Technology and Innovation Management Payment Service Organization

Question: Describe about the Technology and Innovation Management for Payment Service Organization. Answer: Introduction Section 1: First Section MasterCard is one of the leading online payment services organizations in the world today. With the advent of globalization, the online payment processing services has become a key element of the innovations of the new technologies where the consumers use such services for online shopping, touch less transactions and in future to have biometric technology. The firm Master Charge framework was established by some banks of California in 1960s to contest with Visa (earlier known as Bank AmeriCard). The name Master Card was introduced in 1980 and now it is the second largest online payment service in USA after Visa. With the advent of globalization, it has become imperative for Master Card to keep pace with the new rivals existing in the market and thus such competition is both a challenge and an opportunity to the organization. Master Card conquered Euro pay International, one of the leading credit card network in Europe in the year 2002. The banks in Europe that was the holder of Euro pay now holds an ample stake in Master Card. The banks of Europe are habituated of saying a lot about the activities of Master Card in Europe and this loss in trust ultimately affected the IPO negotiations. Creativity refers to the process of innovating values by working differently, and it is generally meant to believe that it is a successful implementation of a new technique, which will be beneficial to generate value. It refers to revolutionary, radical transformation in the idea of a process or product. It can also be minimum alterations which lead to sustainable improvements rather than a huge change. The essential feature of what answers innovation in the industry of financial services is that these transformations need to rise the value for the clients and the manufacturer. The aim of innovation is to bring in a positive change and to improve the process. The meaning of the word value differs from person to person and thus defining it would be like different consumers and markets can seek out different need in something that is costing them the same amount as they find a different beneficial package rendered to them in specific situations. According to Davenport (2013), innovatio ns related to finance is something unique that decreases costs and risks and gives out an updated product or service that satisfies the demands of the participants better. This study will provide information about the logic based analysis of innovation in the payment process that has led to the efficiency in the consumer payment services in Australia and in other countries as well during the last few years. In this respect, it also examines the effect of suitable variables that impede such variables. With new and modern techniques in this industry, such techniques mainly concentrate on a sustainable improvement of the payment process and services, subsequently improving the user proposition of the customers. Adoption of new technologies in the perpetual payment services is an effect of evolution in the technological sector. The mobile phone use as a method of payment channel is also in use in Australia with patience waits for a couple of years after which they are predicted to be introduced in the prevailing market. The paper will thus discuss about the innovative techniques introduced by the Master Card and how the implementation of such mechanism will develop the economy and the standard of living of the citizens of the society. The reason behind choosing the organization Master Card in Australia is due to the fact that there have been significant changes in the Australian payment service over a period of time. The use of paper like cheques as a mode of payment have been replaced by electronic substitutes with paper based transactions limiting to only old and conservative customers. The process of direct debit and direct credit has been in use for the last twenty years but the path of use has changed over the years from the counters of a bank to internet. Internet has been an easier access to the customers and firms has compelled to have a growth in these type of payment process. In the 90s, Telstra (earlier known as Telecom Australia) brought in prepaid stored value cards and in the current scenario such cards are being used very economic sector even in the ATMS. Australia has seen drastic changes with the introduction of substitute electronic payment systems like BPAY, Pay Pal, Post Bill Pay etc in the las t ten years. At the expense of cheque, which have reduced in both value and quantity, electronic payment mechanism has increased to a substantial amount. EFTPOS and credit cards have seen the growth to the largest amount with respect to the number of transactions. The uniqueness in the future step of payment is the use of biometrics which is merging rapidly. Most of the major organizations are using fingerprints for a valid identification to make payments with respect to PIN and signature, which can be duplicated or stolen. For example, the application named Pay-by-Touch used in some supermarkets in US is the perfect example of the use of biometrics. There still has been improvements in the authentication method in the internet payment service and the customers are still worried about the fact that their personal information and payments are not safe yet. Section 2: Collaboration strategies One of the main concerns about every organization is to find answers to the difficult decisions with respect to the operations to be performed internally and externally and whether to operate individually or collaboratively with one or more partners. Collaboration also enables the companies to reach for more at an increased rate with low risk and cost associated to it. But still, there exists a few negatives in collaboration as the new firm can expose the organization to risks (Yoo, 2013). Collaboration sometimes result in giving up a certain degree of supervision on the development and few share predicted