Useful innovation consistently delivered – a financial services company can’t ask for much more than that in the payments arena. And that is what Dominic Venturo has delivered at Minneapolis-based U.S. Bancorp, despite the recent national economic downturn.
Since Venturo was appointed to his current position as chief innovation officer for the Retail Payments Solutions (RPS) division in January 2007, U.S. Bancorp has launched a number of pilot projects that advance the frontiers of mobile and contactless payments and money transfer. These include an instant-issue contactless debit card and a magnetic stripe/contactless multiple account card. Venturo will appear at the BAI Payments Connect Conference & Expo on March 2 in Kissimmee, Fla., to describe how he took these projects from concept to pilot stage.
Venturo’s group has won acclaim in the industry by generating innovations on a consistent, rather than one-off basis. As he explains in the following interview, it all starts with a dedicated team that has access to other resources at the bank and enjoys clear support from the top. After that, it’s a matter of rigorously analyzing and filtering the various ideas and putting them through a process of test and re-test with customer groups before delivering the resulting products to the business units.
“One of the decisions that we made early on is that the voice-of-the-customer and customer research needed to inform our ideas and our business concepts, rather than trying to rely on a team of experts within the company to “invent” the products of the future in a vacuum,” Venturo says.
Q: How intimidating is it for you to live up to a title like “chief innovation officer?
Venturo: It cuts both ways, right? I think it’s important, relative to the role and setting a stake in the ground, to say we’re serious about innovation and very committed to it. But you’re right, in that the title also can conjure up the thought that you must be the smartest person in the room when, in reality, you’re probably asking more questions than anybody else.
Q: U.S. Bancorp is known for its “invest and innovate” payments strategy. Do you find it more difficult to carry out that strategy in today’s recessionary economy, when banks are more focused on risk-avoidance?
Venturo: We have to make difficult trade-offs ever day, whether the economy is good or bad. You always would like to be able to do more with limited resources. So, at the end of the day, you have to be true to your strategy and advance your business forward. If you stop innovating and moving forward, you will lose ground against those who do. We’re absolutely not stopping.
It also helps that our company has fared reasonably well in the financial crisis. We’ve been very good stewards of our capital and our business; we continue doing that as we allocate funds into pilot projects and innovation.
Q: Do you find yourself in meetings where you really have to push to get funding for new projects?
Venturo: Oh, absolutely. We have to be very careful about everything that we do. But quite honestly, innovation doesn’t have to be expensive. We’re not doing research and development (R&D) that takes years and years; we’re not putting chips on wafers. We’re working largely with technology partners who are able to develop new products and services. That’s very different from pure R&D.
That doesn’t mean we’re not making an investment. You still have to justify that funding and discuss all the other kinds of trade-offs that you have to make when you’re running a business.
Q: But if you’re doing a pilot with, say, Smart Phones, you have some assurance that the basic technology is going to work; you just need to determine whether it meets the needs of customers for a certain application, correct?
Venturo: That’s exactly right. For example, look at our Visa Sticker contactless pilot. The idea was to enable people to stick a remote contactless payments device on their own phone, or another appliance, to be able to conduct transactions. We wanted to learn if this was a form factor that customers valued. We were looking for a lot of data to help inform our decision as to whether to go forward.
If we had not done that pilot to get all that feedback, I might have spent a whole lot more money developing a commercialized version of the device, launched it and then ended up with a product didn’t sell well, or needed to be changed. When you look over the whole time horizon, iterative pilots and feedback can actually make your product development cost less.
Q: In recent years, U.S. Bancorp has developed payments innovation on a consistent, rather than one-off, basis. How did you develop that capability?
Venturo: Our group was formed almost three years ago with a focus on emerging markets and technology – things that are not commercial today but could be the products of the future. One of the decisions that we made early on is that the voice-of-the-customer and customer research needed to inform our ideas and our business concepts, rather than trying to rely on a team of experts within the company to “invent” the products of the future in a vacuum.
We wanted to understand what’s going on in the customer’s mind. What do they like or not like about the products that they use today? What are their pain points, areas of concern? If they were to say something like, “I wish I could …,” how would they complete that statement as it relates to either banking or payments?
So we recruited a panel of advisors, consumers, and asked them to work with us over the course of a year. It’s not unlike what we do in our banking operation in the different markets, where we have market committees. We show these consumers product concepts and begin to get feedback so we can refine the products before they even get to the pilot stage.
We started our first panel two years ago. We’re into our second panel now and just created and launched our first small business panel, which represents owners or general managers of small businesses. These panels represent one of the many ways that we get voice-of-the-customer feedback.
Q: And then, from there, you go to the pilot?
Venturo: No, not necessarily. We also do field research with consumers and small businesses, where we spend time with small groups of people to see how they work with products and how those products could be improved. And we do other kinds of traditional focus groups and quantitative research. All of these techniques, collectively, constitute our voice-of-the customer research.
