When you think about payments, you think about Suzy handing over a bunch of dollar bills or Jimmy sliding a credit card through a slit. Most payments today look this way. But that is about to change.
One of the powerful attributes of digital money is that it divides to any resolution, however small, and you never have to count change. You can pay someone, say, $0.001. Now, who would bother with such a tiny payment? Nobody today perhaps, but let’s open a door and look at tomorrow.
So much on the Internet is free today: Google is free, email is free, YouTube is free, free advice is free. We are getting used to it. But who is paying for our free lunch? The free-service provider gets paid by a third party, say an advertiser, and naturally caters to this third-party payer, rather than to its audience. More than a quarter of a million Google servers are at your fingertips whenever you click on a search. These servers crawl through the entire Internet 24/7, and cross-index their harvest. The relevant information you get on your screen in a split second, a 20th-century president of the United States could not get in hours.
So why complain? Well, the basic economic truth is that whenever you get “free stuff,” you do in fact pay for it, but with a hidden currency and for an unwritten amount. Free search costs you through its skewed ranking of the results. You overlook the best store for your needs, and remain clueless about a high-quality, convenient supplier for what you are after, simply because of how Google ranked its results. Free-content sites are another example. Wouldn’t you prefer to pay a couple of cents per page to be free of the ads? And when your computer is idle, you probably would not mind for it to process data for some extra cash.
With digital cash, your computer or phone will micro- and nano-pay per your instructions, but without bothering you about the actual transaction. Real-time transactions between strangers, or between their computing machines, will pervade the scene. Think of ad hoc Internet-connectivity services, quick charging of electrical cars, per-minute payment for first-class online lectures, even a revived Napster with peer-to peer paid music and video distribution. Cars may pay real time for exceeding speed limits, and auto-pay each time they use a high-speed lane.
Envision a tomorrow when individuals provide what they can uniquely offer to anyone on the planet who is uniquely in need of that service, anonymously, efficiently, without human intervention in the money transfer and at any small denomination. You will type a list of desired items into your phone, which will independently follow sales and price fluctuations to pounce, order, and pay when the price is right.
Yesterday, a letter writer had to fetch an envelope, fold and insert his letter into it, lick it, affix a stamp, walk to the “blue box,” and then return home. Today, you click your email, and your message gets there instantly. Similarly, the laborious payment process of today, when you and the other party mutually identify yourselves, then carry out a fraud-prone ritual, will be minimized. For the majority of payments, humans will determine policy and preference but rarely participate in the payment dialogue.
But convenience will not be the major benefit from the explosion of frictionless payment. The big boon will lie in the creation of fertile ground for individuals and groups to invest in high-quality products and services to be offered in the Global Village. If you can solve a problem, and you live at the end of the world, you could offer your solution and get paid for it by a client who resides twelve time zones away without the effort of making his acquaintance. It’s like a stranger paying for a subway ride. The empowerment and prosperity generated by the simple process of supply and demand—the process that gave us our prosperity in the “old space”—will be reapplied in cyberspace.
Computers are much faster than humans. Ad hoc micro-denomination transactions are much more numerous than what we see today. As a result, the number of transactions will explode.
In retrospect, one could say the Global Village is not the Global Village until any node in the network, any computing device online, could pay any other computing device online, instantly, and without human intervention.
—Gideon Samid • Gideon@BitMint.com