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Why Payments Are Hard, Even For Apple And Google

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Re: Why Payments Are Hard, Even For Apple And Google

#31

Post by ryanwaggoner »

thinkcomp wrote: post #22
jaskerr wrote: post #20

Earlier quoted context omitted.

I'll bite ... what is it about their reader / product line that makes it equivalent to a "gorgeous eight-track"? I've thought the reader looked a bit fragile (and wouldn't hold up to heavy use), but that doesn't make it obsolete right out of the gate.

The next generation of payment technology will not be plastic card-based or involve a magnetic strip. They've created a really nice magnetic strip reader for plastic cards. It's kind of making the most amazing tape deck ever right before the mass distribution of Audio CD. Certainly it's an impressive feat of engineering and design, but it's not what I would pour my time into as an entrepreneur or my money into as an…

And that's probably why they'll win. This generation of payment technology isn't going away in the next 12-18 months. I bet we won't see the next generation surpass this generation (in usage) for at least five years. During that time, someone like Square can build tremendous momentum and relationships that will allow it to much more easily transition to the next generation, because it has a strong brand, strong relationships with the marketplace, and corporate competency in the space.

For a fantastic example of what I'm talking about in another space, see Netflix.

Re: Why Payments Are Hard, Even For Apple And Google

#32

Post by bigiain »

I wonder if Google's smartphone Google Authenticator app and three factor auth will prove to be a competitive advantage for them in the payments space?

Given the choice between a Paypal and a Google Checkout option, I think I'd be significantly more likely to choose to use a 3 factor authorised Google service over an emailaddress/password authorised Paypal one (especially if I was using an untrusted network)

I'm not sure Apple would be able to ramp up a cross platform 3 factor auth system particularly quickly... (seeing iTunes on Windows makes me suspect market takeup of "iThirdPartyAuth on Android app(tm)" isn't going to be world-changingly rapid...)

Re: Why Payments Are Hard, Even For Apple And Google

#33

Post by thinkcomp »

ryanwaggoner wrote: post #31
thinkcomp wrote: post #22

Earlier quoted context omitted.

The next generation of payment technology will not be plastic card-based or involve a magnetic strip. They've created a really nice magnetic strip reader for plastic cards. It's kind of making the most amazing tape deck ever right before the mass distribution of Audio CD. Certainly it's an impressive feat of engineering and design, but it's not what I would pour my time into as an entrepreneur or my money into as an…

And that's probably why they'll win. This generation of payment technology isn't going away in the next 12-18 months. I bet we won't see the next generation surpass this generation (in usage) for at least five years. During that time, someone like Square can build tremendous momentum and relationships that will allow it to much more easily transition to the next generation, because it has a strong brand, strong relat…

Maybe. But relationships with whom? Why would a large retailer want to use Square? Why would a competing point of sale vendor with an enormous installed base want to work with Square?

Netflix isn't a very good analogy. The retail payment space involves a three-sided market: consumers, merchants and POS vendors. Netflix didn't even have to struggle with the complexity of a two-sided market. Though it's done well for itself, it also hasn't completed rendered the previous standard useless. Plenty of people use DVD and Blu-Ray today.

I think your view is possible but I'm not sure I understand the details. In contrast, I can answer both of those questions given the model for my company's technology.

Re: Why Payments Are Hard, Even For Apple And Google

#34

Post by saturnine »

mjfern wrote: post #12

>In addition, you only get the bank’s confirmation of the payment 3-5 days (in the US) to 3 weeks (in some EU countries) after the payment attempt. I find it surprising that it's been 15 years since the commercialization of the Internet and (near) instant global data communication and it still takes banks 3-5 days to confirm payment (e.g., the time it takes to send a physical letter, coast-to-coast, via the USPS). Th…

if banks could confirm electronic transfers within a few seconds

Banks do this millions of times each day on the global ATM network. I can swipe my bank card at most any ATM in the world and within seconds the funds are removed from my account and dispensed into my hand.

In that case, the card is indirectly linked to my bank account. It's only when you know the exact bank account and routing number from which you want to remove the funds that you're forced to use the archaic ACH system.

Clearly the technology for instantaneous confirmation of funds transfers already exists, but it has yet to be expanded beyond its original purpose.

Re: Why Payments Are Hard, Even For Apple And Google

#35

Post by jules »

lsc wrote: post #30
jules wrote: post #25

Earlier quoted context omitted.

And all of this because the credit card model is fundamentally flawed. When buying something it's like sending the seller a trivially copyable key to your vault and letting him get the money he wants.

While I agree that credit cards could be a whole lot more secure (using the same token for identification and authentication is just plain stupid) fixing that still leaves you a long ways away from solving the fraud problem. E-gold used username/password pairs and seemed to be making pretty good progress towards solving the 'using someone else's account' kind of fraud. The kind of fraud that killed e-gold (and I thin…

That isn't a harder problem. It's a much much easier problem. YOU can decide where to buy from. It's a much saner system from both the customer and the seller's perspective.

And it works right now. In the Netherlands there is a system called iDEAL that works like this:

1. You go to a seller's site e.g. bol.com (which is like amazon). 2. You fill your cart and click checkout. 3. You get sent to your bank's site with a page that displays the amount and a button "pay". 4. The bank then transfers the money to bol.com.

Re: Why Payments Are Hard, Even For Apple And Google

#36

Post by lsc »

jules wrote: post #35
lsc wrote: post #30

Earlier quoted context omitted.

