Universal Commerce: A Conversation with First Data’s Lead for Global Product Management and Innovation, Mark Herrington
Most recently we had the opportunity to speak with Mark Herrington, executive vice president of Global Product Management and Innovation, about First Data’s Universal Commerce strategy. In this Q&A format, we cover topics such as the outlook for First Data in the coming months, trends in the payments market, and an in depth analysis about First Data’s Universal Commerce.
Mark Herrington joined First Data’s Executive Committee in May 2011 as executive vice president of Global Product Management and Innovation and is responsible for helping to establish a suite of world-class products and solutions that First Data can distribute globally.
Previously, Mr. Herrington served as general manager of First Data Corporation’s Retail Solutions division and came to First Data from Money Network, now a First Data company, which he co-founded in 2001. Mr. Herrington brings more than 18 years of successful experience in high-growth, technology-focused environments.
1. What has First Data been focused on from a product perspective over the last few months?
There has been a tremendous evolution of the product organization at First Data over the last five to six years. Coming out of the KKR acquisition brought an entirely new focus on growth strategies. We needed to focus on organic growth as opposed to acquisitions – this led to a critical need for a world-class product development organization.
We have put an organization in place that did not exist before. Previously, you had the sales channels, you had operations and technology, and product, and they were each strung together in a very disconnected fashion. It’s been a journey to put together, piece by piece, and honestly, not until October of last year did we finalize that journey, where we now have a truly effective and fully developed and efficient product organization that is aligned throughout our entire enterprise, including our international businesses. The product organization now reports to the CEO and sits as the hub in-between the channels and the operation and technology groups to rationalize how we identify opportunities and deploy our resources from a capital and operational perspective.
We are now very externally focused. As we look in the marketplace, among other areas, we’ve been engaged particularly in the mobile area. We’ve been investing in that area for several years. We have a lot going on and are now starting to get real traction. An example of this would be if you look at the things we’ve done with our Trusted Services Manager (“TSM”) product, which is obviously the platform to support Google Wallet, and then the continued traction we are getting around the globe with that capability and that solution.
2. What do you see as the major trends and themes in the payments market?
We expect to see more change in the next three to five years than we have seen in the last 30 or 40 years quite frankly. We have research that gives us confidence that the trends we are seeing are real in the market such as Google Wallet, as just one example. You see investment going into the space and you know the attention it is getting from everybody in the marketplace. It really does feel like we are on solid ground to see more and faster change than we’ve ever experienced in this space.
We sat down as a team last August and said, “Look, these things all really converge and it really does create this new payments environment, one that is evolving quite rapidly.” And that’s where our Universal Commerce framework originated. What we are talking about is enabling any type of payment anywhere, with any type of form factor, and that is, at its core and heart, Universal Commerce. It also includes a lot more than just payments in the future. It’s a much more two-way communication or two-way interaction at the point-of-sale where you are tendering an offer that is attached to the payment, or a coupon or a loyalty reward, or some other service. Our hope and aspiration is that it gives the market a rational framework to discuss this with all constituents.
We believe that Universal Commerce is emerging because consumers are leveraging technology in ways that change how commerce works. When you talk about Universal Commerce, we believe there are five factors essential to delivering a robust Universal Commerce ecosystem.
However, it is still a work in progress. These five enablers include smart devices like smartphones, integrated applications, an enabling infrastructure, actionable intelligence, and a partner ecosystem.
In Universal Commerce, the actual point of sale, whether it be physical or virtual, becomes something that is much more intelligent, much more critical in this evolution than it’s been in the past. To-date, it’s been pretty much a dumb box. So what the trends indicate are the landscape and the point of sale have to be open, it has to be scalable, it has to be secure, and it has to be tied into an infrastructure that can manage a lot of complexity in a cloud-based environment as it relates to new, additional, incremental services that get layered in, wherever those may come from. Whether it’s a merchant that wants to publish their own deal or whether it’s a manufacturer with coupons, the key word again and again is “open.” If you look at any technology evolution over the course of the last couple of decades, with the exception of Apple, everything else has become based on an open standard. It evolved based on an open standard of some type and that’s the role that First Data is in a position to play. Most of the players in this ecosystem, just based on the nature of their business and how they make money, are going to go at this from a very different perspective than someone like First Data who sits at the middle of the action. First Data is agnostic to all those different influences and that is very important.
The landscape will give the ability to allow merchants to make an investment in the near term that they feel confident is going to give them the ability to not have to come back and make multiple iterations and changes as all the new products and services evolve very rapidly, but also be very prepared and be ready for whatever happens with EMV, whatever happens with mobile, and whomever ends up being the most influential in the deals space, among a few examples. These various providers need a platform that gives that insurance, flexibility, and security. There will need to be investments, so the question is, “how do you make the best and safest investments?”
