bye bye banking, entrez-vous payments (part I)

International turmoil hits the streets as the public discovers the real face of financial institutions. Surely, the price of money indicates a market. When that market is disturbed it loosens the cannon. There comes politics, alarmed by the ever looming issue of trust. Distrust between states, multinationals and citizens is widely known as the perfect cocktail. For social instability and unrests, that is.

Direct effects, such as shortage of credit, influence investments. In turn, this affects macro-economic performance. Governments supporting financial institutions start seeing other industries knocking at their door. Just now the telecoms industry is worrying. No doubt business will be affected by the shortages and market volatility.

However, while banking has lost its attractive karma of trust and stability, payments are hot. Apart from western propensity to consume, the trend of alternative means for payments is firmly settled, even in developping countries. Kenya, in this respect, is at the very forefront of mobile payments.

Now let's take a close look at consumer payments. Direct clearing of the transaction has become standard procedure in electronic payments. Since transactions are 'measured' in valuta, actual volumes flow back and forth according to the banking scheme. Due to the bank's business model this volume's are used for lending, investing or both. Payments are thus part of the money flow.

Telco's billing systems bear resemblance to this scheme. Operators offer credits in terms of minutes and are able to ensure direct clearing of the transaction. The scheme is fundamentaly different. Banks enable inter-institutional transactions between aquirering and issueing counterparts. A telco does transactions between customer and..itself.

Payment scheme's such as premium SMS are in place, so not all is lost. However, unleashing the potential of a bank-like scheme is desperately needed.

For starters, imagine the components:

A trusted party such as your telephone company. It is well known for one aspect that comes in time and seldomly diverges from the truth: the BILL. Accordingly, mobile telephony is post paid, so credit (and risk) is agreed upon at the start of subscription.

A trusted system such as interconnection. Little is known by the public but the fact that calling succeeds most of the time (fees and costs are delibrately left out of this picture, as are interbanking fees).

A trusted fysique: the cellphone. Well known to be part of the holy consumer trinity of wallet, keys and phone.

[later more on payments]