Creating a Framework for Payments Innovation

Creating a Framework for Payments InnovationDominic VenturoChief Innovation OfficerRetail Payment Solutions

Dominic VenturoChief Innovation OfficerRetail Payment Solutions

October 20, 2009October 20, 2009

2© 2009 U.S. Bank

3© 2009 U.S. Bank

U.S. Bancorp Overview

*As of September 11, 2009

2Q09 DimensionsAsset Size $266 billionDeposits $164 billionLoans $182 billionCustomers 15.8 millionMarket Capitalization* $ 42 billionFounded 1863Bank Branches 2,850ATMs 5,173

4© 2009 U.S. Bank

Diversified Financial Services Provider

2Q09 YTDExcluding securities gains (losses) net

5© 2009 U.S. Bank

Innovation is a Top Priority

USB 2008 Annual Report

6© 2009 U.S. Bank

Innovation Framework

7© 2009 U.S. Bank

Read…

…a lot

8© 2009 U.S. Bank

How to Innovate?

Source: Harvard Business Review, June 2007; USB Calling Efforts

SPREADDEVELOPMENTSELECTIONEXTERNALCROSS-POLLINATION

IN-HOUSE

Percentage of penetration in desired markets, channels, customer groups; number of months to full diffusion

Percentage of funded ideas that lead to revenues; number of months to breakeven

Percentage of the ideas generated that end up being selected and funded

Number of high-quality ideas generated from outside the firm

Number of high-quality ideas generated across the Division

Number of high-quality ideas generated within a unit

KEY SUCCESS INDICATORS

Are we good at diffusing developed ideas across the company?

Are we good at turning ideas into viable products, businesses, and best practices?

Are we good at screening and funding new ideas?

Do we source enough good ideas from outside the Bank?

Do we create good ideas by working across our Division?

Do people in our unit create good ideas on their own?

KEY QUESTIONS

Dissemination across the organization

Movement from idea to first result

Screening & initial funding

Collaboration with outside parties

Collaboration across units

Creation within a Unit

SPREADDEVELOPMENTSELECTIONEXTERNALCROSS-POLLINATION

IN-HOUSE

Percentage of penetration in desired markets, channels, customer groups; number of months to full diffusion

Percentage of funded ideas that lead to revenues; number of months to breakeven

Percentage of the ideas generated that end up being selected and funded

Number of high-quality ideas generated from outside the firm

Number of high-quality ideas generated across the Division

Number of high-quality ideas generated within a unit

KEY SUCCESS INDICATORS

Are we good at diffusing developed ideas across the company?

Are we good at turning ideas into viable products, businesses, and best practices?

Are we good at screening and funding new ideas?

Do we source enough good ideas from outside the Bank?

Do we create good ideas by working across our Division?

Do people in our unit create good ideas on their own?

KEY QUESTIONS

Dissemination across the organization

Movement from idea to first result

Screening & initial funding

Collaboration with outside parties

Collaboration across units

Creation within a Unit

Idea Generation Conversion DiffusionIdea Generation Conversion Diffusion

9© 2009 U.S. Bank

Possible Approaches

Highest execution risk and highly dependent on IP rights

Working within a more complex ecosystem and risk of execution with partners

Higher risk and expense of development and commercialization

Cons ExampleProsBrief ExplanationModel

Avoids the costs and effort required to bring the product to market, better leveraging scarce resources

More flexibility than integration

Usually requires lower investment than does integration

Control of entire process and higher percentage of the rewards

A “Licensor” is the primary owner of the idea of the new product or service, but does not own its development or marketing.

Like “renting” a business system to its licensee(s)

The “Orchestrator” controls all aspects of innovation, but do not execute all of them.

Companies orchestrate when they lack the capabilities required to create a new product or don’t wish to “acquire” the capabilities themselves.

The “Integrator” owns and manages the entire innovation process.

Most familiar model and historically, the dominant one.

Dolby Laboratories

BASFLicensing

Apple iPhone

Microsoft Tablet PCOrchestration

Apple iPodIntegration

Highest execution risk and highly dependent on IP rights

Working within a more complex ecosystem and risk of execution with partners

Higher risk and expense of development and commercialization

Cons ExampleProsBrief ExplanationModel

Avoids the costs and effort required to bring the product to market, better leveraging scarce resources

More flexibility than integration

Usually requires lower investment than does integration

Control of entire process and higher percentage of the rewards

A “Licensor” is the primary owner of the idea of the new product or service, but does not own its development or marketing.

