Apple Pay’s usability advantage is not as dramatic in
names and email, the Internet’s killer app, were built this Australia as it is in the US and the tighter regulatory way. So was HTTP, the technology that underpins the
environment weakens the commercial proposition.
world wide web, as well as BitTorrent, which is used for However, it clearly demonstrates that new ideas,
peer-to-peer file transfers. However, since HTTP was
approaches and technology can eliminate the friction
developed, the creation of new platform applications has in the traditional payment process. The questions we
become rarer. Most modern solutions simply use (and
should ask are: Have we entered an era of
abuse) HTTP rather than creating a new application-level diminishing returns, and does the future of payments
protocol. The wealth of innovative
rest somewhere other than shaving another second
IP network applications anticipated by the telcos –
or two off the existing process in an attempt to make
platform-level applications that could be
it as frictionless as possible?
managed, measured and metered by the platform
operator – never appeared. Instead, the telcos
We must ask similar questions of APCA’s New Payments
have voice, the traditional IP applications such as
Platform. While the short-term benefits of providing cheap email and a lot of web traffic. The expected
and effective low-value transactions are clear, the longer-bonanza from approving and metering high-value
term strategy of creating a platform that enables new
IP platform applications never arrived.
payments ‘applications’ is an approach that has a less than impressive track record.
The same story is likely to emerge from the New
Payments Platform. After the initial low-value, real-time Telcos adopted a similar approach when they
payment application – a push payment, where the sender shifted to Internet protocol (IP) networks – moving
pushes the payment to the receiver – some of the effort from proprietary technologies to the ‘open’ technologies behind the upwelling of FinTech start-ups can be
used by the Internet. The thought was that voice was
expected to result in a simple but effective solution to simply one application that would run over the new IP
support pull payments in which the receiver pulls the
networks and that the future would be filled with a
payment from the sender. Other types of payments may
wealth of innovative new applications that would sit
be built into the basic push and pull payments system.
beside voice and use the platform’s capabilities in
Examples include ‘mutual’ (or ‘third-party’) transactions new and interesting ways that we couldn’t predict.
–
in which the payment is pushed to a third party by the This is similar to how the Internet developed, with the sender before being pulled from the third party by the networking technology split into layers. The lowest
receiver – or ‘deported’ or ‘complex’ transactions that layers define the platform and the higher layers take the blend the other three types of payments to create more raw functionality provided by the platform and
sophisticated services such as those provided by PayPal.
repackage it to create useful applications. The core
services the network needs, such as managing domain
The Future of Exchanging Value Cryptocurrencies and the trust economy 31
The telcos’ IP networks now support a special-purpose
The convenience of being able to pay via a tap or a wave voice service and a general-purpose data service, with is clear, but the wisdom of having the service provided by most of the innovation at the edge of their networks, not in an intermediary is being questioned. At the small end of the core platform. The innovators have found it easier to town, restaurants, pubs and clubs are encouraging
work with established platform services and innovate at customers to pay in cash or by debit card to avoid paying the edges where they have the freedom to do what they
interchange fees. They do this by either providing a
thought necessary, rather than attempting to design,
discount for cash, or by some other means, such as
implement and seek approval for a new platform-level
entering cash-paying customers in a monthly prize draw.
application controlled and metered by the platform
At the other end of town, larger retailers are funding the provider. Can we expect payments to go the same way,
development of alternative payments solutions. The
with retailers and consumer applications innovating, and industry solution with the highest profile is CurrentC™34
the New Payments Platform simply used as a cheap and
being developed by US-based industry group Merchant
efficient transport?
Customer Exchange (MXC), led by Walmart. CurrentC™
provides consumers with a smartphone-hosted mobile
While the finance sector has been investing heavily in wallet that can interact with merchant terminals to enable upgrading the established payments infrastructure,
direct bank-to-bank transactions and cut out payments
many users are starting to question its value.
intermediaries.
Many, if not all, firms are finding that the pressure on their margins is rising. Consumers are using their
Financial institutions should be worried about new
smartphones and ubiquitous access to the internet to
payments paths that remove them from the process, as
find either the cheapest or the best (and cheapest)
most of their interactions with customers are based on items from a global pool of merchants. The same
customers’ need to pay for products and services.
consumers are using their smartphones to browse
reviews and recommendations and share their
experiences. The balance of power is firmly in the
hands of consumers and they are using it to push
prices down. Coupled with the shift from physical to
virtual (digital) payments, merchants are finding that the transaction fees charged by the major processing
networks are becoming a significant expense.