Although you may know me more for my musings on traffic theory and becoming immortal, this post focuses on the increasing ease of exchanging money within our daily lives.

In the Beginning

You see, in the beginning was the bank and the bank stored all the gold.  Accessing the gold required going to the bank and withdrawing it for use in the market place.  As new modes of communication evolved the methods of exchanging money became easier and easier.  You now have ATMs replacing banks for dispensing cash, e-commerce replacing brick-and-morter, and PayPal replacing Western Union.  (Ok, so perhaps replaced is a strong term, instead these services supplemented the older forms of exchanging funds.)

Throughout time one thing that held true was the relationship between the merchant and the consumer.  The merchant was typically a company and the consumer an individual.  Common area market places such as eBay helped break down the walls and enabled individuals to sell items to other individuals, but still these required a virtual store front.

New Merchant Class

The term merchant is slowly being democratized in the open market place as individuals accept and exchange digital funds through fluid, simple, and inexpensive methods.  There are a number of factors that influence this new merchant class, so let’s go into a few.

  1. Increasing number of Payment Service Providers: The affect of Web 2.0 and social media applications have catalyzed the marketplace for new methods of exchanging money in both a virtual environment (Facebook, Second Life, Zynga) and via emerging payment methods (Spreedly, PayPal PayFlowPro, iPhone applications).  The lines between the individual and the merchant are blurring to the point that exchanging funds can be done more fluidly than ever before.
  2. Increasing number of payment integrators: With this increase in the number of payment service providers comes a wave of new businesses that aim to support the new merchant population.  With new merchants come new point of sale third parties who wish to sell them services and support.  More and more service providers are appearing with an ever greater list of services they are offering to the new merchant class.  Each of these new services providers may act as a vector or path through which an attacker can access payment data.
  3. Becoming a merchant is easier than ever: In addition to the new methods of accepting payments, merchants can go mobile faster than ever.  Instead of accepting cash only at the local farmers market, the new merchant class will gladly accept major payment cards via their Square or VeriFone PAYware enabled iPhone.  This level of service, once reserved for more established merchants, is now being disseminated into the hands of the masses.
  4. Chip and PIN increasing: Chip and PIN or EMV has seen great successes in reducing card present fraud in Europe and Asia.  This technology recently jumped-the-pond and was adopted for implementation in Canada.  It’s only a matter of time before merchants in the US begin to see Chip and PIN technology rolled out to their personal cards and then to their retail locations.
  5. Cost cutting is key: Previous approaches to compliance were via the mass adoption of security technology.  These days merchants are more cost conscious and agile in their approach towards compliance and security.  The new merchant class calls for reduced costs through new technology such as point-to-point encryption and “tokenization”.  They are happy to exchange the flexible use of payment data for the security and cost savings of scope reduction.  They are looking for overlapping regulatory controls to kill multiple birds with one stone.  They don’t want point solutions but instead comprehensive approaches towards security.  They want strategy, flexibility, and mobility instead of “solutions”.
  6. Training and education needed: In order to achieve these goals: adopt new technology, reduce scope, and leverage internal employees there is a great demand for education and how they can achieve all this.  The need is stronger than ever for an educated merchant class who understand the tradeoffs and can make strategic decisions that balance not just compliance but also business directions.

Future of Electronic Money

Today we see the break down from traditional models and democratization of technology that equips and enables mobile merchants.  Taking this to its natural evolution we will next see the seamless move towards person-to-person transactions where exchanging money is as simple as taping your mobile phone against that of another.

  • Want to split the dinner bill five ways? Put all your cell phones back to back and shake them in unison and the bill plus tip is split five ways and paid!
  • Do you owe your friend $10? Pay them via email!

The barriers of exchanging proverbial gold are dissolving and those that enable this new future will be the ones who survive and rise to the top.