While I agree that credit cards could be a whole lot more secure (using the same token for identification and authentication is just plain stupid) fixing that still leaves you a long ways away from solving the fraud problem. E-gold used username/password pairs and seemed to be making pretty good progress towards solving the 'using someone else's account' kind of fraud. The kind of fraud that killed e-gold (and I thin…

That isn't a harder problem. It's a much much easier problem. YOU can decide where to buy from. It's a much saner system from both the customer and the seller's perspective. And it works right now. In the Netherlands there is a system called iDEAL that works like this: 1. You go to a seller's site e.g. bol.com (which is like amazon). 2. You fill your cart and click checkout. 3. You get sent to your bank's site with a…

That's almost exactly what e-gold did.

They stated as a design goal that you shouldn't be able to back out of a transaction once it's gone through. The problem was that the system became popular with sellers of fraudulent goods, and this does, eventually, start to cause problems.

I suspect that iDEAL has some way of letting you report fraud and get a refund from your bank if you get ripped off. they probably have some form of chargbacks, etc.

Re: Why Payments Are Hard, Even For Apple And Google

#37

Post by jules »

lsc wrote: post #36
jules wrote: post #35

Earlier quoted context omitted.

That isn't a harder problem. It's a much much easier problem. YOU can decide where to buy from. It's a much saner system from both the customer and the seller's perspective. And it works right now. In the Netherlands there is a system called iDEAL that works like this: 1. You go to a seller's site e.g. bol.com (which is like amazon). 2. You fill your cart and click checkout. 3. You get sent to your bank's site with a…

That's almost exactly what e-gold did. They stated as a design goal that you shouldn't be able to back out of a transaction once it's gone through. The problem was that the system became popular with sellers of fraudulent goods, and this does, eventually, start to cause problems. I suspect that iDEAL has some way of letting you report fraud and get a refund from your bank if you get ripped off. they probably have som…

It works like wire transferring money to the seller, you get the same rights and protections. In fact it is wire transferring money to the seller.

Charging back is not easy, but it is not a problem in the least. It's only a problem when you buy from people you don't trust (but then I wouldn't want to give them my credit card number at all!). This does happen on sites like ebay. The risk is moved from the seller to the buyer. For sites like ebay you need a middle man to be safe, only now you need it as a buyer instead of as a seller.

Re: Why Payments Are Hard, Even For Apple And Google

#38

Post by mgkimsal »

thinkcomp wrote: post #29
mgkimsal wrote: post #23

Earlier quoted context omitted.

What's cute is that much of the time when I pay for something it's instantly charged to my card - my account balance reflects the deducted money, whether it's been actually moved out to the other account or not. But if a merchant gives me a credit/refund, it can take several days for that to show up - some places will say "two billing cycles" (although they have no idea how long my billing cycle is - I presume they m…

That's because the plastic card interchange works in real time and ACH does not. Even your charge cards have a delay, though. There's a difference between authorizing a purchase and capturing the funds. Once funds are captured there's still a batch settlement process that happens each day. So it's not really that big of a conspiracy; the players aren't even the same.

Agreed on auth/capture/settle - it's possible it could be different though, we just have an entrenched group of players that prefer the status quo.

Re: Why Payments Are Hard, Even For Apple And Google

#39

Post by andymurd »

saturnine wrote: post #34
mjfern wrote: post #12

>In addition, you only get the bank’s confirmation of the payment 3-5 days (in the US) to 3 weeks (in some EU countries) after the payment attempt. I find it surprising that it's been 15 years since the commercialization of the Internet and (near) instant global data communication and it still takes banks 3-5 days to confirm payment (e.g., the time it takes to send a physical letter, coast-to-coast, via the USPS). Th…

if banks could confirm electronic transfers within a few seconds Banks do this millions of times each day on the global ATM network. I can swipe my bank card at most any ATM in the world and within seconds the funds are removed from my account and dispensed into my hand. In that case, the card is indirectly linked to my bank account. It's only when you know the exact bank account and routing number from which you wan…

I have been a banking programmer for some large European banks, so whilst I can't speak for the US system I can describe the way ATM transactions work in the UK, Germany & Switzerland.

Making a withdrawal from an ATM/ePOS does not debit your bank account immediately, but it does reduce the limit (i.e. available funds) on your card immediately. Checking your "balance" at an ATM shows the card's total available funds, not your bank account balance.

ATM operators are often not the same as your bank, even though they may show your bank's logo at the top. There are fees at every stage of the transaction so ATM operators and ePOS transaction acquirers can decide whether to ask your bank/VISA etc whether you have the funds. For small, low risk transactions they will often wait, preferring to batch a bunch of debits to a single institution at a quiet (cheaper) time of day.

Your card is reconciled with your bank account daily (usually daily). A payment to a third party takes longer - the payee's bank needs to complete reconciliation too and, as other commenters have pointed out, the network breaks sometimes.

Banks can improve the time it takes to transfer funds to third parties and have done so in many countries but it has taken government intervention. The float does play a part, but getting competing banks to agree to a standard is almost impossible.

Side note: Your card has many, many limits most of which you will never encounter. Examples: total cash per ATM per day; number of cardholder-not-present transactions per day; total spent in gambling establishments per month.

Re: Why Payments Are Hard, Even For Apple And Google

#40

Post by thinkcomp »

mgkimsal wrote: post #38
thinkcomp wrote: post #29

Earlier quoted context omitted.

That's because the plastic card interchange works in real time and ACH does not. Even your charge cards have a delay, though. There's a difference between authorizing a purchase and capturing the funds. Once funds are captured there's still a batch settlement process that happens each day. So it's not really that big of a conspiracy; the players aren't even the same.

Agreed on auth/capture/settle - it's possible it could be different though, we just have an entrenched group of players that prefer the status quo.

It definitely could be different. That's why I'm working on FaceCash.
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