America has lagged behind much of the world in terms of digital wallets. Elsewhere, people routinely use phones instead of credit cards. There are several reasons for this.
Partly, it is because North America saw mobile phones so early. When other regions finally rolled out mobile phones, infrastructures were more modern. The larger reason, however, is that there is so much at stake.
Right now, there are a limited number of players in the lucrative payment network world. Visa, MasterCard and American Express would like to move to your phone. They fear, however, that enabling electronic wallets in phones would allow aggressive young players onto their turf. PayPal, Amazon and Google are, in fact, financial networks, and they would love to do your banking.
So far, progress has been slow, but the emergence of Android is opening up new possibilities. Work is being done by the Mobile Payments Industry Workgroup that would establish standards. What we know for sure is that the established payment networks will do their best to keep out upstarts. We also know they will fail.
Part of the reason for this is political. Part is cultural.
The politics are that Wall Street and the major banks have never enjoyed lower public regard and support. Consumers sense that the bailout profited rich bankers more than consumers. The customer base is not going to support politicians who continue to put the interests of favored banking institutions above those of consumers.
Eventually, market forces always win. Currently, retailers are capable of dealing with only a few credit and debit card companies. This limits competition and keeps prices higher than they would otherwise be. A sophisticated mobile payments infrastructure, which is inevitable now that the Android has broken free, will arise. In fact, it will arise before most people know it’s happened.
The cultural factor I referred to is the difference between the old-school financial institutions and the new electronic services. I have little confidence that Visa or MasterCard is going to do what’s necessary to exploit the convergence. They’re too habituated and institutionalized.
PayPal, Amazon and Google, however, are populated by people who want to transform the financial world. They will find a way to force themselves into an industry that has lost serious credibility and clout due to its participation in the ongoing subprime mortgage fiasco.
Fortunes will be made by financially sophisticated app developers.
Finally, I’d like to get a little speculative and tell you what I think the real long-term consequences of the Linux/Android revolution will be.
It’s not well known, but Peter Thiel, one of the founders of PayPal, was motivated by quite subversive goals. His initial purpose was to create a mechanism for financial transaction outside the reach of governments. He has written:
As an entrepreneur and investor, I have focused my efforts on the Internet. In the late 1990s, the founding vision of PayPal centered on the creation of a new world currency, free from all government control and dilution — the end of monetary sovereignty, as it were.
Obviously, he has not succeeded. Nor do I think we’re going to see such a purely private system in the near future. However, we are moving very rapidly toward developing an electronic infrastructure that would enable brand-new forms of banking. Given our recent experience with the federally controlled financial system, the need is clear.
I won’t detail here how I think this new banking will function. For now, however, I’d just like to warn you that you shouldn’t be too surprised to see completely transformed financial institutions arise from the current rubble. Who knows? Maybe Thiel will be proved right. For extra credit, you can read F.A. Hayek’s Denationalisation of Money: The Argument Refined online here.
Patrick Coxfor The Daily Reckoning
Patrick Cox has lived deep inside the world of transformative technologies for over 25 years. This expertise lead him to Mauldin Economics, where he now heads Transformational Technology Alert.
Creating alternative banking systems is pretty much suicide. Look to Libya for an example.
I could see paperless currency becoming mandatory but it would still be under the control of national central banks.
Pingback: jazda konna
Pingback: plantacja lawendy
Pingback: how to win the lottery books linked web-site
Pingback: european roulette free
Pingback: find houses
Pingback: name lookup
Pingback: manhattan home inspection
Pingback: Merle Dixon
Pingback: new country music
Pingback: logo gifts
Pingback: slot machine bar
Pingback: make money online
Pingback: multi port serial
Pingback: driving lessons milton keynes
Pingback: accellent cardiology
Pingback: gkV7M7tOFy gkV7M7tOFy
Warren Buffett is a great investor. Perhaps the greatest investor in history. But the most impressive thing about Warren Buffett isn't his portfolio... It's convincing mom and pop investors he's just like them. Chris Mayer explains why this couldn't be further from the truth, and offers a warning to those who are vulnerable to The Oracle's folksy charm...
Cancer research has come a long way in a very short amount of time. But it still has a long way to go. Today, Ray Blanco explains why cancer research could make leaps and bounds in the coming years, and how early investors could make a fortune because of it. Read on...
The government's influence on the life of an average American citizen is simply staggering. At every turn there is a different "department" or "agency" with a different rule for how you must live your life. Today, John Pugsley offers 15 unique and peaceful ways to legally combat the government's influence on your daily life. Read on...
Thanks to a surge in development, new energy-efficient technologies are constantly changing the way people power their homes. And that's put the tried and true utility sector on the defensive. But while there are plenty of different alternative-energy sources that are pushing this trend forward, one clearly stands ahead of the rest. Greg Guenthner explains...
Thanks to the tireless efforts of the Federal Reserve, currency in circulation is up $72.5 billion in the last year - which equates to $234 for every man, woman and child in America. And after rifling through his wife's purse yielded fruitless results, The Mogambo Guru has launched an all-out investigation to find his share. Read on...