When will be your Kodak moment?
There was a time when a ‘Kodak Moment’ meant the permanent capture of a truly memorable experience. However, the more sinister and final ‘Kodak Moment’ is remembered as the point when the Kodak Corporation could no longer save itself from the rapid disruptions to its core business that it had failed to respect and address. Is there another ‘Kodak Moment’ coming for the traditional leaders in the payments industry? There are certainly many interesting parallels.
Kodak was the leader in photographic media throughout most of the 20th Century. So ubiquitous was the brand that it even made it to the status of being an adjective, in a similar way that ‘Uber’ and ‘Google’ today have become common verbs. George Eastman did for photography what Henry Ford did for automobiles and brought cameras into mainstream use for everyone. He built a household name worth $30 Billion at its peak, employing over 145,000 people around the world.
Today’s banks and payment processors are sitting on a seemingly endless flow of payment revenues delivered on reliable but outdated systems. The impacts of the Covid-19 pandemic were sudden and dramatic and saw a 30+% drop in payment volumes although there are signs of recovery and a shift to more e-commerce business. Were traditional organizations able to quickly react and quickly adapt to this new contactless, remotely operated, and rapidly changing environment? Have they heeded the warning signs?
Had Kodak gone ‘all-in’ on digital cameras they still may have not weathered the storm. Digital camera sales have dropped over 80% in the last 10 years due to the smartphone and continue to decline rapidly as evidenced by Olympus recently pulling out of the camera business after 84 years. It is estimated that over 3 Billion photos are taken every day on our phone cameras with only a tiny percentage ever converted into print. Some disruptions just cannot be survived by the masters of the ‘old way’.
Today's payment services are still heavily card based. Given the technology and security features in mobile devices, it Is hard to see why we still need to carry around a piece of plastic to identify us anymore. My phone, with a fingerprint or facial recognition is more secure and more convenient and importantly can initiate contactless payments.
Is the current card-based ecosystem going to last forever? Kodak sponsored the Olympic games from 2002 to 2008 – eventually filing for bankruptcy in 2012. Visa has an Olympic sponsorship deal through 2032 and supports the FIFA World Cups. Mastercard also sponsors many marquee sporting events such as the UEFA Champions League and MLB. Is history about to repeat itself?
New payment types, new networks including open banking, QR codes and person-to-person payment schemes threaten the traditional card payment business and bring choice to both consumer and merchants in the payment process. Already I can pay via my checking account, credit account, 3rd party account, virtual currency and soon maybe airmiles or gaming points. I can pay now, later or in installments. Progressive merchants quickly support these new payments types which themselves are quickly adopted by a technology driven generation of new consumers.
Traditional payment rails have built on legacy, proprietary infrastructures that, while being reliable, are difficult to change and costly to maintain. Despite various regulations to encourage competitive pricing, card-issuers, card-schemes, and networks built around the card processing business continue to earn billions of dollars in revenue. Although the card networks are now independent of their original bank founders, they still perpetuate a model established over 40 years ago. A model that retailers have continually challenged to bring down costs.
There is a move to have these platforms ‘lifted and dropped’ in the cloud but that isn’t really innovation and certainly doesn’t make them any more agile. Perhaps too concerned to disrupt their current cash flow, payment businesses are not investing in true innovation and opening their payment platforms to the wide diversity of schemes emerging around the world. In Europe a group of Banks are having another attempt at building their own competitive payment network called PEPSI (Pan European Payment System Initiative.) It at least considers instant payments, mobile payments, and transfers as well as a card payment scenario. Challengers come in many guises but make no mistake – the legacy payments leaders are facing increased and determined challenges from many quarters.
New age payment platforms are payment token agnostic and use modern technology (especially cloud native) to support the fast deployment of API’s and have workflows that can be quickly and cheaply constructed, deployed, updated and importantly quickly deconstructed and retired. Modern development and deployment tools enable the rapid automation of testing, QA and deployment of new business logic to exploit this brave new world of payments.
In its prime, Kodak was a powerhouse. They had innovative thinkers and even developed the first hand-held digital camera in 1975. The business however was not agile, too reliant on its cash-cow film business and not prepared for the digital revolution that ultimately led to its demise. Sound familiar?
If you still haven’t had your Kodak moment and your payment strategy is based on legacy business and IT models you might want to take a snapshot and think again. Before it is too late!