I’ll say this for bitcoin: it’s got a whole new class of people, like Matt Levine and Guan Yang, increasingly interested in one of my longstanding obsessions — payments. (You might be surprised to learn how hard it is to get people interested in payments.) Guan’s post, along with the response to it from Simple’s Shamir Karkal, provide a techie’s viewpoint into a question which many non-Americans have when they start living in this country: how on earth can can moving money from one person to another be so difficult, expensive, and time-consuming?
The smart cards, just tap two card together?
The simple answer, as Karkal hints at, is that we’re suffering from a particularly toxic combination: an outdated payments system combined with a seemingly powerless central bank, which is happy to let the big banks dictate the pace of change (or lack thereof). And as American Banker’s Kevin Wack explained in a great piece last November, the big banks are very good at vetoing even incremental improvements in the US payments infrastructure.
Silicon Valley is going to bypass the banks in this one, just like the crypto currencies do. Retail chains will love the concept, cheaper, faster, and it allows specialized crypto dicount coupons, of their own design.
Realistically, that upgrade can only be overseen by the Federal Reserve — an entity which doesn’t feel empowered to enforce such a thing. Until then, as Guan says, “US Dollars, while a good store of value and unit of account, are also terrible for making payments.”
No, Silicon Valley will market this directly to the WalMarts, Home Depots, and OverStocks. These vendors, and the grocery chains will be all over this. Low transaction cost, cheap technology, multi currency; the smart card, it is happening.
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