The original disruptor

02 October 2017

When a small Internet company came on the scene nearly 20 years ago and said it wanted to disrupt the payments industry, few paid it any attention.

That tiny outfit has since grown into a giant. PayPal is now one of the largest payment companies in the world, dominating the online payment space, with offices across the world including in Singapore.

But the original disruptor is not immune to disruption. In fact, the company is facing a “boiling ocean of disruption,” said PayPal’s Vice President Ben Edwards.

The company is facing co-opetition and competition from both the big guns, such as fellow technology companies Apple, Samsung and Alibaba, as well as the smaller start-ups which are experimenting with new modes of payment like blockchain. To meet these challenges, PayPal has been intensifying its innovation efforts, especially in this part of Asia. 

Part of its strategy has been to acquire new capabilities and knowledge through mergers and acquisitions. More importantly, the company is focused on building innovation from within.

In 2016, the company launched the Innovation Lab in Singapore, its first outside the United States and a key part of the company pushing the boundaries of innovation.

Innovation Lab@SG

The lab has three main areas of focus: research and development, incubating start-ups and working with small local businesses. The lab takes a forward-looking perspective to research areas that can potentially affect PayPal’s business, said Mr. Anupam Pahuja, General Manager for PayPal Singapore’s Development Center. 

“At the innovation lab, we like to look far forward: what it will be like in five years’ time, ten years’ time. And not just what is going to happen but also what we would like to happen,” explained Mr. Pahuja.

“From there, we map out the areas that are relevant to us and create a roadmap for PayPal such as securing customers financial information and payment security.”

At a fireside chat at Innovation Project 2016, PayPal CEO Dan Schulman said the company’s innovation efforts are aimed at one thing: Serving its customers better. To do that, the company invested huge amounts of resources into understanding exactly who it is serving.

“My goal is to get us laser-focused on who we are going to serve and how,” said Mr. Schulman, who was appointed CEO in early 2015. 

At the same time, he also set out to create a ‘fail-fast’ structure within the company. In this case, it is about “being open to new ideas and tossing what wasn’t working aside,” said Mr. Schulman.

Part of this new structure is an unwavering focus on customer centricirty. The company wants to be a customer champion first and then a technology or financial services company.

This mode of thinking has clearly filtered down to the rest of its offices. At PayPal Singapore’s Innovation Lab, the focus is very much geared towards connections and collaborations to expand the reach of PayPal payments.

The lab is working with small and medium enterprises to develop new solutions. For instance, the company piloted, in partnership with local software firm Tabsquare, a new e-payment system for restaurants, which allows customers to pay directly from their PayPal account. (see sidebar) 

The lab is currently incubating three fintech start-ups which look at a range of developments, from blockchain to digital short-term financing and big data. This is driven partly by PayPal’s desire to work with external parties which may provide fresh impetus and insights to the company.

In fact, within PayPal, the mantra is that innovation is a mindset and a culture that is to be nurtured, said Mr. Pahuja.

So the idea that the lab is where all the innovation happens is simply wrong. It’s not a place where “people put on, like, white lab coats and crazy hats and do crazy things and it's all isolated,” he said.

“It's not actually a lab. It's about getting everyone around into the mindset and being able to innovate around their area of expertise. So it could be somebody from legal, it could be somebody from finance. It could be somebody from our technology teams who thinks that, “hey, you know what, there is a way to innovate this process, there is a way to do this better”,” he added. 

The research that gets done in Singapore supports PayPal’s global innovation efforts. New services or products that are developed in Singapore have the potential to scale across the rest of PayPal’s markets.

One big success story was the creation of the PayPal app Home Screen. The development and creation was solely driven by Singapore and that is the first thing PayPal users all over the world sees when they open their PayPal app. Amongst other things, large parts of the consumer applications for PayPal app for Android and iOs are also designed and implemented by engineers in the Singapore Development Center.

Singapore: More than just stability

When multinational companies are asked why they want to set up a major office in Singapore, most would tick off the usual reasons: Location, political stability and infrastructure. 

These apply for PayPal too. But Mr. Pahuja said Singapore has additional and more compelling advantages when it comes to innovation activities.

PayPal’s model of innovation is one that thrives on having an eco-system that works. It needs good talent, strong technological skills and the right partners. In this respect, Singapore delivers the complete package.

One big advantage is the presence of very good universities and research institutions in Singapore. They provide a strong pipeline of talent that is critical to supporting PayPal’s research projects, shared Mr. Pahuja.

“The Singapore environment is one in which we have little trouble finding researchers. We have professors who can help our research and we also have, internally, the senior leaders who can identify problems that are valuable to PayPal,” he said. 

