Fintech has huge upside in the early innings moving to mobile and online
Source: WSJ, June 19, 2016
New financial technology is disrupting everything from payment systems to messaging to how we manage our data. Dennis Berman, financial editor of The Wall Street Journal, explored the implications with John Collison, president and co-founder of Stripe, an online payments company, and David Gurle, founder and chief executive of Symphony, a cloud-based secure-messaging system. John Collison and David Gurle on how CFOs face a very different environment. Edited excerpts follow.
Dennis Berman: What do CFOs need to know?
John Collison: Part of what’s happened due to the decreased distribution costs of the internet is that capital constraints disappear. We’re used to thinking in a capital-allocation frame of mind, and sometimes, when it comes to technology development, that’s not the right framework. Because you have these tiny tech teams who end up developing a platform, or a product that grows to tens or hundreds of millions of users.
Two things. I still think the world is in a head-count state of mind. You notice this when managers discuss the size of their organizations, that that’s the unit of relevance. When you’re dealing with new technology that could have a very large impact on a company, it’s very dangerous to think about it in terms of head count. The second thing maybe is the metrics you choose for early-stage technology. Revenue will seldom be the right metric. We use market share. Obviously, we later want to optimize that net revenue into earnings and things like that.
David Gurle: Technologies have a cycle, and it’s going to keep changing and challenging your assumptions all the time.
Most of the time it is the early adopters that make the strategic bet and eventually make the big benefit. The late adopters, or the ones who come in midterm, they miss the train. Because adoption of new technology is just not money you’re going to spend. It’s also a change in your corporate culture, in processes.
Dennis Berman: What should businesses think about in terms of the pace and ease of payment?
John Collison: The important thing to realize about online and mobile commerce is that it’s still relatively tiny. Between 2% to 5% of global commerce happens online. In the U.S., on a consumer basis, it’s around 5%. That’s online and mobile, so it’s still just a very small total. And you can kind of see why—in that it’s such a pain to do anything online or on mobile. This is why we spend so much time on the developer experience.
We think Apple Pay In-App has been a huge deal. [In-App Purchase allows purchases within apps simply and securely.] You go from this multipage, lots of data entry experience to just pressing your thumb on the fingerprint sensor. Apple announced its bringing that to the web and to Safari. That’s going to be a huge deal. When you get a platform and a technology that enables a new kind of commerce or payment experience, you get these entire industrial shifts. I think there will be something similar with Apple Pay, where there are a new breed of companies and businesses possible that were not possible before.
Dennis Berman: Can you think of a cool example?
John Collison: Sure. You can’t buy an individual newspaper issue online right now; they only sell subscriptions across all the major papers. I think that is because it’s been so cumbersome to go through the payment flow, that once you pull someone through it you might as well sell them a subscription. So we might see different forms of content, it being possible to sell them as a result.