awards for the creativity but it can also reveal the industry to risk of misconduct by the partners. Master Card however though does not need any collaboration with any other companies as Master Card itself possesses its own resources and capabilities for the innovation and development of internal projects. The organization also might think of selecting a project of individual venture if it thinks that collaborating might put the technologies at a risk. Few organizations think of avoiding any collaboration as it thinks that the proprietary technologies may not be a secret anymore. If the organization works with another firm, the trade secrets of the organization may get exposed to its rivals. The organizations also seek to have exclusive hold on its own technologies during the development period. Every firm wishes not to disclose its detailed secretes about its product or service for the exchange of any patents and thus most of the enterprise wishes to keep its innovations as trade secrets. Trade secret thus refers to any information that remains solely to particular firm and remains unknown to the others. Any information is treated to be a trade secret only if it shows a distinctive edge to any company in the economic sense and remains valuable only till the time when the information remains private. Thus trade secrets include data about a companys customers, its goals and its business processes. Any data can be treated as a trade secret only if it meets the norms under the Uniform Trade Secret Act. The norms are as follows: The data should not be known or easily available through any legal means. The information should have importance regarding the economy and should remain secret. Reasonable measures must be taken by the holder to keep the information secret. If all the norms are met by any information, then according to the Uniform Trade Secret Act, owner can restrict any third party from taking benefits out of this data without prior permission. The act thus recommends that no one can duplicate or use to reap the benefits out of a trade secret only if they are bound by any confidential duty, or have signed a non disclosure agreement, gained the information through any illegal means or have received the information from someone who is not authorized to disclose it. For example, in many states of USA, if the entrepreneur of a trade secret feels that another party or firm has stolen or revealed its information regarding its trade secrets, then they can take the help of the court to file an injunction against any more use of the trade secret and they can even claim for damages due to any financial and economic injury suffered due to the illegal use of this information. For example, in November 2002, proctor and Gamble claimed that Potlatch Corporation had stolen its trade secrets to manufacture bath tissues and paper towels by employing two of Proctor and Gambles experts of manufacturing. During 2003, both the organizations had come to a settlement out of court keeping the terms of agreements a secret. During the end of the 1990s, Master Card redesigned its image as Priceless during its promotional campaign. The promotion delivers a message unavailability of cash can never stop anyone from generating priceless moments with the friends and families. Every promotional advertisement starts with the image that every service or product is bought with a credit card and is followed by a sentence showing some memorable moments, such as precious time with ones children which is not purchasable (Dodgson, et al., 2015). The word priceless then is shown on the screen along with a voiceover that There are certain things money cant buy and for everything else, theres Master Card. The promotional campaign promotes the organization as a financial service organization that understands family value and supports the restrictions of consumerism. The advertisement also shows that the payment service via Master Card gives a warmer feeling to the family and friends and not any interest charges or late fe es. The organization protects its brand very aggressively and has sued any infringers who have used their tagline Priceless. All the member banks and the merchants need to follow the rules and policies in how they represent the acceptance mark and brand marks. The image of the firm has however been faded through some litigation. The effect on the average customers of such litigation has been minimum, but the antitrust regulators wearing the shoes of the customers view Visa and Master Card to act together as the two major US credit card organizations like the next Microsoft (Shani, Chalasani, 2013). The advantage of such aggressive mentality of the firm can be seen at present. Master Card has complete control on their process of development though having a partnership can save money and time. They think that efforts for development are the essential elements to create and renew its abilities. Individual development of innovations pertaining to technology creates a challenge to the enterprise to establish new skills, market knowledge and resources. There are several reasons for an industry to choose an individual development but there exists several factors for a firm to engage in collaborative development and thus there exists an increase in such initiatives. The next part of the paper, discussions will be done for the advantages of collaboration and weaknesses and strengths of various types of collaboration (Norman, Verganti, 2014). External perspective The existing rivalry degree There is a high level of competition for Master Card as a technological processing payment unit. Its biggest rival is Visa as they have a similar structure of business as Master Card. The threat of Potential Entrants The level of new entry in this sector is minimum as the level of global processing payment facilities is huge. New entrants such as Jacobs, American Express and Diner pose minimum threat to Master Card. Bargaining power of Suppliers There is no supplier for Master Card as it is a technology organization and are continuously developing new ideas and security organizations act together to regenerate