Join the Community

20,823

Expert opinions

43,682

Total members

385

New members (last 30 days)

165

New opinions (last 30 days)

28,189

Total comments

Join Sign in

Payments - Or a Wink and a Nod!!

03 April 2012 2 comments

Advait Rege

Principal - Business Consulting

Infosys Limited

Read this story..

"Pay by Face you fools"

https://www.finextra.com/news/fullstory.aspx?newsitemid=23584

Very interesting because, it takes us towards the Utopia..

But more interesting because it reminds me of how the more things change the more they remain the same (or return to basics).

For instance, a typical transaction at my local vendor goes like this.

‘I walk in and look him in the eye. He sees me over a number of other customers and acknowledges me (as do his minions who are constantly looking at him and the entrants in the shop) – KYC, face recognition rolled into one). The shop owner’s acknowledgement is enough to allow me a free run in the shop. I pick up a few items. On my way out, I show them to him. He looks at them, jots them down in a rough pad (if they are a couple of items) or notes them in a book specifically meant for me if they are more than a few – (I get credit as well without a card mind you). I walk out with the goods.’

Not a word is spoken in this whole transaction (STP). All behavior is implicit (or is it standardized?).

Once in a month – I pay him and the transactions continue in the same fashion.

I understand that the above transaction might be difficult to implement in the practical world – but that is exactly what is happening. From the customer perspective, as long as I can wave my hand or nod or wink my payment instruction or a request for credit, I don’t really care, what intricate technology is being used to close out the transactions.

I am trying to ask an even more basic question though.

While we all agree that compensation is necessary for services or products, is Currency the only means of settlement? As a customer, is it possible for me to NOT PAY in the traditional form (currency) and yet enjoy the services. Imagine the savings in transaction costs.

We already have Pay Before (Pre-Paid), Pay Now (transactional basis) and Pay Later (credit). How about we work towards a ‘Pay Never’.

Still thinking on how that can be operationalized..:-)

This content has been created by the Finextra editorial team with inputs from subject matter experts at the funding sponsor.

3552

Report

Channels

/payments

Comments: (3)

John Dring Digital Services and mCommerce at Intel Network Services

04 April 2012

I like it. But note how in your example it is the shopkeeper/merchant who assumes all the risk. I mean, one month you may just leave and forget to pay, or you might actually die naturally aged over 100 of course and then who pays the merchant.

Most of the technological solutions to buying stuff have a lot of thought to where the risk is left, and how to minimise it. Even in the Pay Now scenario, there is often a window of time where one payee can lose out (2-phase commit stops the online case).

As for Pay Never - I guess you mean the barter system? You run up some credit and sometime later you 'repay' with some other service to the value of the credit. No money involved? For example - perhaps you supply the shop with some goods which offsets your debt. The operationalisation of this is basically a stock market - where the value of different goods and services is continually traded and changing according to supply and demand.

Report

Ketharaman Swaminathan Founder and CEO at GTM360 Marketing Solutions

05 April 2012

@Advait R: Great post! I especially liked your KYC, face recognition and STP analogies.

@John D:

You make a valid point around the role of technology in risk attribution / mitigation.

However, awareness of risk and how it is handled are highly dependent upon local business culture. Having spoken to many vendors of the type exemplified by Advait R - in the course of pushing retail payment technologies, I must add - I am fairly sure that they will have the following answers ready when the risk of default is pointed out to them: (1) If my customers delay payments, I will keep knocking on their doors so persistently that they will risk losing face with their neighbors and eventually cough up their payments (2) Very few people do such vanishing tricks; even if they do, there will be somebody else in the same house who I can grab to realize my payment (3) Children and grandchildren do most of the shopping for old people, very low chances of default due to natural death; in any case, my risk is limited to one month's shopping and it is bad karma to chase up for such a paltry amount from a dead person's relatives. While I may or may not agree with the form of risk management followed by the vendor, I have to accept it as a given.

Besides, it's not as though payment technologies do such a great job of risk management. By focusing on eliminating risk of defaults, they introduce other - and arguably far greater - risks viz. potential loss of revenue from shopping cart abandonment, false positives, and so on. While some other technology does come along to solve these problems, we go back precisely to the crux of this post, namely, how the more things change, the more they remain the same.

Report

Advait Rege Principal - Business Consulting at Infosys Limited

Author 11 April 2012

@ John D. POint well made about how payments technology tries to minimise risk or indeed appropriately assign it in the course of a transaction.

@ KS - I liked your reply about the difference between risk awareness and risk mitigation. As with my local vendor, I am sure his credit lines are not uniform and are based on an astute understanding of the client and her creditworthiness.

Report