innovation!! Chitra!Narasimhan!|!Managing!Director,!Citi!Ventures!and!former!head!of!Strategy! American!Express!! Mike!Pasilla!|!CEO!of!Elavon! !Chris!Gardner!|!Serial!entrepreneur!and!CEO!of!Paydiant!

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MARKET!PLATFORM!DYNAMICS!! ! ! !

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The$Innovation$Project$2013$ 1$ Interactive*CEO*Session*|*The*Architecture*of*Innovation*|*March*21,*2013$

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Out*With*the*Old,*In*With*The*New* $ Peter$Drucker,$the$father$of$modern$management$and$perhaps$the$most$influential$thinker$on$that$ subject$once$said,$“If$you$want$something$new,$you$have$to$stop$doing$something$old.”$When$written$in$ the$mid$1950s,$Drucker$was$describing$the$rationale$for$his$legendary$“management$by$objectives”$ concept,$which$as$we$all$know,$is$about$aligning$employee$performance$with$corporate$objectives$in$ order$to$assure$that$corporate$strategy$is$executed$effectively$and$consistently.$ !

But,$that$same$notion$could$also$be$the$tweet$that$Josh$Lerner$L$Harvard$Business$School$professor,$ expert$on$entrepreneurism,$innovation,$venture$capital$and$private$equity,$and$author$of$the$recently$ released$book$“The%Architecture%of%Innovation”$L$might$use$to$describe$how$corporates$must$approach$ innovation$today.$ !

Lerner$draws$his$insights$from$decades$of$work$at$the$intersection$of$entrepreneurship,$venture$ investing,$and$private$equity.$He$may$spend$a$lot$of$his$days$at$the$blackboard$as$an$HBS$professor,$but$ he$is$an$active$and$wellLrespected$advisor$to$the$biggest$names$in$the$business$in$these$areas.$One$of$ Lerner’s$most$potent$observations$—$and$key$input$to$this$book$—$relates$to$his$research$into$the$ performance$of$companies$that$had$been$acquired$by$private$equity$firms$and$then$ultimately$spun$off$ business$units.$He$and$his$colleagues$observed$that$before$the$transaction$and$spin$offs,$there$were$few$ differences$in$performance$between$the$firms$and$their$category$competitors.$After$the$acquisition$and$ spin$off,$things$changed.$The$acquired$firms$became$more$innovative,$not$because$they$did$more$ “innovative”$things,$but$because$the$things$they$decided$to$innovate$around$were$more$focused,$ investments$in$innovation$more$targeted,$and$incentives$around$outcomes$more$clearly$defined.$$ Overall$performance$in$the$core$business$improved$as$well.$This$drove$a$number$of$additional$insights$ around$the$structure$of$—$or$architecture$of$innovation$—$ in$large$organizations.$ !

“An$abundance$of$evidence$suggests$that$greater$attention$to$the$ways$in$which$organizations$and$ incentives$shape$the$innovation$process$can$produce$significantly$better$results,”$Lerner$says,$ conceding$with$“innovation$is$complex$and$multiLfaceted.”$But$he$is$pretty$emphatic$that$the$ traditional$ways$that$corporations$attack$“innovation”$today$is$deeply$flawed$—$and$worse.$ !

Centralized$R&D$models,$which$relegate$the$responsibility$for$innovation$to$a$particular$group$within$a$ company,$is$a$pretty$standard$way$for$many$large$companies$to$organize$its$innovation$initiatives.$ The$ rationale$for$such$a$method$is$to$“ring$fence”$innovation$so$that$it$doesn’t$disrupt$or$distract$the$core$ business$and$so$that$outcomes$related$to$innovation$can$be$measured$and$monitored.$Except$that$the$ actual$results$don’t$exactly$map$to$those$expectations.$ !