You also get into the conversations that talk about information and analytics that have to be very rich and be able to have the relevance of the types of transactions that occur and the types of offers that are made.
3. What is one of the single most important aspects for the industry to deal with right now in this new era of Universal Commerce?
Security is the area that is very important in people’s minds now. This becomes especially critical to the mobile environment if something bad happens and that’s when it’s too late. That would jar confidence and so one of the investments we’ve made over the course of the last few years is TransArmor, a tokenization and encryption solution that is industry best-in-class. Because of that solution, in conjunction with a number of other things we are doing, we feel very confident of our ability to provide a secure environment for those transactions that take place in the physical as well as on-line environment.
4. Do you think there is going to be a change in the type of players that participate in the payment landscape?
I think it’s somewhat of the Wild, Wild, West right now, quite honestly. I can tell you that if you look around and see the people who are making the investments, it’s pretty obvious that there are a lot of non-traditional participants that are impacting and influencing the space. Any of those players, based on the position they’re gaining and the mindshare they’re gaining with the consumer, could be impactful. The other component is consumers are going to be much more relevant in the final state of this. Because we’ve all become so wedded to the functional capability and convenience of our phones, you start layering the ability to pay and redeem coupons and loyalty transactions from a phone and there are certain merchants that will start allowing this capability. We aren’t completely original in our thought on this, but I do think we are well positioned as an enterprise to provide exceptional and complete services throughout the payments value chain.
5. Where do Financial Institutions fit into your view of First Data’s role in Universal Commerce?
First Data’s core business over the years is managing hundreds of millions of cards on file in the physical world and processing billions of transactions. The same thing happens in the virtual world – just more complicated, more sophisticated, and with more security risks. TSM clearly allows the financial institutions the opportunity to be a trusted brand in that ecosystem of First Data’s uCommerce solutions because there does have to be, at the end of the day in most cases, the financial institution involved. There is a great opportunity for financial institutions to participate because they want to get their accounts into a wallet and they need the ability from a provider to give them that ability in a fairly straight forward, frictionless, and safe manner. The financial institutions can be very relevant in the daily deal and offer space. They have the customers, they have the transaction information, they have the interaction, and in many cases they also have the merchant relationships.
This is in evolutionary phase of the market and the final state that we end up with may look very different than what you or I might sit here and think it might look like today. The trick is going to be are we right about the very foundational and fundamental pieces of this and that’s where we are spending a lot of our time and believe we have it right.
6. What worries you the most in terms of industry adoption and participation?
I think at the end of the day there is a lot of confusion. I would say right now that is the biggest risk in the market and is what could be easy for our strategy to be misinterpreted by partners and competitors alike. But clearly, we are looking at a future Universal Commerce world in which we play effectively the same role we play today, which is a provider of safe, secure transactions, settlement, and reconciliation of all the transactions to all the participants.
What are unknown include friction points, the adoption rates, and the opportunities across this commercial landscape. There will be a lack of some ubiquity in terms of how we talk about it and what the technology is. As you can imagine, as you’re launching into a new kind of era, you are going to have all types of market participants. They are all going to have their own flavors of what Universal Commerce is, which causes a lot of confusion and people that are confused generally don’t take action. So that’s really why we felt like we were in a good position as a company because of the role that we play in this ecosystem – delivering First Data’s uCommerce solutions.
7. What is First Data’s advantage in this new era of Universal Commerce?
The fact is we are completely agnostic and neutral relative to payment type or form factor. We feel we are in a position to be a trusted advisor with an open platform. The words we use are “open,” “agnostic to payment types,” “open architecture and technology,” and with “ubiquity at the point of sale” or online no matter what the form factor, the payment type, or what the merchant. It must be a ubiquitous transaction that happens both for you and I as consumers.
The key point we’re trying to drive here is we’re not a threat, in any way, shape or form, to any of the traditional players. We aren’t trying to become a financial institution nor are we trying to drive more transactions to any brand versus the other. We’re simply trying to provide openness, the security, and then most importantly for all of us to see, it’s in everyone’s best interest that this take place. It is very important that the actual interaction of a consumer with a merchant, again whether it be online or offline, become a more rich experience and a more valuable experience. It’s in everybody’s best interest when the consumer spends more, the merchant has potentially better stickiness and loyalty from the consumer. The consumer is happier based on the experience. There’s an opportunity here where everybody wins in the end.
For more information, please contact Scott Calliham, Principal specializing in Merchant Acquiring, firstname.lastname@example.org
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