Then, we look at what’s happening with payments not only in the U.S. but around the globe – such as transit systems in Asia, for example. You take in all of those inputs and begin to ask, how do I fulfill customer needs in a different way?
It’s a lot to keep track of and we’re by no means keeping track of everything that happens everywhere. But we do see a couple of trends emerging. One is a pretty heavy convergence toward mobile technology, which isn’t an earth-shattering observation by any stretch of the imagination. But it’s clear people expect to do more things on their mobile devices than they have ever done in the past in an always-on, always-connected, always-able-to-get-information, near-real-time kind of way. That begins to help you define the products of the future.
Q: What are the major lessons that you have learned in your various pilots about making payments with mobile phones? When will it reach mass-market adoption?
Venturo: A number of factors in the U.S. currently inhibit payments from evolving on a mobile device. For example, there are some fairly significant technology challenges, such as the need for standardized platforms among carriers, or a universal way for the carriers and banks to interact. Also, the technology around mobile isn’t what I’d call “high nines reliable,” meaning reliable 99.9% or more of the time. Even though the mobile device doesn’t necessarily need to be working within cell tower range for a payment to occur, transmitting alerts, accessing account information and personalizing the device for payments all require stable communications.
Another aspect of the challenge is merchant acceptance. Even if we solve all the problems with mobile technology and the carriers, we still need merchants able to accept the payments.
But remember, our charge is longer term. We can look ahead to, say, three to five years before mobile payments is commercially available. The technology has advanced immensely in the last couple of years so it’s not unreasonable to believe that some of those problems will be solved in the near term. To put it another way, we’ve seen the technology advance pretty dramatically and have reason to believe that it has potential.
Q: Going back to your innovation process, what kind of organizational support do you have within the bank for gathering and analyzing all this information?
Venturo: I have a team of full-time folks and then I have a part-time “virtual team.” For example, our research organization does other kinds of research for other parts of the payments business in the bank, but they also provide a support function for our voice-of-the-customer work. While they’re not on my team per se, they do that work at our direction.
Then we have product innovation people whose dedicated job is to work with all of what I described, to work with partners, to develop and refine the pilot concepts and then actually run the pilots. There are also some dedicated marketing people.
Q: Can you give us any idea of how many people you’re talking about?
Venturo: Within my full-time team, we have five people, plus myself as the leader, who are focused almost entirely on innovation activities. Then we have two people within the research organization that I would say are mostly dedicated to help us do that work. We interact regularly with a whole host of folks, probably another twenty. But if you were to ask how many are totally dedicated to payments innovation in our business, it would be the eight.
Q: How do you coordinate the work of these individuals and then push the concepts through to the pilot stage?
Venturo: We’re a pretty close-knit team, so the coordination is not rigid in an organizational sense. When we’re developing the ideas, we meet with partners, vendors and other people all of the time. When we decide to move an idea forward, our group makes a recommendation to our executive group in the RPS division. We tell them, this is the idea, this is what we hope to learn or accomplish, this is what’s involved and here are the pros and cons. We then get a collective decision across our business unit, which happens at the level above me and with my peers.
Q: So the decision to go from concept to pilot occurs at the level above you?
Venturo: It depends on the project; it also depends on the level of investment. It’s mostly the investment decision that would get pulled out and decided somewhere else while we rely on our executive team in RPS to make the business decisions.
Q: I assume you have a pipeline of ideas that are in varying stages …
Venturo: Yes, we have a pipeline. I won’t describe too much of it. But I can tell you in a general sense that, first of all, we have active pilots. Then, we have things that are coming up within probably the next twelve months. Those latter projects are far enough advanced that we’re either already working on them or we know when we’re planning to work on them. Finally, we have more long-term ideas that may or may not go anywhere. We’re always refining those more futuristic ideas that may someday move to pilot stage.
If we run a pilot, and we believe it has potential, then we can move that to commercialization. That means either move it to a new business area, if the product is entirely new, or to one of our existing product areas if it fits better there.
We’ve got a lot of things in various stages of development at any one point in time. Of course, when we first started, in January 2007, the list was pretty small. Now, it’s frankly pretty long.
Q: How do you personally work to make sure that you have support from the highest levels of the company for your innovation activities?
Venturo: Within the payments organization, Pamela A. Joseph, who is the vice chairman of payment services, participated in the original creation of this group and remains a very strong supporter of the work that we do. We keep her apprised of our activities, as you would expect. We also spend a lot of time updating the company overall on what we’re doing through a variety of different channels so that folks understand what we hope to accomplish across the different business lines and channels. We do a lot of presentations to the different business organizations around the company and, especially, to the research, technology operations and compliance groups that we rely on to get the work done.
Mr. Cline is managing editor of BAI Banking Strategies. Mr. Swift is a director, content development, at BAI.
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