Re: High tech meets low finance

On 16 May 2016 at 08:53, Roger Bass <roger@traxiant.com> wrote:

> Melvin et al,
>
> I agree. Finance generally, and payments in particular, I would argue, are
> where conditions are best aligned for the (Semantic) Web to enable a killer
> app, and mass market adoption. This hasn't happened yet, of course. But the
> complex, multi-party interactions in finance (and even payments) suggest to
> me that any new "Web" platform technology would follow an exponential
> growth curve with a high exponent: in other words, a "flat" part that's
> particularly long and slow, but also that grows explosively once it emerges.
>

I think incentives play an important role.  Once the spark of incentives
begins things can gain traction fast.  Getting that spark is quite hard tho.


>
> The "Internet of Payments" seems to me a better term to use for such a
> phenomenon than "Web...". Despite the importance of semantic
> interoperability, the early use cases I see are more messaging-centric, and
> hence email-like. (This is not to suggest that such a phenomenon would stay
> limited to payments. It wouldn't; but traction in payments comes first, I
> suspect).
>

Messaging is huge on the web already.  I think that eco system can also be
part of a larger system.


>
> Payments are the high volume, mass market interactions in the financial
> world. And yet it's finance - lending - that drives the more significant
> value and revenue streams, and hence investment in new models. (Credit
> cards have a lending component, so they would be at the intersection of the
> two). Change in payments, in particular in the higher volume and value
> world of B2B, where semantic interoperability also matters more, is being
> driven by a increasingly significant integration of the two. By this, I
> mean scenarios where payments become a low-cost channel for delivering a
> financing value proposition that also arbitrages across the buyer's and
> seller's access to credit.
>

Yes, agree.  We have technology that can drive down costs.  A payment is
technically no harder to achieve than an SMS or IM.  It's the trust layer
that is expensive.


>
> Blockchain technology can also play a key role here, though I'd note that
> it's not *necessary* for semantic interoperability: they're separate
> layers. In particular, I hypothesize that a (blockchain-based) global,
> interoperable framework for payments that also supports financing scenarios
> could have a transformational impact. An Internet of Payments (IoP)
> Framework, in other words.
>

Block chain is useful particularly for bitcoin and also for eduction.  It's
not a magic bullet tho.


>
> Thinking about this need not be a "blank sheet" exercise. SWIFT, along
> with a number of leading global banks, has in fact developed such a
> structure, the "Bank Payment Obligation" or BPO, which relies on a complex
> electronic document matching platform, the "Trade Services Utility" or TSU.
> It's true that the overly-complex BPO has very little adoption so far
> today. But I suspect that, with a few key simplifications, it could lead to
> the development of just such a framework. BPO could also come to mean a "
> *Blockchain* Payment Obligation". The document-matching-based payment
> conditionality that the TSU provides could, and probably should, be
> gradually supplanted by blockchain implementations: ("smart contracts" is
> the term some use; this group's work on crypto-conditions seemed to me as
> if it might align reasonably well). It's obviously important to have both
> the broad, extensible framework, but also early clarity on one or a few
> simple use cases to drive initial adoption.
>

> For anyone interested, I recently drafted this blog post outlining four
> elements that I see on the path to a next-gen framework for transforming
> global payments and finance
> <https://www.linkedin.com/today/post/article/how-bpo-could-catalyze-internet-payments-roger-bass?trk=prof-post>.
> (One of those elements being blockchain; another, semantic
> interoperability, ie the IoP). Gluttons for punishment can find some more
> related posts from me here
> <https://www.linkedin.com/today/author/0_3UVdciY9C17l63MmyHf2hE?trk=prof-sm>
> .
>
> I'm talking to a few of the leading players about this - happy to discuss
> further on this list, or one-on-one, if there's interest.
>

Interesting stuff, thanks for the pointers!


>
> Roger
>
>
> On Sun, May 15, 2016 at 3:16 AM, Melvin Carvalho <melvincarvalho@gmail.com
> > wrote:
>
>> Nice article in the economist about tech and finance
>>
>> "TECHNOLOGY ought to have revolutionised finance more than any other
>> industry. After all, modern money is mostly an entry on a computer—capable
>> of being transmitted instantly and virtually costlessly around the world.
>> Stockmarket activity is now dominated by high-frequency traders, who make
>> deals faster than they can blink.
>>
>> The finance sector spends more on technology, as a proportion of its
>> revenues, than any other industry. Nevertheless, compared with the world of
>> e-commerce, banking still sometimes gives the impression of a Volkswagen
>> Beetle instead of a Formula 1 racing car. It took many years of effort to
>> get to a world of “T+2”, where securities are settled two days after the
>> trade is made, rather than the “T+3” system that preceded it."
>>
>> Read more ...
>>
>>
>> http://www.economist.com/news/finance-and-economics/21694531-all-money-spent-technology-banking-not-efficient-high-tech-meets-low
>>
>> I think we need to try to use the web to create more progress, in this
>> area.
>>
>
>