Virtual Banking: A Guide to Innovation and Partnering

Introduction: Innovating Through Scarcity

“More money is rarely the answer to innovation. The best innovations actually come from a world of scarce resources.”

—John Donahoe, CEO, eBay¹

A few years ago, I had the privilege to be one of the early members of PayPal X, a division of PayPal owned by eBay Inc. PayPal X was a radical idea at the time—a complete shift in business and operating models, which put developers and partners at the center of everything PayPal did. It was an acknowledgment that despite the significant number of talented people working at PayPal, far more talent, business insight, and innovation existed outside PayPal’s walls than from within. That’s a tough realization for any company to grasp—the fact that the best ideas, business, product, marketing, and engineering talent will always live outside the walls of any particular company, regardless of how successful it is with its core business. It requires a lot of courage to invite outside talent to compete with your company’s ideas and products, and that was certainly true for PayPal. It meant that other companies might have a better idea of how to serve their customers with your company’s assets. It requires a very strong, forward-looking CEO to allow that creative destruction to take place—a company might disintermediate itself to some degree, but the trade-off is that it stays relevant and has its fingers on the pulse of where an industry may be headed.

Most financial services companies are not wrestling ...