proper software and hardware. Bargaining power of Buyers There exist a lot of buyers for the firm such as banks, consumers and government thus creating a high bargaining power on Master Card as there is very similar substitute to this firm that gives same sort of service at the same price. Threat of new substitutes There is no substitute for such firms. Master Card is showing the way for universal payments processing. The chances of a new rival entering the market with some new ideas of seamless and easy payments that is globally accepted is very low. The reason is that the banks, governments and the consumers have a lot of trust in the existing firms such as Master Card, American Express and Visa (Lages, 2016). Internal Perspective Does the firm have a different source of competitive differentiation? The firm Master Card has met all the Hamels and Prahalad 3 criteria. The technology used by Master Card to present to the banks allows the customers to get benefit of cashless payments that is more appropriate. It is very difficult for the rivals to duplicate as Master Card holds the technology that is essential to perform such universal technology that can be used for many different services and products. Does the competency responds to a single business? The competency only transcends to a single business as Master Card is such a huge organization that any technological changes have become difficult for application. Thus they have established their own labs, which is a different department all together concentrated to innovate Master Card. Thus, the firm only concentrates on functioning the present business at a worldwide range and the labs concentrate on providing the current innovations and security. Are the competitors having difficulty to imitate the competency? It is hard to duplicate the competency for the new industries in the market. but for the existing rivals, there exists only one renowned competitor who is doing same job. Still, they have unlike business goals and aims. Master Card is the processor of the largest number of payments globally whereas Visa is the manufacturer of the highest number of bank cards with the largest number of customers who globally accept Visa. Section 3: Types and Patterns of Innovation The process through which the decision making authority is kept at the top level management is through centralization whereas decentralization involves the decision making to be done at the lowest levels of management. Centralization often comprise of both the geographical performance and to the place where the command over the performances are situated. It means that the operations may take place at a location far away from the head office but the decisions pertaining to the operations are taken in the head office itself resulting to an increased centralization than their physical location would have assumed. With respect to the industries having a number of research and development projects the problem arises whether to have a centralized and decentralized system becomes a complex issue. Decentralizing the RD operations to the different sectors of the industry often leads to innovative process and product which are in terms of the needs of the particular departments. The answers they create are in close relation to the department and the needs of the customers served by them. The projects for development also use the knowledge diversification and contacts in the market that exists in the differen t departments. But there exists a risk for recreating the wheel when the RD operations are decentralized. The repetitive RD operations can be functioned in different departments but the full promise of the technology to generate the value in the other sections of the company may not be found out properly. Moreover, keeping so many RD increases the economies of scale and the curve effects. In the other respect, if an organization undertakes centralization, it can maximize the curve effect and the economies of scale in the RD providing an increased division of labor in the experts working in the RD. The centralization also finds out the new innovations and technologies throughout the organization, increasing the consistency of the organizations new product or service development initiatives. There are certain arguments regarding the centralization and decentralization of certain departments of an organization. The use of decentralized and centralized process for development varies from firms to firms. A study by Tim Opler and Laura Cardinal pointed out that organizations, which are research oriented are more likely to establish individual RD creativity centers to improve the innovation transfers across the departments and also to provide a better communication system. Another evaluation by Peter Golder revealed that during the production customer products, an organization uses more decentralized RD providing projects according to the demand in the local market whereas focused with electronic business positions its RD in the centers of excellence that focused on only providing competencies. A firm with high centralization can able to make aggressive transformations in the direction and due its compact control and command structure helps to implement any changes in the low er levels. The decentralized firms may have difficulties to get cooperation from all the necessary departments for any significant changes. But in case of any environmental or technological changes, the decentralized units respond better as all decisions do not require to be taken permission from the higher level and thus changes are initiated rapidly. Successful procedural innovation can only take place when the partners, alliances and collaborators work closely and efficiently. The ideas created are then re-crafted and then becomes enhanced through inputs form different locations and groups putting in new skills and ideas and experiences. The implementation of PIN and Chip is an exclusive example of how rivals can introduce innovative products in the market. Master Card and Visa are thus can be viewed as firms co-operating before their public listings. It is on the basis of the