process updateSometimes "The Payoff" writes about you. Sometimes it's about your customers. Installments like "Qthru Aims for a Different Self Check-Out" obviously apply to the many readers working in retail organizations: a better way to get shoppers through check-out certainly matters to you. Why waste space, though, on currency exchange in Malta or ordering pencils in Pretoria?

It's no waste. While those sorts of payment systems don't apply immediately to your operations, they fill a need in the lives of many of your customers. This, in turn, sets the context in which your consumer-facing payment systems operate.

That's not all. A couple of weeks ago, "Predicting payment winners: deep complexity" considered the extent to which we can pick winners. Google, Visa, PayPal, Barclay, Apple, and plenty of other heavy-hitters seek dominance in processing financial transactions. We know payment systems will change rapidly over the next decade; we don't know which of the "elephants" will emerge on top.

We know more than just that, though. This episode will be like millions of other innovations in human affairs, and will compound myriad small milestones. This important point deserves more careful explanation:

Overnight success many years in the making

Sometimes business observers think of "success" or "market dominance" in terms of the iPhone, where customers were waiting in line for hours and even days before the first ones were available for sale. This is misleading: even the iPhone's explosive sales launch was the culmination of at least four years of deliberate design and staging.

It's far, far more typical that a product or innovation first establishes itself in a narrow niche. It grows profitable there, both for its producer(s) and consumers. It "works out the kinks". It generates its own marketplace or ecosystem of dependent products and services. From this base, it incrementally grows to replace a previous generation of technology.

Successful products do not take over instantaneously, with exceedingly rare exceptions. This has been frequently documented, under such rubrics as "technology lifecycle" or "normalization process". The telephone, bicycle, radio, electric motors, automobiles, typewriter, pagers, and thousands of other innovations all took years and generally decades to "win". Payment systems have already seen this several times: bank checks, credit cards, electronic data interchange (EDI), online shopping, and even cash itself all thrived first in small communities of early adopters for years before they diffused across the larger society.

Prediction of particular dance-steps made by the elephants of payment systems doesn't interest me so much, therefore. I like to spot innovative solutions that work now, even if only for a neglected market, and watch their development and refinement to the stage where that market grows.

In this perspective, I see several "hot spots" of innovation where the consumers you're likely to want to have in a few years are already learning about novel payment systems:

First is the "unbanked" in the US and other consumer societies. Normal civil life here assumes banking services in many ways--but there are over ten million unbanked or underbanked households in the USA. That's hundreds of billions of dollars of opportunity now picking up financial habits from Money Mart and pre-paid credit cards.

Second are international diasporas: Latinos in the US, Nigerians in the UK, Japanese in Brazil, Vietnamese in Germany, and so on. These communities remit large amounts (roughly a half trillion dollars annually) across international borders, often to relatives who are themselves unbanked or underbanked.

Finally, adoption of "m-commerce" and "m-banking" in Africa and other Third World countries is simply stunning. Millions of people are jumping directly from the periphery of the world economy to online mobile consumerism, often without any experience with such "prerequisites" as electric service, indoor plumbing, or even literacy. When judged by aggregate dollar value, these transactions remain modest (probably under a hundred billion of dollars annually); as testbeds for robust payment systems, they are invaluable.

"The Payoff" will return in two weeks to examine the implications of these changes for how you relate to both your customers and suppliers.

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