As$recently$as$the$end$of$the$1990s,$for$those$companies$that$organized$innovation$that$way,$R&DL$ driven$innovation$contributed$less$than$25$percent$of$the$value$of$what$investments$in$traditional$assets$ would$have$produced$for$that$company$(e.g.$supply$chain$efficiencies,$cost$reductions,$etc.).$A$cascade$ of$misaligned$incentives$produce$the$wrong$outcomes,$Lerner$concludes,$including$not$knowing$when$to$ deep$six$innovations$that$just$won’t$ever$produce$useful$results$and,$ironically,$shuttering$projects$just$ because$new$leadership$feels$compelled$to$change$things.$ ! MARKET*PLATFORM*DYNAMICS!* *

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The$Innovation$Project$2013$ 2$ Interactive*CEO*Session*|*The*Architecture*of*Innovation*|*March*21,*2013$

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So,$if$R&D$efforts$in$large$corporates$don’t$drive$innovation,$then$the$venture$capital$model$must.$ Venture$investing$is,$of$course,$when$independent$investors$contribute$funds$and$the$professionals$who$ manage$those$funds$make$bets$on$companies$that$have$the$prospect$of$delivering$a$return$on$those$ investments$over$a$set$time$horizon,$usually$8$to$10$years.$But$Lerner$doesn’t$exactly$think$that’s$the$ poster$child$for$commercializing$innovation$either.$Investments$made$by$the$entire$venture$capital$ sector$over$the$course$of$any$given$year$amount$to$much$less$than$the$R&D$budgets$of$a$single$giant$ pharmaceutical$firm$like$Merck$or$a$notLsoLinnovative$GM.$And,$in$2011,$ventureLbacked$firms$ represented$less$than$10$percent$of$all$publically$traded$firms$in$the$U.S.$ !

The$venture$model,$Lerner$believes,$is$flawed$for$a$number$of$reasons$too,$including$its$dependence$on$ public$markets$to$produce$liquidity$–$the$hallowed$“exit.”$ That$causes$VCs$to$invest$only$in$firms$that$ can$scale$and$drive$an$exit$in$their$investment$time$horizon$or$by$pegging$company$valuations$to$the$ public$market’s$view$of$the$value$of$that$sector.$The$result$is$that$some$promising$sectors$or$companies$ are$completely$overlooked$given$their$longer$or$more$difficult$time$horizons.$Some$companies$can$also$ become$completely$overvalued$because$the$market$overstates$the$value$of$a$technology$or$a$concept$ that$may$not$be$all$that$valuable$to$the$sector$at$all,$making$it$harder$to$ultimately$produce$a$return$on$ that$investment.$ !

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Architecting*Innovation*in*Payments$ Lerner’s$insights$as$applied$to$innovation$in$the$payments$sector$is$relevant,$important$and$critical,$ especially$as$the$pace$around$innovation$in$this$sector$is$increasing.$Payments$is$about$the$most$ complex$platform$industry$there$is$and$igniting$innovation$in$payments$is$anything$but$a$given,$even$if$a$ company$is$doing$it$within$the$construct$of$a$successfully$operating$platform.$The$complexity,$as$we$all$ know,$rests$with$the$discipline$of$having$a$strategy$that$can$create$the$delicate$balance$across$all$ stakeholders,$deliver$traction$in$a$relevant$timeframe$and$drive$profits.$Many$investments$in$innovation$ by$corporates$and$venture$funds$underestimate$the$complexity$of$getting$that$to$happen$and$ overestimate$the$adoption$of$“new”$by$merchants$and$consumers,$often$because$the$incentives$ associated$with$driving$this$adoption$haven’t$been$well$developed.$ The$combination$of$new$technology,$investment$bubbles$and$a$lack$of$appreciation$for$this$complexity$ has$caused$otherwise$rational$people$to$make$irrational$or$illLtimed$bets$in$payments.$Consider$the$ following:$

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IllLtimed$investments$in$payments$technology$didn’t$just$start$a$few$years$ago.$The$Internet$bubble$ of$the$2000s,$fueled$by$the$ability$to$shop$online$for$the$first$time,$is$rife$with$payments$innovation$ road$kill,$including$one$that$the$venture$community$itself$voted$one$of$its$worst$all$time$investments$ –$ Flooz.$ This$online$ currency$ worked$ then$ like$ Facebook$ Credits$and$Amazon$ Coins$ works$today$ –$ except$that$the$stuff$people$wanted$to$buy$was$physical$goods$from$places$like$Macy's$and$the$Gap.$ Even$ $50$ million$ dollars$ and$ endorsements$ from$ celebs$ such$ as$ Whoopi$ Goldberg$ couldn’t$ get$ enough$ legitimate$ consumers$ to$ try$ it.$ Flooz$ shut$ down$ in$ 2001,$ not$ too$ long$ after$ it$ launched$ in$ 2001,$when$the$only$people$who$responded$well$to$its$proposition$were$crooks$who$used$it$to$hack$ into$people’s$accounts.$