co-operative entity principles, which are as follows: All the participants should have an equitable hold along with the provision of keeping it open to all knowledgeable participants. The authority needs to be distributive and equitable along with having the maximum possible degree that all the activities need to be voluntary. With respect to the above principles discussed, the US banks have accomplished few things which they would have been able to do on their own without taking such ample risks. The model of co-operation has provided all the banks to monitor and take command of their own products along with having the power to reach the national and compete with the big players like American Express and Diners Club. The organizations competing are not only the participants in need of some level of communication before any creativity can be gained. There exists an interrelationship with the merchants, suppliers, government and the other rivals in the market (Aghion et al., 2016). The First XI study established that the essential elemen t of winning network, a model identified as looking in and looking out. The First XI firms are concentrated in a number of ways, which are as follows: Their main concentration is on their clients to satisfy them. They work in co-operation with the other rivals. They take the initiative of making the future better. They even focus on going outside Australia as well They created a sense of responsibility towards the society. Out of all the points, working in hand in hand with the collaborators is the most important point for creativity and innovation. For example, Macquarie Bank is renowned for its variety of new and improved service and product developments but most of the organizations operations are done along with the joint venture with one or more partners. Though, the payment processing units in Australia had in past shown the capability to join hands to innovate, through the example of introduction of BPAY and EFTPOS in the most recent developmental projects, such projects have faced problems in gaining contracts from the institutions as projected by the postponement of the project BPAY assured that its MAMBO project had been postponed for a twelve month evaluation, during the period when the leading banks asked BPAY to curtail its present developmental rounds of work on the firms initiation and to reanalyze the project in the middle of 2009. The process goes down to how Master Card labs have implemented such innovations. It is often seen that innovations are generated to bridge in gaps in the market or respond according to the needs of the merchant and the consumers. The bigger merchants will thrive for innovations in a respond to increase the convenience, speed and loyalty towards the clients to decrease the expenditure and increase the profit margin. Such an incident is often seen globally in the present. It is thus done through proper business function to implement innovation in electronic payment process as well as finding out the craze for innovation. The payment service providers cannot predict that a creativity service will increase an substantial amount of demand among the customers just due to the fact that the service renders new technological abilities in an innovative way. The next aspect involves the provision of net benefit for a transaction, which mostly the banks and the other financial service providers give implement successful innovation. The creativenesses which need less changes from the known practices have more acceptance than the ones which are new and unknown and thus require a change in the behavior. The use of technologies to induce the existing payment facilities enhances an enterprise to take fruit out of the established practice system known to the customers to decrease their start up costs. The new payment systems usually contend with the older ones for financial resources and to seek attention from the management. The projects, which are long-term, pose a threat to the active business function with respe ct to the profitable debit and credit card activities who may not get the support from the industry due to conflicts among the different departments and having a horizon of short planning. The crucial network and mass effects can postpone the implementation of a cost-effective and useful creativity technique which results to the lock in of the products which are old (Johnston, Marshall, 2016). The crucial step for Master Card was the establishment of their labs, which was a big leap toward undergoing a business renovation. The ability to create new and innovative products efficiently and rapidly is the most vital factor for their success. Industries related to hardware, software, electronics etc often depend on their innovations, which respond to the increase in their sales. The key elements required for an effective product development is maximizing the requirements according to the clients, minimizing the time of production and limiting the development expenses. A new product to be successful in the market needs to offer better quality, attractive features and effective pricing than its rival products. Still many firms fail to maintain these features as they do not have a clear idea of the features the customers prefer or placing the product at a price range thinking that the customers will purchase it because of its new features (Baden-Fuller., Haefliger, 2013). The or ganizations too have problems of resolving the heterogeneity in the demands of the customers as when some customer base requires some other features, the enterprise might create a product compromising among the conflicting demands which results in the failure of the product to attract customer base. Finally an organization with a limited development cycle can quickly transform its product and provides designs which are due to technological advancement. An organization with such a cycle can take the advantage of both the first and second mover. The speedy production of new products also results in the degradation of the quality and poor market introduction (Amit ., Zott, 2012). 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