The payment revolution will not be televised (Blockchain Society 5/6)

The payment revolution has been going on for years. In many places it has already happened. Your country might not yet be on the list, but the genie is out of the bottle… And it has nothing to do with Bitcoin, Libra, or any other cryptocurrency.

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Switzerland, November 2019

I am at a gas stop on my way to Berne, to visit my friends. I just finish topping up our gas tank — 39 Swiss Franks— when I realize that all my cash is in Euro. I have no Swiss Franks at all. Fortunately, I still have an account at Postfinance, and their ATM card.

I fumble out the card, and touch it to the RFID reader. The machine thanks me for my service. That’s it.

While my German friend is continuing to drive through the Swiss traffic jam, I am trying to get some internet to contact my Swiss friends on WhatsApp, so I type a code on my mobile to activate a flat-rate package for my old Swiss pre-paid SIM. I get two messages — an “Activation Successful”, and a “You are running out of cash”: the annoying Swiss telemarketers calling me on my Swiss number in Thailand have used up the little reserve I had put on it two years ago. I log in to my Postfinance account — the one with the ATM card —using a mobile app, and top up the SIM with a few clicks.

The rest of my trip to Berne is uneventful, and after a while I realize that I dont’ actually need Swiss Franks after all. All my daily shopping —gas stations, supermarkets, döner kebap stands, the local train tickets, all my food in the next few days, everything gets paid with the same card, no extra charge. Even if all I buy is a $0.60 yogurt.

Unlike me, my friend never even takes his card out. He pays with his mobile. This includes the supermarket cashiers, the restaurants, and also the e-bikes that we rented for a short trip across Berne. Unlock with the app, go to a parking spot at your destination, close the lock — get the electronic bill and the few CHF deducted from your account, based on the km driven. Paying for it involves so little work that it is genuinely confusing. It feels like it is free.

I ended up installing one or two apps (including the e-bike one) but never taking out any cash in Switzerland. And since I don’t use a lot of money, I didn’t even have to type my ATM PIN once. Which is probably just as well, I am horrible with numbers.

A few years ago not using any cash for days would have felt like magic. Except I am already used to it from Bangkok.

Bangkok, Thailand, a week later

I walk into the SkyTrain station, touching my LINE Rabbit card to the RFID reader. The gate opens, and the machine thanks me for my service.

I remember that my LINE wallet is about to run out of cash, so I refill it straight from my banking app while riding the train. It is instant, and free. I could have connected the card directly to my bank account, but I prefer this little extra layer of safety - unlike on my banking app, there is no PIN on LINE Pay.

At my destination, I swipe the card again, and get a notification in my chat client: the system has already deducted the few stations from my LINE wallet — 29 Baht, around one dollar.

I use the same card to pay for my bubble tea at a random street kiosk on my way to class. I receive 10 Baht discount for using the card. At lunch time, I use the same card to pay for my food court at Gateway Ekkamai. Shucks, no discount this time, but it is convenient not to have to stand in line for an extra payment card at the entrance, or to fumble with money or paper coupons while handling your food.

Later, at home, I pay my electricity bill by scanning the barcode on it with my banking app. The payment is instant, and free. Same with the common utilities bill. I never even have to think about my Thai mobile phone bill - it is deducted from the e-wallet automatically every month. I get a LINE notification when it happens.

For dinner, I decide to buy some street food. Sadly, this is one of the few situations in Thailand where I can’t just pay with my card, or a mobile phone app. (Unlike in China, where the vendor or the taxi driver would accept either WeChat Pay or Alipay on his mobile phone, and wrinkle his nose at your attempts to pay with paper money.) So I use my ATM card to get some cash from an ATM next to my apartment. I get an SMS with the amount deducted, before I even hold the cash in my hands. The ATM card happens to be the same card I used for everything else earlier — the Rabbit LINE Pay system is ubiquitous in Bangkok, and so the banks issue their cards with a Rabbit chip built in. (If not for that, I wouldn’t even need the card. I can get the cash at the same ATM by simply scanning a barcode with my mobile phone.)

Just as I walk over to the little series of food stalls at the corner, I get a LINE message from a friend who wants to meet me for Sushi at K Village instead. There go my quiet 1-dollar dinner plans.

I call a LINE MAN taxi instead, which works like Grab, or Uber. With one difference — when I arrive at my destination, the price is automatically deducted from my LINE wallet. There is nothing more to do for either me or the driver. The system knows via GPS that we are at our destination, and has computed and deducted the price.That feels a bit weird, because instead of money changing hands at the end of the ride, there is just a thank you, and a shrug. As if it was free.

I pay with the same ATM card at the Sushi restaurant. Today, I get a 10% discount to use my bank’s card at this place. I only have one. Most Thais have several, and use whichever gets the highest discount at this place today.

We decide to split the bill, so my friend transfers me her half of the price from her banking app, to my phone number, before we even get up to leave. I get the money and an SMS instantly. The transfer — bank to bank — was instant, and free for both of us.

Apart from the street food stalls I have paid everything with one card, and one mobile phone. My entire experience was pretty seamless, and completely free. In fact, a lot of the time I received a discount for not using cash.

Oh, I kept mentioning LINE… What is that?

What it was supposed to be, is a messaging app. What it really is, is everything and the kitchen sink. You can message people, create chat groups, call, video-conference, but also order a taxi or a food delivery service, shop online, read news, and, last but not last, pay for stuff. Like your BTS ride. It is popular in Asia (specifically in Thailand and in Japan, though in Japan mostly as a chat client), and almost unknown in the West. And in most of those regards, it is just like WeChat.

Meanwhile in China…

In China, almost nobody wants your cash, especially not the large bills, because they don’t have enough change for you. Or change, period. They might not even have cash on them.

What they have instead, is WeChat. WeChat is essentially an Internet on its own — a chat app with which you can do everything you can do with LINE, and more. It is also a convenient way — or sometimes, the only way — to pay anyone or anything.

Scan a QR code, enter the amount, press OK. Or let the vendor scan your QR code and confirm the amount. That’s it. Alternatively, select a friend, transfer money, done. More than a billion (1 000 000) people use WeChat, and apparently, over 800 million of them used it to buy Chinese New Year gifts for their loved ones in 2019.

The question, therefore, is not whether we will migrate to electronic payments. This is already happening. The question is only — what final shape will they take?

What about Bitcoin?

Compare the 1 billion WeChat users with the total number of unique BitCoin wallets. How many do you think there are?

The number of unique bitcoin wallets is approaching 50 million. World-wide. Yes, this is a lot. But at the same time, it is unknown how many of those are even active, as opposed to just being throw-away addresses — and even if all of them were, it is less than 5% of just WeChat. In fact, it is less then just the number of users joining WeChat this year. And that, despite WeChat only existing in China, and having to compete with Alipay in the same space. Alipay, which has more than 600 million users active monthly, and 300 million active users daily — 6 times more than the total amount of bitcoin wallets worldwide.

Though if you look at where the highest percentage of GDP is transferred using mobile payments, Asia is only the number two. Number one is… Africa. What do countries like D.R. Congo, Egypt, Ghana, Kenya, Lesotho, Mozambique and Tanzania have in common? They all use M-Pesa. (As, by the way, do Albania, Romania and India.) This system is very different, and would require a separate article to describe.

In fact, most developed (and many developing) countries are trying to adopt some form of electronic or mobile payment — some of them, like Japan, have multiple competing systems that are jostling for dominance. By and large, all of them are free for the consumer. Interestingly, no country I know of is using a “cryptocurrency” to implement it — even though all of them use cryptography. This might have to do with the fact that — as I have mentioned in several articles before —blockchain-based cryptocurrencies are hard to do right, and don’t scale.

The currently emerging model seems to be: in every country that deregulates the financial sector far enough, or gives it a shove in the right direction, multiple competing systems spring up, compete, and then one or two of them win. Mostly, the systems are seamless for everyone who lives in the country — but are sometimes a pain in the neck for foreign visitors.

The current systems work well, scale well — see WeChat and M-Pesa — and the only real challenge is, how do we integrate them. But unlike the many problems with cryptocurrencies and blockchain ledgers, data integration is a solved issue; there are many free and commercial tools on the market making it trivial, many companies that have been doing it for 20 years and more, and the advent of standards like SWAGGER / OpenAPI in combination with machine learning make even those more and more obsolete.

The revolution will not be televised

The payment revolution is taking place all around us. In many places it has already happened. It takes the shape of faster, easier, more modern, better integrated banking; new mobile payment systems making use of RFID and QR codes; “Swiss-Army-Knife” chat clients that try to include everything and the kitchen sink; or encrypted SMS and e-wallets stored on your mobile phone. Many of the newer systems make PayPal obsolete via better integration with your bank account (for example, “paydirekt” and “Sofort” in Germany or “PromptPay” in Thailand), or cheaper prices. The days where the banks can wait days before transferring your money between accounts are numbered. In some countries, like Thailand, most private payments and transfers between banks are already instant and free, and this will just become more and more common. If there is a future for cryptocurrencies, the replacement of traditional banking, electronic payments or the mobile payments is probably not going to be it.

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