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The$Innovation$Project$2013$ 3$ Interactive*CEO*Session*|*The*Architecture*of*Innovation*|*March*21,*2013$

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Then$there’s$Pay$By$Touch.$This$company$attracted$$360$million$dollars$in$2003L2004$when$it$ devised$the$payment$method$to$end$all$payment$methods$–$pay$by$finger.$It$was$rolled$out$to$700$ retail$locations$to$great$fanfare$only$to$fall$into$bankruptcy$less$than$five$years$later.$Investors$had$ themselves$convinced$that$the$payment$system$of$the$future$was$one$that$rode$ACH$(so$cheaper$for$ merchants),$leveraged$something$that$everyone$carried$into$the$grocery$store$(not$your$phone$but$ your$finger),$and$was$secure$(used$a$PIN).$Obviously$the$pitch$was$compelling$enough$to$create$an$ avalanche$of$funding,$but$not$enough$to$get$consumers$to$sign$on.$They,$in$fact,$gave$Pay$By$Touch$ the$finger$(but$not$the$one$that$they$were$supposed$to$pay$with)$and$the$investors$lost$it$all.$



The$daily$deals/group$buying$market$frenzy,$fueled$primarily$by$Groupon’s$entry$into$the$business$in$ 2008,$also$drove$a$massive$amount$of$investment$in$“offers”Lbased$companies$by$venture$firms$and$ initiatives$funded$by$just$about$every$payments$player$in$the$land.$It$also$ended$up$driving$huge$ consolidation$as$about$170$of$530$offers$and$deal$sites$that$existed$in$2012$(down$considerably$from$ 2011)$were$either$shut$down$or$sold$at$fire$sale$prices.$Groupon$itself$has$lost$more$than$80$percent$ of$its$value$since$it$went$public$in$November$of$2011,$and$Amazon’s$book$value$of$its$$175$million$ stake$in$Living$Social’s$stood$at$$52$million$at$the$end$of$2012;$after$Living$Social$posted$a$$905$ million$operating$loss$that$same$year.$Investors$failed$to$recognize$that$the$“80%$off”$deals$was$a$ race$to$the$bottom$of$the$market$that$few$merchants$wanted$to$run$consistently$and$that$deal$ customers$didn’t$have$much$of$an$interest$in$becoming$full$price$customers$at$those$same$ merchants.$



Then$there's$NFC.$It's$hard$to$know$just$how$much$venture$firms$—$plus$those$in$the$payments$and$ mobile$ecosystems$—$have$invested$to$help$ignite$this$technology,$but$it's$likely$we're$in$the$billions.$ We$do$have$a$few$concrete$data$points$though.$At$least$$100$million$was$invested$by$AT&T,$Verizon$ Wireless$and$TLMobile$in$ISIS$—$the$mobile$NFC$payments$network$that$has$delayed$its$launches$ many$times$and$is$barely$in$the$market$today.$Vivotech$–$the$NFC$pioneer$that$came$onto$the$scene$ in$2001,$raised$about$that$same$amount$over$the$decade$that$it$was$hawking$NFC$as$well$—$ investments$fueled$by$analyst$hype$and$payment$network$belief$that$that$NFC$was$the$future$of$ mobile$payments.$In$spite$of$payment$network$evangelism,$a$challenging$value$proposition,$business$ model$and$steep$ignition$curve$resulted$in$Vivotech$selling$its$patent$portfolio$to$a$ventureLbacked$ start$up$in$2011$for$pennies$on$the$dollar.$

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So,$where$are$we$now?$And$just$what$is$the$architecture$of$innovation$in$payments$going$forward?$ Well,$sort$of$where$Lerner$thinks$it$just$might$have$its$best$prospects$to$succeed.$ The$largest$players$in$the$space$are$today$funding$dozens$of$“innovation$experiments”$focused$on$ driving$payments$into$the$mobile$realm,$and$more$broadly$expanding$the$reach$of$electronic$payments.$ At$the$same$time,$access$to$new$technologies$and$the$availability$of$IPLenabled$devices$such$as$the$ smart$phone$and$tablet$reduced$the$barriers$to$entry$for$many$an$emerging$venture$to$make$a$play$for$ something$new,$innovative$and$gameLchanging.$ Hundreds$of$millions$of$dollars$of$venture$money$

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The$Innovation$Project$2013$ 4$ Interactive*CEO*Session*|*The*Architecture*of*Innovation*|*March*21,*2013$

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poured$(and$are$pouring)$into$the$sector$to$foster$the$“next”$new$thing$in$payments.$In$2012$alone,$ more$than$$1$billion$was$invested$in$emerging$payments$firms$by$VCs.$ !

