Buried amidst the fanfare surrounding the iPhone 6 and the iWatch is a technology with a great potential for huge changes in the way we pay for goods and services: Apple's digital wallet. Edward Castronova and Joshua A. T. Fairfield have a compelling op-ed in the New York Times that discusses the potential - and far reaching - implications this technology could bring about as it becomes more widespread.
Up to now, the only currencies you could use everywhere in an economy were state-issued currencies, like the dollar.But that distinction is eroding: After all, the value of a currency lies in what you can buy with it, not in the fact that a government says it’s worth something. So if I want to buy a widget, and the only thing I can use to buy it is Widgetcash, then I am willing to trade dollars or euros or anything else for Widgetcash. When I buy something with Widgetcash, it doesn’t go through any bank.
That’s why a digital wallet, loaded with your dollars, credit and loyalty points, is such a revolutionary technology — it makes those transfers and transactions seamless and safe.
In essences, what the authors are describing is a vast trading regime that allows for the exchange of everything that can be used to purchase goods and services, not just government issued currencies. In other words, expect to see ticker symbols for airline miles and even, Best Buy Points, another example cited by the authors:
The revolution is what comes next: an exchange that connects and trades these different stores of value to find the most cost-efficient one to use, both within your wallet and between wallet users, worldwide. Let’s say you want to buy an audiobook from Best Buy. It costs $16, or 1,000 My Best Buy points, or M.B.B.P.s. Your wallet contains several hundred dollars and 200 Best Buy points. The wallet software automatically determines that, at the current exchange rate between M.B.B.P.s and dollars, it is better to buy using the points.But then let’s say you only have 50 M.B.B.P.s. The wallet system searches its clients and finds someone — call her Hannah — with enough M.B.B.P.s for the transaction. It buys the audiobook with her points and sends it to you, and sends Hannah dollars from your account.
Following Bitcoin’s protocol, the wallet software broadcasts these transactions to the network, and every wallet in the world updates the M.B.B.P.-to-dollar exchange rate.
How do you guys see this panning out? Will we see airline points attached to ticker symbols and cash value? Are the authors getting ahead of themselves? Or is this the future of transactions?
This sounds like a lot of the irrational exuberance that we saw with Bitcoins, Dogecoins, and the like.
No, just no.
I think the question shouldn't be how great is the wallet, but the rate at which NFC transactions take off. NFC (Near Field Communications) has been around 2002, when Sony and Phillips first started designing the specifications for NFC. It didn't start to become commercialized until about 3-4 years ago, especially when it became integrated into Symbian OS and Samsung/Google announced that the Nexus S would be the first NFC Enabled Android device.
What you have is a mobile transaction platform that could completely take off if its done right, thanks to the addition of Apple. I don't think you'll have this exchange rate and smart functionality like the Op Ed is proposing, but I think that the tap to use functionality and being able to choose if you want to use BestBuy Points or AMEX will be present. I think that no one in their right mind would agree to having their points platform be tied to exchanges like that and that is extremely far out of the realm of possibility. I think that Apple may be the necessary push for NFC transactions, but I don't just seeing it expand far beyond using the cellphone as an alternative means to pay for things instead of pulling out a credit card.
I really like my Microsoft points
Revolutionary? Are you kidding me? Mobile payments have been around for years, as those who don't worship at the altar of Apple know.
Then you miss the point of Apple joining the NFC world. I suppose you're the Android Douchebag who believes this:
I'm not an Apple Fanboy but even I can acknowledge the effect that Apple embracing NFC payments has in the US. Yes, the world has been using NFC since it was first integrated into Symbian OS, but in the US, no one uses Symbian. Sony and Philips started development on NFC because they saw it was a the way of the future. Now that Apple has embraced it, the question is will it take off in the US like it has in the rest of the world.
You know what's awesome for paying for goods and services? US Dollars.
Actually, apple has already decided to corporate with UnionPay. Personally speaking, digital wallest still has long way to go due to potential barriers like regulation and technical stability…
Just another device to carry around. This is why I never bothered buying a tablet.
The whole point of a rewards program attached to a credit card is to entice you JUST enough to make you choose that credit card over another. Credit is credit; the rest is branding and the potential for a slightly higher rewards rate. This would simply make everyone's programs go straight to the lowest common denominator as i'd argue many of them are based on people simply not knowing any better or redeeming them for stupid things.
What you are describing is a P2P transaction system which you'd have to get buy in from all the points carriers, etc to do which will require as I mentioned a substantial watering down of reward points anyway. This is pie in the sky academia at it's finest.
Digital wallets have been around and although they may not have been as easy to use, which is really all that matters when it comes to an Iphone, you could have said this about any of them. I laughed when they talked about a secure and seamless platform; there will be absolutely nothing 'secure' or 'seamless' about any of this. It will be a messy uphill battle at every turn. Yes, wallets will be gone one day and we will embrace digital tech as a means of payment. Yes, this is a good start and since it has the cachet (branding) it might catch on to a greater extent in the US but let's not go crazy here and think that we are magically turning water into wine.
revolution? no. vicious battle for US market share between ebay, google, Amazon, and apple? yes.
I'm also not buying the "points" thing. doomsday preppers, conspiracy theorists, occupy wallstreeters, and the winklevii will all circle jerk to the idea of circumventing fiat currencies, but I just don't see it happening. of course, I could be wrong, I just don't see the benefit unless you share a specific ideology.
yawn
by the way OP, how do you get all of your posts instantly homepaged? is there some secret thing I don't know how to do when I post a topic?
I don't think this is going to be a vicious battle in the already ridiculous phone space. I think that this is just a matter of expanding how payments are accepted. The only difference between this, EZ-Pass and something like Mobil Speedpass is that one uses NFC as its communication method and the others use RFID. If this was going to be a vicious battle, then why is there a consortium of over 160 different companies who are devoted to the technology?
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