At dinner parties, I see people get a little bit glassy-eyed when I tell them that I spend my days working in digital economy strategy: that I focus on emerging payments, mobile commerce, and digital ID and authentication.
They don’t really understand why I believe so strongly in the need things like a new framework for digital ID and authentication that allows us to maintain privacy while identifying ourselves online and new framework for secure, ubiquitous, near instant payments.
The trick, of course, is to find a way to make these concepts relevant to them:
- In the case of digital ID and authentication, I point out that today they can pay for their kids skating lessons online, but that they cannot sign the liability waiver online…That when they buy a house, there is an incredible amount of paperwork required in order to document the transaction, and attempt to prove who they are.
- Mobile commerce is even more exciting. As someone who occasionally forgets his wallet at home, I can’t wait for the day when I can get through the day by paying for my lunch etc. with my phone. (Because of course I might get all the way downtown before I realize that I’ve left my wallet at home, but I always know where my phone is).
The reality is that payments are not really an issue for most consumers and retailers - but that there a lot of improvements to the retail experience that can be made by bringing commerce right to the tips of my fingers.
When I am inside a store, if I want to know the price of something, it shouldn’t be dependent on the item having a price tag. I’d also really like to be able to look up ratings and recommendations, ingredients, and recall and safety reports on products before I buy them. Even better, I would love to be able to just scan the item, pay, and receive my receipt all on my phone rather than having to wait in line to pay. Check out Apple’s Apple Store App for this functionality.
- The need to reinvent payments is tough to convey to people until you ask an entrepreneur how hard they have to work to simply pay their taxes… just like I did this week. Read on and tell me if today’s payment system makes sense to you.
I instructed my financial advisor at one major financial institution (Bank #1) to liquidate a few short-term positions from my corporate investment account and help me move $20,000 into the corporate bank account at another major financial institution (Bank #2). I then walked across the street to Bank #2.
The teller at Bank #2 informed me that the cheque that I received from Bank #1 would be held for five business days because they see an exceptional number of fraudulent checks.
Here were my options as offered:
Cheque: Bank #2 would place the five-business day hold on the funds.
So I said – oh jut give it back to me. I’ll take it back, pay the $25 to have it certified and then bring it back to you…
b) Certified cheque: apparently certified checks are also commonly forged these days, and therefore they are no longer considered reliable or “certified”. For the privilege of receiving a useless certification, Bank #1 would charge me $25, and Bank #2 would still place a hold on the funds for as long as would take to confirm the availability of funds. The teller at Bank #2 estimated that it would take 24 to 48 hours for him to work with his fraud department to contact Bank #1’s fraud department, who would contact the branch issuer (my financial advisor’s office) and then get the information flow back.
c) Use my credit card as a transfer account: I could have Bank #1 place the $20,000 onto my personal credit card, and then have Bank #2 reverse the payment into the corporate bank account. This sounded like borderline fraud, and if I wasn’t careful, it actually could easily have been fraud, not to mention an accounting nightmare.
d) Interac eTransfer: I could have Bank #1 place the money into my personal account, and then conduct ten $2000 email money transfers over ten days. ($2000 being the daily limit for that product). *Note: Interac eTransfers cannot be done by a company, only by people. Again, this struck me as borderline fraud.
e) Wire transfer: this could be done within eight hours if I took all of the appropriate account information from Bank #1 to over to Bank #2 and if I was lucky, and the transaction was initiated early enough in the day, it might only take one day.
f) Cash: to my total surprise the teller at Bank #2 actually suggested that it might be easier, and certainly faster if I were to ask Bank#1 for $20,000 in cash and walk it over to him. However, a cash transaction in excess of $9999 has to be reported to FINTRAC (Financial Transactions and Reports Analysis Centre of Canada), because people simply don’t do large cash transactions. This is such an irregularity that performing the transaction would flag me as a potential terrorist, or member of organized crime trying to launder money.
*Note that the last time that I attempted to do a cash deposit of $11,000 into a major Canadian financial institution, they declined to accept the money, citing the overhead of reporting the transaction to FINTRAC. Of course this is in contravention to FINTRAC guidelines, which says that the bank should accept the transaction but flag it so that FINTRAC can have more data.
In this day and age, in which I can post these ideas in just a few minutes and share them around the world to a virtually unlimited number of people; in which I can send a text message, an email, or other electronic communication in mere seconds; it takes a minimum of eight hours and up to a week and a half to send money across the street from one bank to another electronically, and tellers are still encouraging people to take out wads of cash.
Friction in today’s systems is driving people towards the grey economy, and opens up the door to significant fraud and tax evasion. Friction in today’s systems is an unnecessary burden and restriction on Canada’s ability to have a digital economy.
Canada needs a new framework for digital ID and authentication to allow us to securely transact online while maintaining our privacy.
Canada needs a new framework for secure, ubiquitous, near instant payments.
The good news is that I’m not alone in believing that digital ID and authentication and real-time transaction clearing are key to Canada’s nascent digital economy.
Some leaders in Canadian governments, financial institutions, telcos, and payment companies and others are already thinking about how to make a shift.
The bad news is that whatever we do is not going to take place in time for me to more efficiently pay my taxes for quite a few years.