But$as$good$(and$well$funded)$as$their$great$ideas$might$be,$most$of$these$ventures$will$need$ distribution$and$scale$to$ignite$and$access$to$the$“incumbents”$to$make$that$happen$in$any$sort$of$ meaningful$way.$They’ll$also$need$access$to$the$people$inside$the$organization$who$can$“school”$them$ on$what$it$means$to$be$in$the$payments$business.$Many$of$them$have$no$clear$idea$of$its$complicated$ innerLworkings.$ !

Those$two$forces,$Lerner$believes,$sets$up$exactly$the$right$environment$for$the$right$model$for$ innovation$in$large$organizations$–$corporate$venturing$–$something$that$takes$the$best$of$both$worlds$ and$devises$a$structure,$a$framework$and$a$set$of$incentives$for$advancing$strategic$goals$and$generating$ good$returns$on$those$investments.$ !

Simply$stated,$it$involves$having$corporations$invest$in$promising$start$ups,$usually$through$a$separate$ entity,$and$then$creating$an$operating$model$that$is$helpful$enough$to$the$venture$without$drowning$it$ in$the$corporate$bureaucracy$that$would$only$slow$things$down$–$or$worse.$ !

Lerner$is$the$first$to$point$out$that$corporate$venturing$isn’t$always$the$match$made$in$heaven.$As$he$ recounts$in$his$book,$venture$capitalists$view$corporates$as$“the$dinosaurs$that$they’re$trying$to$kill,$the$ market$opportunity$they’re$trying$to$capture,”$so$it$isn’t$a$given$that$they’ll$be$met$with$open$arms$ when$they$arrive$on$the$scene$with$their$corporate$checkbooks.$But,$he$also$suggests$that$it$has$ produced$positive$results.$Lerner$says$the$returns$from$corporate$venturing$are$at$least$as$good$as$ venture$firms$produce$–$and$has$become$a$mechanism$for$both$stimulating$demand$for$a$company’s$ product$as$well$as$seeding$companies$to$develop$innovation$that$complements$its$own.$And$it$just$has$ to$in$payments$—$because$hardly$anyone$can$do$everything$without$playing$with$the$big$guys.$ !

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It$certainly$seems$to$have$caught$on$in$payments:$ •

American$Express$launched$a$$100$million$fund,$American$Express$Ventures,$to$invest$in$ventures$in$ 2011.$



Starbucks$invested$$25$million$in$Square$in$August$2012$and$will$be$deploying$its$mobile$payments$ app$to$its$Starbucks$customers.$It$now$also$sells$Square$dongles$in$its$store.$



Citi$Ventures,$a$unit$of$Citigroup,$has$invested$in$a$number$of$companies,$including$Square,$Jumio$—$ an$online$credit$card$scanner,$and$most$recently,$Plastic$Jungle$—$an$online$exchange$for$gift$cards.$



Visa$invested$an$undisclosed$amount$in$Square$in$2011.$



First$Data$has$invested$an$undisclosed$amount$in$Cardspring,$a$platform$that$has$fuels$its$open$ redemption$platform$called$OfferWise.$

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Google$Ventures$invested$in$Square$contender,$Corduro,$in$2011.$ MasterCard$invested$in$a$number$of$ventures$in$2012,$including$Truaxis,$a$cardLlinked$offers$ platform,$and$iZettle,$the$Swedish$version$of$Square.$



Ingenico$invested$in$ROAM,$a$mobile$commerce$entity.$

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The$Innovation$Project$2013$ 5$ Interactive*CEO*Session*|*The*Architecture*of*Innovation*|*March*21,*2013$

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Of$course,$this$list$is$just$a$small$sample$of$the$activity$that$is$mashing$up$the$deep$pockets$of$corporates$ and$the$new$ideas$of$innovators$to$architect$innovation$for$the$benefit$of$both.$For$every$strategic$ investment,$there$are$many$more$partnerships$struck$that$combine$the$assets$and$energy$of$these$two$ very$different$types$of$organizations$–$in$fact$there$is$probably$a$press$release$a$day$announcing$these$ sorts$of$alliances.$ !

