A few thoughts on your “Online payments are a mess” section of the show. I’m the Chair of the W3C Web Payments Community Group and have been working hard to bring payments into the W3C for well over 4 years now. I really appreciate all of you giving this topic some thought, as barely anyone knows it’s going on. There’s some background on the W3C Web Payments work here:
http://manu.sporny.org/2014/dawn-of-web-payments/
In general, I was hoping for a bit more than “this is an impossible task and nobody likes Bitcoin”. Some corrections to start:
- Many of the people in the group love Bitcoin and think it’s a good first cut, but could be improved. It’s not that we don’t want it to succeed, it’s that we think all 1.0 technologies can be improved in ways that help them scale better.
- There are loads of things that could be done to improve the payment experience, and many of the organizations that were at the Web Payments Workshop wanted to make these changes. Even the most cynical organization that attended was less cynical than the folks on your show.
- Credit card are awful in so many ways. Online fraud being the worst side-effect of a world run by credit cards. Most everyone wants to replace them with something better, including the banks.
In order to understand the work, you have to understand the motivations for each market segment that’s participating in the work:
- The technology industry thinks it can disrupt the banks (see where Silicon Valley VCs are pouring their money?).
- The smart banks feel paralyzed to make any significant change w/o some serious help. Web technology is not their forte. The traditional banks think everything is just fine.
- The governments are annoyed that their banks aren’t innovating in the areas that need it the most (security, speed, underbanked and unbanked, etc).
Online payments suck for a variety of reasons. There are too few players, there is no single payment interface, the market is heavily regulated, the big players don’t want interoperability, we’re using laughable security measures (CVV2 codes, credit card numbers, HA!), etc. This payments industry is ripe for disruption and everyone knows it.
The banks are terrified of Google, Facebook, Apple, or Microsoft waking up and deciding that they could provide financial services to the world in a more effective and profitable way than the banks can. It costs around $25M to start an international bank, and each of those organizations could do it many times over (and do a much better job wrt. customer service). Bitcoin-like technology could remove droves of middle-men that vampire off money for very little value-add.
Governments are trying to get financial services into the hands of the people that aren’t a priority for the banks, that is the worlds underbanked and unbanked. Mobile services like M-Pesa are making great inroads, and many of the people that don’t have bank accounts or access to financial services actually do have Internet access and a mobile phone. These people are not a priority for banks because they’re not profitable, but they are a priority for organizations like the World Bank, the United Nations, and many local governments. One of the ingredients in the recipe to get people out of poverty is to provide a mechanism that allows people to save for the future (banking services), but the banks aren’t really motivated to provide these services.
So, the financial industry is feeling pressure to reinvent themselves or risk an evolutionary dead end. They’re feeling this pressure from the technology industry, government, and their customers. No one likes their bank as much as they like their favorite technology company.
Take a wild guess as to what each industry above needs in order to achieve their goals? They need a set of solid Web Payment standards.
The technology companies need to band together if they’re going to provide financial services that are compelling to a large demographic.
The financial industry needs to implement a payment mechanisms that are easier to use and that also bring their customer closer to them. At the very least, they need to back a technology that’s not going to send droves of their customers over to Apple and Google.
The government organizations need to back something that’s going to bring a global financial infrastructure to their citizens just like the Web brought a global communications infrastructure to their citizens.
This doesn’t mean that we’re going to end up with “one single way to pay for everything”… that’s a pipe dream. The future is a mix of payment instruments and thus a successful Web Payments standard needs to assume this as a fact. The things that we are planning on standardizing is a standard way to initiate a payment and a standard digital receipt (proof-of-purchase) format. If we can’t support what we use today with this new payment standard, as well as Bitcoin, Ripple, Ethereum, and all the other future cryptocurrencies, the work is dead in the water.
The ideal payment experience in the future is that, when you arrive on a website and see something you’d like to purchase, you just click “Buy”. Your browser would figure out the payment methods the website takes (Visa, Mastercard, Ripple, Bitcoin, Dogecoin) and match it against the payment options you want to use (Visa, Bitcoin). You’d see the final amount, authorize the purchase, and a verifiable digital receipt would be delivered to the merchant ensuring them that you paid.
However, to think that what we’re after is just a simpler payments experience misses the point completely. This is about providing access to a global financial infrastructure in the same way that the Web provided access to a global communication medium where you didn’t have to ask for permission to innovate. This is about bringing the tools that have only been available to the most wealthy and elite in the world and putting them, in a safe way, into the hands of anyone with a connection to the Web.
The above barely scratches the surface of what’s being worked on. The Web Payments Steering Group is expected to launch by mid-September, which is when we’ll see the scope of work get hammered out. Expect the first technical working groups formed by the end of the year to create the future that is laid out above. If you’d like to learn more, or join the cause, we’d love your help. Find out more here: