Blog: How to Think Like a Startup (Part 1) (August 2013)

By Joe DeSetto, Emerging Payments Blogger

The payments startup culture, as it currently exists, is now mature enough that established firms in even highly regulated, slower moving industries can learn a thing or two from how these smaller, faster, younger tech companies think. While size, scope, market, finances and level of success varies widely upon the firms referred to as startups, there are common threads in how founders approach problems. Key differences in startup culture, along with being comfortable living inside a career that can radically shift day to day, fall along the lines of privacy, pricing and creating differentiated experience. Let’s look at a few of these differences in more depth.

1. Social vs. Private

A new startup has an inherent need to be social. Social networks and word of mouth are not only effective, but fall into the far lower marketing budgets of established firms. As such, new offerings from startups often have social media built into core functions, not layered on top in some awkward fashion like a “share” button. If you look at social payments mobile app Venmo, for example, there is no difference between friends and others you can pay using the app to send money instantly. Compare this to the multistep process of a wire transfer or external bank transfer on a traditional banking Website.

Of course, any app with transactions needs to worry about privacy, not just being social. This dynamic of sharing information with the world while simultaneously having strong protections in place when it matters most is something with which established firms struggle. Mixing the two extremes, while giving users clear, easy to understand interfaces that allow them to share and hide information as they see fit, is critical to competing with new players that understand how to do this and have no legacy features to support that might hinder the experience.

Once you have the balance of social and secure right, it’s time to experiment with not just price, but how to convey pricing in an attractive way.

2. Pricing

 Whether free, freemium, in-app purchases, subscriptions, transaction-based or other forms of pricing, startups are quite adept at telling the right story with pricing. So far, established firms have been slow to experiment and are leaving doors open for startups to beat them. Why isn’t a wire transfer an in-app purchase in your bank’s iPhone app, for example? How would a subscription service people love replace a fee your customers hate? Pricing is just a variable, and its one startups continually tweak against often fixed-price older competitors.

Startups understand that how you explain pricing is as important as the number. Square isn’t always cheaper for every business, but anyone who has even glanced at its pricing info can explain it to his local bakery or lawn care pro. Is this true for a standard merchant account? Getting pricing simplified and aligned with a customer base is critical to competing with small firms that can literally change their pricing strategies overnight until one sticks.

Which brings us to No. 3 …

3. Clarity over Fine Print

Startups have lawyers, too, but somehow startups almost always can be more clear and open about what’s being offered, what the thing being offered costs and other payment-related questions than established firms. People are inundated with information and media of all kinds and respond to simple, clear messages. This fee page at Dwolla is startup thinking in a nutshell and yet established firms seem to favor complexity and obscurity. Obviously, there are legal disclosures that must be made, but pricing should be easy to understand and fees shouldn’t buried in the fine print. Clear, open terms aren’t just a sales tool either; they’re easier to support and to teach to new hires. Before you add another line of legalese or options, study your startup competitors that were raised and indoctrinated by a world where Apple’s simple tagline “A thousand songs in your pocket” changed the music industry overnight.

In Part 2 of our deep dive into startup thinking, we’ll look at why user experience wins, how mobile first is not just for Angry Birds anymore, and the element startups aren’t afraid to add but established firms fear: Fun.

Joseph DeSetto is Paybefore’s emerging payments blogger and program manager of the Mobile Development Bachelor of Science degree at Full Sail University. He is the author of The Business of Design and previously served as chief technology officer for two mobile startups. If you’d like to comment on this blog post, please join the conversation on our Paybefore LinkedIn Group.

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