David Letterman, Discover, Innovation and Fleet Payments
I was excited to see an announcement this week from Discover and Car IQ.
Fleet payments is a fascinating market and represents over $30+ billion in annual TPV in the US alone. I was lucky enough to be a key part of this innovation journey. To be clear, everything I write here is in the public domain, no big behind the scenes expose, but lots of good lessons for innovators in banking.
I really appreciate this quote from the Discover innovation leader of this effort, Tyson Goings of Discover on LinkedIn:
“Also a very special shout out to Dion Lisle the innovation sherpa from FACERE25 who has been integral to project success.”
If I wasn’t already so happy being the “Rosetta Stone between Legacy Banks and Fintech Startups” I would totally steal “Innovation Sherpa” from Tyson’s LinkedIn update.
So what was announced:
LEGACY TO FINTECH INNOVATION
“Discover, a leading digital bank and payments company, and Car IQ, a California based financial technology startup, have partnered to create an innovative payment platform for machine-initiated payments beginning with automotive fleets.” Discover Press Release August 25, 2020
Finding a near ideal fit for this project in a SF/Oakland based startup called Car IQ was a key first step. I met Car IQ through my friend Mark McCabe, who tragically passed away during the project from a long term health issue. He is missed but not forgotten.
I got to know the CEO of Car IQ, Sterling Pratz before the project began as we are both in the Bay Area. Then Sterling, Tyson Goings of Discover and I had dinner at 5A5 Steakhouse in San Francisco and it was obvious that this could be a great partnership.
Sterling is a former Race Car driver, which it turns out is a great intro for a payments platform for cars.
BONUS: Sterling as a well connected former race car driver got us special pre-race access at Laguna Seca for a race and a close up view of David Letterman of Rahal/Letterman Racing.
Yes that is David Letterman (who was very gracious to everyone).
It was an amazing event and was a real team builder for the project.
INNOVATION CONNECTING TO A BUSINESS UNIT
“Fleet vehicles that are connected to the Car IQ platform will be able to transact autonomously to pay for services through the infrastructure of the Discover Global Network.” Discover Press Release August 25, 2020
Discover Global Network for those of you that don’t know is a key part of the Discover Financial Services business, a real gem in their FS crown and processes over $400 billion annually.
Another well kept secret is that Discover has a Commercial Payments group run by Bill Dulin, quoted in the press release. Great team of folks that work with corporates to drive payment volume to the Discover Global Network. It is hard to over-emphasize how important the business unit team of BD, product and architecture was to the success of this project.
When you work in Innovation it is easy to forget that legacy banks got there with folks that built the business before your clever innovation came along. I highly recommend we don’t forget.
CLOSE IN OPPORTUNITY
“This integrated commercial payment solution looks to capture a share of what Fleet Management Market report indicates to be a $34Bn fleet industry by 2025.” Discover Press Release August 25, 2020
If you are like me and spend your days and nights focused on innovation you know the two hardest things in bank innovation are:
- Showing the close in opportunity to justify investing in the future
- Staying the course during a long innovation journey
I was so excited when upon research into the Fleet market that it turned out to be a $30+ Billion TPV market in the US alone. This covers service, fuel and tires. I remember too many times hearing from bankers that the market for X is too small, it doesn’t move the needle. (my least favorite big bank expression)
LONG TERM VISION
“We believe the future is machine banking where cars and IoT systems are able to connect and pay for services directly with banks and payment networks,” said Sterling Pratz, Car IQ founder and CEO.
The final piece of the puzzle is that this project had a worthwhile long term destination. Machines autonomously paying for services when that vehicle has no driver or a driver that doesn’t own the vehicle. City of the future has been expedited by the current pandemic and we can expect this to reach us faster than we expected.
PROCESS
Having been in the innovation game for longer than I care to admit.
As a reference point, I worked on Compaq’s first low cost PC. One thing I know is that you need a process.
Luckily my partners at Discover were aligned with my own PAID process.
To be clear the Discover Innovation team is small but I can attest to the fact that they GET IT! Recognition that Innovation is messy and hard helped many times during the project.
We followed the PAID process by starting with a Market Scan, followed by a POC and then a Pilot. This worked perfectly but a key to point out is that Discover forced some key POC KPIs and milestones to ensure the technology met the stated business goals. This is a point that Tyson Goings emphasized as did his excellent business partners and it was invaluable to ensure success.
SUMMARY
Not every innovation project goes as well as this one. Yes there were speed bumps along the way but working with a great team inside Discover and a Fintech committed to the journey along with others led to arguably one of the best bank innovation projects of my career. I should note, that like any large bank there were reorganizations during the time of this project and then a Pandemic hit.
I would say these are the Success Factors to look for in the future
- LEGACY TO FINTECH INNOVATION
- INNOVATION CONNECTING TO A BUSINESS UNIT
- CLOSE IN OPPORTUNITY
- LONG TERM VISION
- PROCESS
My next innovation project whatever it may be, will need to have these 5 success factors.