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Payments*Innovation*in*Action$ So,$is$this$the$right$way$to$architect$innovation$in$a$sector$as$dynamic$and$complex$as$payments?$ We’ll$find$out$by$probing$five$of$payments$most$courageous$and$experienced$innovators$who$will$ debate$with$each$other,$Innovation$Project$delegates$and$Lerner$over$90$minutes$in$a$place$that$has$ given$birth$to$many$an$innovative$idea$–$Harvard’s$Science$Center.$

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Chris&Gardner,&co/Founder&and&CEO&of&Paydiant,$ is$a$successful$serial$payments$entrepreneur.$It’s$ rare$to$get$one$hit$in$this$complicated$space,$but$Gardner$and$team$seem$poised$to$go$three$for$ three.$ Gardner,$though,$has$a$healthy$respect$for$the$complexity$of$the$business$and$concedes,$ “Changes$in$the$payments$industry$take$a$while.”$Founded$in$2010,$Paydiant$is$a$cloudLbased$ solution$that$enables$banks$and$merchants$to$accept$payments$via$the$mobile$phone$–$primarily$via$ a$QR$codes$today.$It$has$garnered$some$pretty$highLpowered$incumbent$partners$and$customers$in$ its$short$life,$including$FIS,$Vantiv$and$Bank$of$America,$in$order$to$do$what$all$ventures$want$to$do,$ “get$our$ecosystem$and$our$acceptance$method$broadly$deployed.”$$Yet,$working$with$incumbents,$ much$less$large$incumbents,$is$not$without$its$challenges.$Scale$can$be$a$double$edge$–$the$same$ thing$that$makes$incumbents$attractive$to$work$with$–$their$largesse$–$may$make$it$harder$for$them$ to$move$at$the$speed$of$emerging$innovators$as$they$wrestle$with$competing$priorities$and$agendas.$ Gardner$will$share$his$thoughts$on$how$he$and$Paydiant$have$aligned$incentives$for$innovation$with$ partners$not$known$for$moving$quickly.$



Mike&Kennedy,&Chairman&of&ClearXchange,&is$pretty$emphatic$about$its$goal$for$innovating$the$role$ of$banks$in$mobile$payments:$“We$don’t$want$to$end$up$in$the$background$as$another$utility.”$ ClearXchange$is$a$mobile$payments$network$that$connects$Bank$of$America,$JPMorgan$Chase$and$ Wells$Fargo$—$those$mega$banks$that$together$account$for$one$of$every$three$bank$accounts$in$the$ U.S.$—$enabling$the$transfer$of$funds$from$one$person$to$another$across$that$network$using$only$a$ mobile$phone$number.$ Kennedy,$who$also$serves$as$EVP$for$innovation$at$Wells$Fargo,$is$convinced$ that$while$a$“gameLchanger”$for$mobile$payments,$ClearXchange$is$also$poised$for$success$because$ it$is$complementary$to$the$current$payments$products$issued$by$those$same$banks$and$used$by$ those$customers.$Kennedy$will$dispel$the$myth$that$big$banks,$innovation$and$speed$to$market$ aren’t$mutually$exclusive.$He$will$also$lead$The$Innovation$Project$delegates$through$ClearXchange’s$ blueprint$for$getting$the$three$biggest$banks$to$the$table$around$a$new$idea,$and$how$that$ framework$may$have$to$change$in$order$to$take$ClearXchange$to$the$next$level$of$innovation$in$ mobile$payments.$

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The$Innovation$Project$2013$ 6$ Interactive*CEO*Session*|*The*Architecture*of*Innovation*|*March*21,*2013$

