A recent article in the Financial Times on the purchase of Worldpay by Vantiv contained this gem, which encapsulates the debate around going cashless:
“Mr Jansen says Worldpay can respond by selling extra services to its customers based on analysing all the data from the 41m transactions it handles on an average day. For instance, it can tell a florist at what time of day rival stores in the same area are selling most products.”
Data is useful. But do you really want your competition to know what time you sell the most merchandise? Would that not be handing them them the opportunity to undercut you by targeting special offers for just that time? Will this not trigger a “race to the bottom” as businesses vie to undercut each other?
And here is another aspect to consider: to whom does that data belong? Obviously in this case, to the payment company. After all, the florist is using the payment company’s platform.
But, the payment is between the client and the florist. The client initiates the transaction (12 roses, please), the florist executes the request (here you go, sir). The platform is just an intermediary. But who has the ultimate power over the business? The intermediary, especially if it can choose to help the business’ competition.
How could a business work around this and still use the convenience of a service like Worldpay? Perhaps Worldpay could offer an opt-out service. Businesses could pay a fee to have their data not sold to the competition. Although doesn’t that sound a bit like extortion?
This increasing power, which can be used against the very businesses the payment platform is supposedly helping, could be enough to discourage businesses from using such services.
Which brings us back to the cash vs. digital payments divide. To keep its business metrics private, florists and other small enterprises would have a good incentive to stick with cash. It’s the ideal transmission mechanism when private contracts are involved.
It is, however, clunky, costly, relatively inconvenient and has certain security vulnerabilities.
If I were the florist in the example, I’d be contemplating setting up my own payment… not sure what to call it… “walled garden”? An electronic payment method, the data of which stays with me. I’d share aggregate information with the tax authorities and my bank, but the privacy of the information would reflect the privacy of the contracts between me and my clients.
Maybe this is where the innovations in the payments space will end up. The winner could be a service that respects the sovereignty of data. “Here, use my platform, set up your own walled garden, you own your client information and business metrics, check out these functions that allow you to do targeted promotions, all I need is aggregate information for compliance, oh, and this is my hefty fee.”
Such a platform could also kickstart the proliferation of seamless loyalty programs (no extra work from the client required). For instance, for each rose you buy, you get a flowertoken, which is attached to the identity automatically created when you pay with your mobile phone. You can, if you wish, use your considerable flowertoken balance to pay for the next bunch of flowers.
Flowertokens could become a type of money.
This idea (which may already exist, I confess I’m not a payments expert but I do enjoy thinking about these things) would take us a step towards the society predicted by David Birch, in which hundreds of different currencies happily co-exist, managed via very clever apps in our smart devices.
Oh, oh, oh, and I could do a flowertoken initial coin offering. Issue tokens on a blockchain, get tons of money up front.
I’m off to register the business now.