When kiwi startup Glassjar headed off to take their place at Y Combinator, there was plenty of congratulations, a few ‘I wish it was us’ moments followed by the inevitable… ’so how did you guys get in?'
When Nelson (Glassjar engineer) responds "...because of the sector we are in, which is being disrupted massively at the moment" he isn’t mincing words. Glassjar has plenty of business nous and positives, but when it comes to their work in the payment sector the timing could not be better. After-all if we are listening to the masses - 2015 is the year of disrupted payments and Mark Pesce wants New Zealand to lead it.
Mark started his keynote at Digital Disrupt leaping into the ubiquity of cellphone technology, which is predicted to hit ownership levels of 80% of adults worldwide by 2020. This is in a world where most of us are already less than 3 metres away from our cell phone at all times. Opportunity? Plenty of it.
Outlining the benefits and freedoms of apps and their ability to essentially ‘take the market with you', Mark is interested in the economic impacts of this action, using Uber as an example of how apps can grow entire markets. In this case, out-of-work Limo Drivers could optimise their time and earnings, whilst simultaneously growing the opportunity for the middle men - Uber. As Uber aggregates, the suppliers also began to aggregate their services, leasing out their cars and hiring new drivers, moving the model from one of optimisation to growth. Competitors sprung up (lyft), and competitors to competitors (uberx) and supporting players like SherpaShare - an app that provides analytics to drivers who use either or all of the above services. Catalytic economic action.
These economic outcomes created by an individual owning a cellphone can be far reaching.
Mark sees the obvious place for cellphones to initiate innovation is within one of the oldest technologies - money. And it is true, that money is not as staid as people may first think. After all we live in an age of credit which is in itself a form of payment innovation, and even extraordinary examples of innovation in economic policy, like that which took place in Brazil. However the last 40 years has really been focussed around two things, making cards faster in stores through contactless payments and increasing security with cards. This narrow scope is not surprising, when you read a 2014 blog on the MasterCard website that talks about 'The Myth of Disruption in Financial Services' you kind of get the tone.
Paying with your mobile phone, may seem outside of the ‘can do’ list of the now, except it is already being done. Kenya leads the world in mobile payments with a pilot programme launched in 2007 by Kenyas biggest telco called M-PESA. Kenya has always been a cash economy, and M-Pessa allows users to transfer cash from mobile to mobile using SMS. This makes exchanging funds easier and faster, building velocity within the Kenyan economy and creating a burgeoning community of startups that use this velocity to grow their own businesses. Essentially, a catalyst for wide reaching change.
This sort of digital currency makes sense in a world of smartphones. Your cellphone becomes your wallet and your marketplace in one - within this new wallet you can share, spend or earn digital currency via a tool that is as Mark says is nearly in the hands of 80% of the adult population of the world.
So what about the global reach of M-PESA? Outside of Africa the uptake on digital currency has been slow, even within economies where there are obvious benefit such as India and China. The tide seems to be turning however as widespread conversation about IBM’s possible foray into digital currency erupts online. Mark wants us all to leapfrog this, and lead the way with a digital version of the New Zealand Dollar, becoming a catalyst for economic innovation here in New Zealand but also spring-boarding a larger change across the Pacific and into Asia.
So far so good right? Easier access to merchant services, development of markets and the ability to create an interconnected community of startups. Whats not to love?
There are reasons to pause the elation, and the biggest amongst them is the need for secure services that are built resiliently, and as an extension of this - those services being perceived as such. This has been cited as one of the stumbling blocks of bitcoin, which was perceived largely as unreliable and at risk of security breaches. Nambuwani Wasike (Financial Sector Deepening (FSD) - Kenya and formally of M-PESA) reminds people that successful mobile money deployments in Africa have been because of 'strong fundamentals in the ecosystem, not just in the economic sense, but also social relations and the political environment.' This relationship with the wider ecosystem, backing by government and social reach gives that seal of approval people need for adoption. Moreover this provides the legal framework the industry needs to function in an above-board manner, ensuring some level of protection for the end user.
Security does not only extend to the dollars and the cents, but to a larger question of data collection. One of the major drawcards of mobile money for business owners has to be the ability to have oversight of buyer behaviour. Person X buys product X with mobile money. Next time they visit they pass through your geo-gate, and you can push them a coupon for that product to entice repurchase. Fabulous! Unless your consumer is more Doctorow leaning. What you do with the data at hand, and how you handle that data all needs to be front-of-mind for a seamless roll out in an economy that does not feel it needs another payment option.
It has to be said the drawbacks do not negate the benefits. After all, this is a conversation not simply about payments but of catalysts. For Mark, digital currency is the spark that lights the flame of innovation, but are we brave enough to get that spark going?
Tech Crunch: The World That Was And Will Be In Mobile Payments | Digital Disrupt: Mark Pesce | A History Of The World In 100 Objects: The World Of Our Making | This American Life: The Lie That Saved Brazil | The Economist: Mobile Money Services - Let Us In |Reuters: Exclusive: IBM Looking At Adopting Bitcoin Technology For Major Currencies |Gizmodo: Is IBM Building Its Own Digital Currency? | Cryptocoins news: IBM and Federal Reserve Want To Create A Bitcoin Knockoff | Forbes: Four Reasons You Shouldn't Buy Bitcoins | Guardian Online: Why isn't the M-PESA effect hitting more countries | Webstock - Cory Doctorow: Light a candle, curse the darkness and win the war on general purpose computers to save the world |