What do you think is the most interesting finding in the 2024 Payments Innovation Jury Report, and why?
When the Jury gave their views on why valuations went sky-high, they said that the main cause was investors being too keen to get the deal in a frothy market and then overpaying. What I found really interesting was that the investors on the Jury saw it the same way! This was unexpected but in my opinion a positive development, as investors will be wary of making the same mistakes again.
However, the other side of the coin is that we don’t want that to go too far. Undervaluing start-ups with good business models can be just as damaging as a lack of capital to invest in research and development can stifle innovation – something else called out by this year’s Jury.
Which of the report findings were you most surprised by?
I was most surprised that the Jury see banks being long-term players in the mobile wallet space. Most of the buzz mobile wallet buzz is around new market entrants (mainly MNOs in developing markets and fintechs everywhere) but the Jury thinks that the banks are not finished yet and that they are best placed for success once the market for wallets becomes more regulated, as they have so much experience managing compliance at scale.
Do you personally disagree with any of the Jury’s findings?
We made our first Jury report back in 2008 and I have learned to appreciate the combined wisdom of so many global industry leaders. There are absolutely occasions where on first glance I am shocked by their perspective, or even disagree, but once we delve into their reasoning in more detail I always find myself agreeing. This is one of the benefits of offering free text responses asking Jurors to explain their answers – it provides the deeper context and allows them to share their expertise.
This view is shared by our readers – one of the most common pieces of feedback I receive on the regularly published reports is “That is exactly what I think but I have never managed to express it in such clear terms.”
The Jury was split on whether the focus on profitability over hyper growth was a short term trend or long term market movement. What do you think?
Personally, I think that profitability will remain much more important than hyper growth. Over the past few years, investors and the broader market have tended to believe that high growth automatically leads to profitability. I don’t think that is always right. Business leaders should always be seeking to generate a return for shareholders in the not-too-distant future.
Which of the Jury’s findings gave you most cause for optimism?
Perhaps the most encouraging finding was that although new market entrants undoubtedly do introduce more risk into the payment system, regulators have responded by suggesting that Central Banks require more operational controls, rather than upping the capital requirements – which in reality simply locks new players out. The Jury is saying that the new players are here to stay and should be here to stay, but that they have to be operationally sound.
The investor Jury members were also strongly in favour of this approach, which makes sense – being operationally sound means that the companies are less at risk of failing and therefore more likely to generate returns on VCs’ investments.
