Telepathy and Frictionless Payments

I have a philosophic theory I have been testing out for some years in my attempts to detect technology trends.

My theory is simple: Anything that makes communication more “telepathic” and instantaneous will be wildly successful. Cases in point are mobile phones (call anyone any time), and more recently Twitter and Facebook, tracking the minutiae of our lives and sharing them to all those who care, in real time. It was only recently while trying to grok the contours of the current mobile payment revolution that I decided to try this theory out on commerce.

Payments still have too much “friction”, too many steps. In a hypothetical world, the ideal commerce transaction would be you think “I want an ice cream” and you’re suddenly holding one, the flavor you wanted. Whatever you owed for that would also be instantly exchanged as well, i.e. your accounts would be debited.

Low-Friction Transactions

App stores, virtual goods stores in general, have reduced the “ooh I’d like an app/song/whatever” to a couple of clicks, maybe a password.

Paypal has done a pretty good job of making *online* payments seamless. Still too many clicks for me (always making me re-log in, asking me in a 3 page wizard if I really really want to buy this) but for the most part, it’s seamless; I want it, I click it.

Amazon’s one-click, as ‘obvious’ as some people try to make it out, was quite an inspiration – I want it, let me indicate my desire and be done with it.

Cash vs. Credit vs. Online Currency

Here’s where some worlds need to meet. I work in an office and often times my colleagues will grab me lunch. I then of course owe them $10 or so. I rarely have cash on me, because I believe that it is the 2nd decade of the 21st century and that the future where I can just carry a card should be here already. Alas, taxicabs and split tabs have convinced me that I can’t get away from cash.

I’ve often thought “Oh I should just pay my friend back with Paypal.” But I don’t. Why?

1) For small transactions, they will literally nickel and dime me or my friend. I don’t feel like paying percentage points to hand someone $10. Have you ever played PayPal ping-pong? It’s a cynical game where you and someone else can send money between each other, back and forth, until PayPal fees destroy all the value. Try sending someone $0.10 cents (I haven’t recently, but last time I did it swallowed the money). It was worse than playing the slots.

2) My friend can’t spend the PayPal money on lunch the next day! There’s a difference between money in your pocket and money online.

Online currency is not as flexible.

It’s not like cash is better because we’re a nation of tax dodgers and we’re trying to keep the IRS from knowing about our under-the-table garage sale transactions. The problem is that digital, token-based ‘e-cash’ only works in the rarefied online universe. Sure, you can get a PayPal debit card that links to your account – I have one, but I don’t carry it around so I can buy my lunch.

Smartphones to the Rescue

Mobile phones are already making almost everything instantaneous and telepathic. The next logical step is exchange, the ability to instantly own things, and the ability to instantly exchange for things.

Here are some use-cases I’m looking forward to on my phone:

1) No-fee monetary exchange between individuals who are proximal: I can hand you $10 by pressing 1-0-0-0-send and holding my phone near yours. Poof, money’s yours. End of story.

2) Cross-vendor money exchange between individuals remotely: I can send you $10 without money handler fees. I send it from my phone number to yours.

3) Paying vendors with my phone. This is the hard-fought evolution we’re hearing so much about – near field communication – that will remove just a few more steps from the purchase process.

Being able to accept credit card payments with a mobile phone is the most popular stopgap solution and will continue to expand until NFC and other effortless mobile payment techniques are fully deployed. Plastic will be around for some time.

Closing the sale

Instantaneous, minimal effort transactions have a lot to do with increasing sales.

Exchanging money with the phone is not something that we want just because it’s cool, or because technologists want to put everything into a phone (even though those reasons are probably why it’s happening.) The reason it’s important is because anything you can do to remove the friction, the steps, the chances for the person to change their mind or do it another way, removes barriers to their (trans)action.

People change their mind. People are inertial. And when it comes to spending money, people aren’t always that rational. From a sales perspective, if you can get people to literally wave their hand (with a cell phone) and “poof, it’s theirs!”, you’ve solved a key part of the problem of sales.

Exchange of goods and services is really a form of communication, a basic form of human interchange. So anything that reduces the barriers to that exchange should take off like wildfire.

Lots to do!