Mike Rowehl: This is Mobility

The second part of a series of mobile payments posts I’m making to get ready for BarCampBankSF later on this month. The first part was a problem overview for the issues. This part is about the Fear Uncertainty and Doubt (FUD) that stand in the way of trying to get a global system going for moving money around.

I was going to hold off on this topic for a while, but then I ran across this gem of a report from our beloved US government explaining why mobile payments could destroy the world. The whole topic area right here just strikes me as backward, small minded, and at it’s base just really stupid. Here we have the potential for a fantastic system, uncoupling the concept of money from bits of paper and metal. Making it easy for people to do what they want with their money when they want. Being able to reach out and help friends and relatives in far away places instantly.

But instead of seeing the potential upside (not, potential upside, most of us don’t have the ability to do the things discussed in that report under the current set of services), instead what’s called out is the potential for abuse by a very small percentage of the population. I just don’t get that mentality at all. It’s like not allowing cars because people could get drunk and drive around in them. Or declaring that everyone has to walk around naked cause someone could hide weapons under their clothes. It’s just absurd. Why cripple everyone because you’re concerned about the behavior of a few? Apparently all you have to do is include the word “terrorism” and you can propose just about anything you want.

I personally don’t buy it at all. If you want to cut off the potential use of a system by terrorism, sure, by all means! I’m not going to stand in your way. But if you want to cripple a system that dictates what I can do with my money, how I can do it, and when I can do it, well then we have a bit of an issue. If you want to cut off terrorism do things that affect terrorists and money launderers. Inconveniencing everyone in order to do so is just lazy thinking. Unfortunately people have strong and irrational feelings about things like this cause they feel their safety is threatened (Surprise! You never really had safety, you’ve just become more aware of not having it), and any bit of absolutist thinking they can hold on to in order to make them feel better. Well darnit, that’s just going to have to do. Cutting off terrorism by cutting off their funding is one of those areas (Surprise! That’s not going to work either, probably won’t even slow it down).

Unfortunately what we’re working at here, at heart, is a fundamental change in the way people think about money. And like any major change, that really makes people nervous. Especially people who have a vested interest in the particular limitations, controls, and structures brought about by the incidental effects of the current system. People like governments and banks, who unfortunately are holding most of the cards in this game. In order to figure out a workable system we either need to work around the folks who would normally stand in our way, or convert them to our side. Most of the efforts that have come before are based around a third option of giving incentive to the existing folks and caving in to their restrictions. I don’t consider that option to be on the table, limiting a new system to make the players in the old system happy isn’t a path to progress in my opinion.

Converting the existing folks to our side seems like it could be pretty difficult. Hard to say though with the setup the way it is in mobile payments. With the carrier sitting in the middle of every significant transaction we might be able to play the banks against the carriers to come up with a system that works at scale to break open that market for the banks. But the banks have their own sets of issues. Working completely around the existing system might be the real option we have. Direct user to user payments with something only vaguely resembling a bank in the middle. Using alternative “payment” methods like trading prepaid minutes or prepaid messages. That gives us a bit of a foothold, but how does the regulation and legal arena look for schemes like that? For instance can I take $25 from someone in CA and at their request provide it to someone in NY for withdrawl? What needs to be reported and recorded in that case, and what base restrictions are there? If someone has good pointers please share them.

There’s an event called BarCamp Bank coming up in Berkeley in a few weeks. I saw that a few people signed up for the event were already listed as interested in digital cash or mobile payment systems. I figure it’ll be a good chance to gather some folks and discuss what options we have available, and I want to kick the conversation off so that we can get to the real meat of the discussion while we’re there.

The first thing I want to say is that existing mobile payments do not work. I’ve heard it said a number of times that mobile “comes with a built in payment system”, but that’s really a load of shit. Allow me to elaborate.

First of all theres the structure and revenue share of the existing payment infrastructure. In the cases where it’s possible to bill back to the customer bill the functionality is backdoored in frequently through premium SMS messaging. The carrier generally takes a large share of the transaction (I hear numbers like 50 percent here in the US, and I’ve been told it’s even worse in India). And of course the transaction isn’t directly from merchant to carrier to customer. Oh no, of course not. Theres the premium SMS provider in the middle as well also wanting their cut. It’s a hostile environment for merchants with way too much lockin for existing players. The base costs to use these systems are so high, and the overhead so steep, that it really discourages lots of potentially interesting usages.

Second is the off-deck payment systems. Stuff like Google Checkout for mobile, PayPal Mobile, and Obopay. First is of course that there are some user interface or user perception issues around the services. They also assume a credit based economy. No problem in the US and Europe, but a horrible problem in Africa, India, and China. “Who cares about people in China” you say? (particularly if you live in the Bay Area, people around here just love to dismiss the rest of the world) Well, ask anyone who watches construction and commodity markets where they think interesting stuff is happening. I bet those folks are interested in China at the very least. For all the nastiness of carrier billing, at least it handles the cash based economy and prepaid cell plans relatively well.

And finally, say we had a magic system that everyone could use with minimal setup and a great experience, every user had access to it, and every online merchant accepted it. Now you start having to worry about some pretty heavy regulation. There are banking and financial regulations meant to insure the basic level of trust. But recently there are also more regulations meant to curb money laundering and nefarious activities. How many people are familiar with those regulations on a global level? Even if we crack the technical problems and solve the user interface issues and gain user trust there’s still some potential issues with the G-men, whoever those shadowy puppetmasters might be.

So thats what we’re looking at. Tough, but things worth tackling normally are. Next post on this topic is a bit of background on whats been tried in the past and what technologies exist. The hat will be tipped to David Chaum I’m sure, but I need to read up a bit before I’m ready for that.