It's about trust not payments. RIP MCX

This weekend I ordered dish washing detergent through my  Amazon echo.  I never thought once about the actual payment.  And if I'm a financial company that's worrisome.  You're eliminating me from the value chain and more importantly from the commerce equation and customer mind space.

It seems the last decade or two has been spent trying to "disrupt" money.  Google Wallet, Coin, PayPal, Venmo, Braintree, Square, Apple Pay, Betterment, Wealthfront, Lending Club, Stripe, Affirm, MCX...the list goes on.  But what are we fundamentally trying to disrupt?   And why, like MCX admitted yesterday, are so many of them failing?  So here's the secret: money doesn't exist.  It isn't a psychical thing we can improve with a "better money."  Those dollar bills in your wallet are nothing more than a representation of a covenant or agreement.  It is a representation of universal trust.  

Which is ironic right?  We live in a global world/economy/society that exists solely on trust (the fundamental of currency).  Yet we live in one of the most politically distrustful times since the Cold War.  In the US, presidential candidates share a distrust the political system-- wanting to ban groups of people, overhaul the system or repeal legislation.  Outside the US, there are massive global trust issues.  Living as an expat is eye opening.  The world is very skeptical of its leader, the US.  Europe is looking side eyed at the UK on the eve of a Br-exit.  Almost no one trusts Russia. The list goes on. Yet all of the companies and individuals rely on trust in the form of the World Bank and/or monetary policy.  So how do you innovate on money?

The hardest thing to do is to earn someone's trust.  It takes shared experiences and knowing the response of the other party in a given circumstance.  This is what makes Fintech so hard.  I already trust my bank, the credit card companies, etc. (and yes I know if you look at the indicators, there is a feeling from most americans that these institutions are ripping them off.  They may be justified in this fear).  But even though they are ripping me off at small levels; giving control of my money to the equivalent of a guy in the alley selling gucci bags on a cardboard table (unknown start-up) is terrifying. Will they be open tomorrow?  If they aren't where did my money go?  It's all about trust.  So most people choose the the lesser of evils.  Or rather they choose the perception of a safe harbor.

Let's look at costs from the perceptive of computing power/storage.  In 1980, the cost of 1 GB was ~$193k, today it is ~$0.07.  Think about that.  Data storage has dropped by well over a million percent and there has been a negligible drop in credit/debit transaction rates. Storing bits/atoms(value) around has gotten cheaper by 2 million percent!  And this is exactly why Visa has a profit margin of 54.5%.  And why everyone is keen to have a piece of this pie.

So if money doesn't exist, what do I build?

Build trust.  That is why there were such high hopes for Apple Pay.  Apple is one of the most trusted brands on the planet as demonstrated by the 800 million cards on file.  Amazon is another company that has built amazing trust with consumers.  But should the trust or money be built/own/run by a consumer goods company?  History says no.  So the innovation should come from a bank? Not likely, there have been only 3 banks opened in the last 5 years.  So who will win the space? I look back to the roots.  The origins of money.  The relationships between individuals.  Money was born out of the need to replace the barter system, out of the need to account for debt.  

So how do we as an untrusting world get back to a system not between corporations but between the individuals?  At this point money is nothing more than bits in the ether, part of the blockchain, or a simple handshake.  

But use Apple Pay on the Apple Watch or split dinner on Tab and you once again realize that money is just a facet of the human relationships called trust. The way that trust is passed has changed from metals to paper to bits but will always rely on trust. So start building trust, not apps.

Until the next Last/Best...........

In the meantime, you can always find more Last/Best ramblings here.