Governments Must Act on Digital Payments

Unfortunately today the Web is straddled with a very uncompetitive payments system dominated by banks guarding their monopoly. We need a frictionless, ubiquitous payments system to efficiently exchange value as we communicate and collaborate with our networks with no additional charge for moving money internationally and no long delays in processing transactions.

The banks and credit card companieshave built a proprietary, locked-down system that despite substantially lower costs for computing, storage and communications they are charging similar fees as they did 50 years ago.

Daniel Roth at Wired warned the banks “it’s safe to say that the payment industry is going to change dramatically. As money becomes completely digitised, infinitely transferable, and friction-free, it will again revolutionise how we think about our economy.”

People expect Governments to protect consumers with a sound and just legal system. The 19th century scammers and snake oil salesman were slowly shut down by consumer protection legislation and the system continues to work today because offenders can be exposed by the trashy but popular current affairs programs. Whilst most of our economy was not conducted online we might have tolerated an unregulated, unenforceable, buyer beware online commercial environment but not now!

Not only must a payments system be safe, secure and trusted it must also be extremely easy to use. Digital payments need to use a device people are already carrying; a smart card that replaces all credit cards or a mobile phone. The mobile phone is winning so let’s go.

Public-key cryptography has developed commercial systems where it is extremely difficult, nearly impossible, to determine the original information starting the transaction. Today credit cards could display a number that changes every 30 seconds so that your credit card identity can never be stolen and again this is easy to do on a mobile phone. Effective online consumer protection is available now but it may take government regulation to make the banks responsible for protection of transactions and the identity of their customers.

Just as child protection laws provide safety for children and consumer protection laws create a safe and reliable place for commerce we should look to our governments to provide the same in the online space because without feeling safe and secure there will be no trust and without trust we will not achieve the potential productivity gains that are necessary to achieve the potential benefits from this digital canvass where we can create better ways of working, learning and living.