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Mike&Pasilla,&CEO&of&Elavon,$seems$attracted$to$payments$innovation$like$a$moth$to$a$flame.$“I’ve$ always$chosen$the$option$that$presents$the$greatest$challenge$and$provides$the$greatest$return,”$he$ says.$ “I$don’t$go$for$the$sure$thing.”$Well,$he$sure$seems$to$have$picked$the$right$industry$at$the$ right$time.$Elavon$is$the$fourth$largest$merchant$acquirer$and$card$processor$in$the$U.S.$and$is$ owned$by$U.S.$Bank.$It$also$operates$in$a$sector$that$is$being$challenged$by$new$and$old$players$alike,$ who$see$acquiring$as$a$logical$place$to$disintermediate$existing$players.$Tired$of$being$labeled$a$“fast$ follower,”$Passilla$is$creating$an$innovation$agenda$around$new$ideas$that$instead$lead$the$market$by$ giving$customers$and$partners$a$bigger$voice$in$how$that$agenda$should$look.$And,$initiating$ partnerships$that$accelerate$the$pace$of$innovation$for$its$customers$–$and$establishing$a$platform$ for$emerging$innovators$to$plug$into.$ Passilla$will$describe$how$innovation$works$at$Elavon,$give$us$ peek$into$his$innovation$roadmap,$and$explain$how$he$attracts$and$retains$key$partnerships$while$ balancing$the$requirements$of$his$bank$parent$company,$and$a$regulatory$environment$that$layers$ added$challenges$to$an$already$tricky$process.$



Chitra&Narasimhan,&Managing&Director&at&CitiVentures,&is$a$payments$innovation$pioneer.$She$was$ tapped$by$Ken$Chennault$at$American$Express$in$the$early$to$mid$2000s$to$develop$both$its$ Corporate$Development$and$its$Enterprise$Growth$initiatives$–$two$groups$that$are$at$the$heart$of$ the$innovation$we$see$coming$out$of$that$163LyearLold$company$today.$Now,$as$a$driving$force$for$ CitiVenture’s$incubation$initiatives,$ she$seeks$out$the$next$generation$of$innovators$for$Citibank.$ Narasimhan$has,$therefore,$walked$the$high$wire$between$corporate$priorities$and$innovation$ imperatives$many$a$time.$Her$advice$for$both$innovators$and$investors$is$consistent:$“Believe$in$the$ idea$and$don’t$forget$the$big$picture,”$a$nod$to$the$slippery$slope$that$consistently$focuses$on$ what’s$wrong$and$not$what’s$right$about$what$an$idea$can$bring$to$both.$ Narasimhan$will$offer$her$ insights$about$how$to$structure$innovation$inside$huge$financial$institutions$and$then$make$ investments$that$fulfill$corporate$commitments$but$don’t$stifle$emerging$innovators.$

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These$insights$will$be$brought$front$and$center$to$The$Innovation$Project$2013$delegates$by$Lerner$and$ Diane&Offereins,&President&of&the&Discover&Network.$Offereins$was$handed$the$reins$in$2008$and$given$ responsibility$for$Discover$Network,$PULSE$and$Diners$Club$International.$But$it$was$she$who$first$ thought$about$licensing$the$Discover$network$to$other$innovators$to$propel$their$innovation$agenda$four$ years$ago.$"We$are$kind$of$like$a$startup$business,"$Offereins$says.$"We$have$fierce$competition$with$two$ established$players$in$the$market.$We$cannot$use$a$meLtoo$strategy.$We$need$to$be$different.$We$need$ to$be$way$more$creative."$And$way$more$creative$she$has$been.$Announcing$the$PayPal$partnership$in$ August$2012$was$the$result$of$that$fourLyear$journey$that$laid$the$groundwork$for$an$entirely$new$ innovation$architecture$at$Discover;$one$that,$frankly,$rocked$the$industry$when$it$was$made$public.$The$ strategy$that$Offereins$used$to$move$that$ball$down$the$field,$the$incentives$that$were$needed$in$order$ to$get$organization$on$board$and$aligned$a$new$vision$for$its$future,$and$what’s$next$for$the$sector$will$be$ the$topics$that$she’ll$use$to$challenge$this$panel$and$IP$2013$delegates$to$think$differently$about$ designing$innovation.$ Key*questions*that*she*and*Lerner*will*pose*to*this*roundtable*include:$

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The$Innovation$Project$2013$ 7$ Interactive*CEO*Session*|*The*Architecture*of*Innovation*|*March*21,*2013$

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Does$payments$pose$any$unique$problems$for$innovation$in$large$organization$or$is$it$just$like$ innovating$anything$else?$