Like “renting” a business system to its licensee(s)

The “Orchestrator” controls all aspects of innovation, but do not execute all of them.

Companies orchestrate when they lack the capabilities required to create a new product or don’t wish to “acquire” the capabilities themselves.

The “Integrator” owns and manages the entire innovation process.

Most familiar model and historically, the dominant one.

Dolby Laboratories

BASFLicensing

Apple iPhone

Microsoft Tablet PCOrchestration

Apple iPodIntegration

Source: PayBack, Reaping the Rewards of Innovation, Andrew & Sirkin, BCG, 2006

10© 2009 U.S. Bank

Framework Decisions to ConsiderOpen / ClosedParticipative / PrivateSuggestive / Directed Mad Scientist or TeamsCentralized Support or DistributedCommon Framework or Entrepreneurial Evaluation Methods

11© 2009 U.S. Bank

Our [current] ApproachDedicated team for emerging technologies and marketsDevelop, Pilot, and Refine within Product Innovation and with business partners where appropriateTransfer/Transition to core product groups once proven

12© 2009 U.S. Bank

Retail Payment Solutions Product InnovationMission:

To discover, test, and assist in commercialization of new payment solutions to seed new Horizon Two and Three revenue streams and to incubate and grow emerging businesses

13© 2009 U.S. Bank

TrendsDesktop

Mobile

Netbook

Web-connected AppliancesSpecial purpose devices

Bandwidth increasing

On demand Social networkingConsolidation of devices

More multimedia

Savings rateLess email (Net Gen)

microblogging

Smart(er)Phones

DVR

Slingbox

Chumby

Cloud computing

3D TV

iAnything

Surface

2D Barcodes

Augmented Reality

Virtual Reality (Natal) Wii, Xbox, Playstation

Nike+

Cisco Telepresence GoogleVoice

Chrome Bing

Satellite TV/Radio

Ford Sync

OnStar®

Tesla & Volt

GPS

Kiosks

NFC & Contactlessform factors

eBook Readers

3G & soon 4G devices

Multi-touch

Siftables

Holograms

WiTricity

Nanotechnology

Biometrics

Laptop

textbell

14© 2009 U.S. Bank

Payment Types

15© 2009 U.S. Bank

Value Exchange

All other trademarks and copyrights are the property of their respective owners

16© 2009 U.S. Bank

Enabling Technologies

© Smithesmith | Dreamstime.com

17© 2009 U.S. Bank

Information

18© 2009 U.S. Bank

Customer Needs / VOC

19© 2009 U.S. Bank

20© 2009 U.S. Bank

21© 2009 U.S. Bank

Concept Development and Testing

22© 2009 U.S. Bank

23© 2009 U.S. Bank

24© 2009 U.S. Bank

25© 2009 U.S. Bank

26© 2009 U.S. Bank

27© 2009 U.S. Bank

28© 2009 U.S. Bank

New Features Add FunctionalitySMS Text / E-mail account alertsSecondary card Bill PaymentMultiple Form FactorsFunds TransferInstant Issuance

29© 2009 U.S. Bank

A single Visa card for identification, purchases and secure facility access• Traditional magnetic

stripe• Visa payWave®

enabled• HID iCLASS enabled

Multi-Application Contactless Payments and Access Control

30© 2009 U.S. Bank

In the NewsIn the News

All other trademarks and copyrights are the property of their respective owners

31© 2009 U.S. Bank

Part 2

32© 2009 U.S. Bank

Getting Everyone in the GameCommunicateTrain staff across other parts of business on innovation and provide centralized process, tools, and supportEncourage innovation through directed challenges and team assignmentsHelp remove barriers to innovationRecognize and reward innovation – even, or especially, failures

33© 2009 U.S. Bank

MythsInnovation is bleeding edge or high riskInnovation is expensiveInnovation requires high technologyInnovation leads to “home runs”

34© 2009 U.S. Bank

ConsiderationsHow will innovation support your strategy?Will your corporate culture be supportive?Are you prepared to invest in “learning”?What do you hope to accomplish by when?• Is this realistic?

Who can you work with or learn from?How will you measure results?How will you communicate success, failures, and learning so there is broad value?

Creating a Framework for Payments Innovation

Creating a Framework for Payments InnovationDominic VenturoChief Innovation OfficerRetail Payment Solutions

Dominic VenturoChief Innovation OfficerRetail Payment Solutions

October 20, 2009October 20, 2009