The company has a series of agreements with the National University of Singapore, Nanyang Technological University and the Singapore Management University. These cover a range of projects from machine learning to blockchain and cyber security.

Second, the explosive growth of the tech startup scene here over the past few years is a big plus for the company, noted Mr. Pahuja.

The growth of startups means that there is an additional employment option for graduates after they leave school, on top of the usual job opportunities at MNCs government and local firms. The wealth of opportunities, in turn, attracts the best and brightest in the region to study here, noted Mr. Pahuja.

“So having the whole ecosystem of different types of companies, broad environments and varied opportunities means students want to study here. They want to get their degrees here and that gives us a great talent pool to look from,” he said. 

The lab is also doing its part to nurturing promising start-ups. Its incubator currently houses three growing start-ups.

One of them, InvoiceInterchange, looks at helping companies get access to cash quickly. Instead of waiting a month or two for an invoice to be paid, the company can go to the firm’s portal and auction their invoice for cash.

Another start-up that’s being incubated is Axinan, a start-up that deals with big data and machine learning in order to quantify risks of transactions.

The third, TenX makes sending and spending virtual money and cryptocurrencies free around the world. Users can make payments to 32 million merchants around the world through credit card terminals. 

Third, Singapore has always been an important part of PayPal’s network of offices. The company’s international headquarters is based here, which houses some of the company’s most important regional people. This gives PayPal tremendous synergies for innovation, said Mr. Pahuja.

For one thing, it becomes a lot easier to do innovation. The senior leaders based here can usually define the problem statement for the innovation team to work on, especially since they have a wider regional perspective of the business.

“By support, I don't mean just ‘okay, great job, guys’ and they give you money. It is a commitment to developing success in everyone. Even with incubating the start-ups, for example, when they come here to be incubated, they expect to get mentored by the best, by senior leaders,” he said.

Similarly, government support for PayPal has also been strong, important for foreign companies venturing into the region. 

Combining these elements in one place makes it easy for innovation to happen, said Mr. Pahuja.

“Having this collaboration between SMEs, start-ups and R&D, and having the kind of environment and mindset with the people here, that's unique to Singapore,” he said.


Paying bills with zero fuss 

The smell of sizzling meat wafts through the air amid the constant chatter at Japanese restaurant ENBU at Suntec on a Friday night.

One of the diners is done with his meal. But instead of raising his arms to call for the waiter, he taps on a tablet on the table, which calls up the bill for his dinner.

He types in his mobile number and a link pops up on his mobile phone, which he promptly taps. The bill is paid for, straight out of his PayPal account.

No queues, no waiting for stressed out waiters and no fuss—the entire process took less than two minutes. 

The e-payment solution may not seem earth-shattering but it is the small things that matter for businesses looking to improve their operations. And helping SMEs and local companies improve their operations is a big part of PayPal Singapore Innovation Lab’s objectives, said Mr. Anupam Pahuja.

“The program in Singapore also has a strong focus on SMEs. Globally, PayPal has always been the small business champion, enabling small local businesses to go digital and gain access to the global marketplace. PayPal Singapore takes it further by working with SMEs to help other SMEs,” he said.

In the case of ENBU, PayPal worked with local e-payments provider TabSquare to create the digital payment solution through integrating a PayPal mobile solution to their existing e-menu ordering system.

On its own, being able to see a bill and pay digitally is not new. What this solution does is that it cuts down the trips made by the waiter when someone calls for a bill. 

Typically, a waiter makes about four trips when a customer calls for the bill. First he walks to the cashier, then goes to the customer with the bill. After the bill is paid, say by credit card, the waiter has to go back to the cashier to verify the credit card details and walks back to the table to pass receipt to the customer.

All of this is unnecessary and unproductive work, said Mr. Pahuja.

“The difference really comes is in being able to reduce the number of trips the waiter has to make when you call for the bill,” he said.

This also means that the waiter can focus on other tasks such as ensuring customers are properly served, bringing new guests to their seats and clearing the table for quicker turnovers. 

Customers also slash the time taken to wait to the sign the bill, a major bugbear for many busy Singaporeans.

In many ways, having an SME focus ensures that local firms benefit directly from PayPal’s innovation efforts. And in so doing, PayPal is making a difference that matters, he added.

Said Mr. Pahuja: “The combination of R&D, startups and SMEs at the PayPal Innovation Lab exists here because of the supportive environment. Besides an ecosystem of startups, world-class universities and a thriving entrepreneurial spirit, the availability of good talent puts us in a strong position to make a difference.”