November 4, 2009
PayPal dances with developers to drive innovation
Back in July , following a discussion with Jeff Carter (who is back in Australia for this month’s Innovative Marketing conference), I asked : What if a bank were to open up development of applications to others in the same way Facebook does?
The discussion Jeff and I were having revolved around the future-proof bank, and what banks will need to do to ensure their offering doesn’t become commoditised.
Not long after, PayPal, a business that has done a great job taking market share from banks around the world, announced it was planning to open up its platform to third party developers.
Launched officially this week at PayPal’s first developer conference in San Francisco, the Adaptive Payments API allows developers to build applications that enable payments from PayPal account holders to anyone with a web presence, be it a mainstream retailer or someone with a widget running on their Facebook page to collect donations.
At the launch, PayPal president Scott Thompson made an important acknowledgement: “The whole world is going digital, and the future of how we communicate, how we get information, and even how we transact, is in the hands of developers”.
Mint.com founder Aaron Patzer, who I spoke to following the sale of his business to Intuit, says, banks will always face a challenge getting the best talent to help build the best platform. “No developer, programmer or user interface designer out of school or, say, Apple, is going to go work for Citi or Chase. They want to work for Google, Mint or Apple.”
But what if you could tap the collective wisdom of freelance developers that wish to remain independent? PayPal is banking on this strategy, today announcing plans for an inaugural Australian developer program, kicking off in January 2010.
PayPal says the competition will challenge the Australian developer community to create the most innovative payment application using Adaptive Payments. It says the winner will receive a “substantial cash prize” to help them commercialise their application.
The move comes at a time when innovation in Australian payments is arguably at an all time low. So much so that the Reserve Bank is threatening the industry with regulation in order to get some movement.
PayPal may not be able to provide the answer to system innovation, but the concept of harnessing talent outside the organisation deserves more attention from the banking industry.
What do you think? Are we moving into a world where developers will hold more power? Is it realistic for banks to open up development of some applications to outside parties, and can their vendor partners play a role in doing this?
Written by: Charis
Filed Under: Innovation, Payments, The Better Banking Blog
Tags: banking innovation, Jeff Carter, payments competition, payments innovation, PayPal
Trackback URL: http://www.bankingreview.com.au/2009/11/paypal-dances-with-developers-to-drive-innovation.html/trackback
kelly
November 6, 2009 at 3:30 am
Charis,
I commend you for staying on top of the most innovative thoughts in the industry. I was excited to see your article on the concept of an open environment for banking.
This is exactly what our vision is! As you know we are the developers of an online banking application that we sell to financial institutions here in the US. While we are proud of what we have developed we realize that one size does not fit all and that we are likely not going to come up with all the great ideas to come in online banking.
For that reason we have developed our product as an "open" platform. To put this in perspective we allow our clients to access the source code, giving them (their developers) control to fully extend or customize the application.
With ~20% or our clients as source code partners, we envision a time when we have a good size group or outside developers creating add ons and modifications, contributing to the user community and leveraging other's developments.
We have already experienced this with things like FICO score widgets, customer rewards program tracking, and innovative target marketing tools.
I think much of the lack of innovation is the result of the vendor community that many of these institutions rely on. The banks are somewhat at the mercy of the vendors. At least thats the case here in the US. Requesting a creative feature addition is pointless. They sell one solution and that solution has to satisfy all of their clients. So making changes is not something they are inclined to do.
Well we, for one, are changing that model! Consumers want and expect more, and they will quickly move their money to whomever will give them what they want.
Its not about brick and mortar any more. Think about it, over 80% of all US citizens have a mobile phone now. Remote deposit is growing, online banking capabilities are advancing rapidly. The banking industry is going to go through a rapid change over the next 5 years.
The banks need to grasp this soon, or risk losing accounts to a whole new breed of online financial service companies.
Kelly Dowell
Jwaala, LLC
Better Online Banking
St3v3
November 10, 2009 at 6:46 pm
As a Australian Paypal Developer i welcome the opening up of the API's. Its a very smart move on Paypals part listening to the people that develop and build the tools that make them the money!