Discover$is$an$innovation$introduced$by$a$very$large$company$—$Sears.$How$did$Sears$pull$off$ creating$a$viable$fourth$payments$network$that’s$worth$billions$and$what$does$this$teach$other$ companies$that$are$interested$in$doing$something$big?$



Are$there$other$Discover/Sears$plays$in$payments?$If$so,$where$do$you$see$them$happening$and$ when?$



Groupon$was$a$small$firm$innovation$that$Google$was$about$ready$to$plunk$$6$billion$down$to$buy.$ How$can$large$companies$avoid$getting$caught$up$in$the$enthusiasm$for$the$next$big$thing$and$avoid$ overpaying$for$ventures$that$may$be$promising$but$completely$overvalued?$



Can$strategic$partnerships$with$new$ventures$help$an$organization$stay$innovative?$Why$not$just$ structure$those$and$avoid$making$financial$investments?$



The$rapid$rise$of$smart$mobile$devices$caught$a$lot$of$companies$off$guard,$including$a$lot$of$ savvy$and$hip$high$tech$firms.$ Two$questions:$Can$corporate$innovators$do$a$better$job$of$ predicting$disruptive$innovation$and$its$implications$for$their$own$innovation?$And$are$there$any$ lessons$for$how$companies$should$rejigger$their$innovation$agenda$when$there’s$a$sudden$ change$resulting$from$drastic$innovation?$



What$the$biggest$failure$in$innovation$that$you’ve$seen$from$a$large$company$in$payments$and$how$ could$it$have$been$avoided?$



How$do$you$avoid$overpowering$the$innovative$ideas$that$are$brought$to$you$by$emerging$ventures?$ How$do$you$decide$which$to$pursue$and$why?$How$do$you$motivate$that$individual$or$that$group$to$ continue$to$bring$you$new$ideas?$



How$do$you$know$when$an$innovative$idea$has$run$its$course$and$when$to$shut$it$down?$Is$the$ metric$for$that$different$in$payments?$



How$do$you$convince$innovators$that$you$really$aren’t$the$dinosaurs$that$they$think$you$are$—$ and$make$them$love$you$long$after$the$check$has$been$cashed?$



What$internal$and$external$forces$have$made$innovation$more$difficult$in$the$last$three$years?$ What$needs$to$change$going$forward?$And$do$you$think$it$will?$$

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!!!!!!The!Innovation!Project!2013! !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!Interactive!CEO!Sessions!|!March!20621,!2013!

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! **COMING!SOON**! ! Guess!Who’s!Coming!To!The!Point!of!Sale?!Reconciling!The!Tension! Between!Innovators,!Merchants,!And!New!Consumer!Experiences! March!20:!12:45!p.m.!–!1:55!p.m.! Thought!Leader!and!CEO!Counterparty!! Karen!Webster!|!CEO,!Market!Platform!Dynamics!! Seth!Priebatsch!|!Chief!Ninja,!LevelUp! !

The!Ultimate!Entrepreneur’s!Challenge:! Who’s!The!Best!–!East,!West!Or!Middle?! March!20:!4:15!p.m.!–!5:45!p.m.! Thought!Leader!and!CEO!Counterparty!! Russell!Simmons!|!Rap!Artist,!Music!Mogul,!Fashion!Retailer,!Prepaid!Pioneer!! Rob!Rosenblatt!|!CEO!Rush!card,!Formerly!EVP!at!JPMC!and!Citi!

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!!!!!!The!Innovation!Project!2013! !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!Interactive!CEO!Sessions!|!March!20621,!2013!

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! Innovating!Cash!|!You’re!Not!Getting!Older,!You’re!Getting!Better!! March!21:!4:15!p.m.!–!5:45!p.m.! Thought!Leader!and!CEO!Counterparty!! Larry!Summers!|!Former!Treasury!Secretary,!Square!Board!Member,!and!Advisor! to!Andreessen!Horowitz!! Hikmet!Ersek!|!CEO!of!Western!Union! CEO!Panel!! Lars!Blecko!|!CEO!of!Loomis!! Arlyn!Davich!|!CEO!of!PayPerks!! Jim!DeBello!!|!CEO!of!Mitek!! Steve!Rathgaber!|!CEO!of!Cardtronics!! John!Moore!|!COO!of!The!San!Francisco!Federal!Reserve!

MARKET!PLATFORM!DYNAMICS!! ! ! !

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