How Elon Musk may revolutionize Internet access

Tesla in space

The fellow who gave this dummy his car hopes to turn broadband on its head.

Remember the guy who, about a month ago, let a literal dummy take his car on a prolonged spin through outer space? Now, he may be making the folks at Comcast, AT&T, and other broadband service providers nervous.

But those of us who are into digital banking should cheer him on.

Said guy is jillionaire Elon Musk, CEO of Google-owned SpaceX and CEO of Tesla, Inc. It’s only fitting, then, that the car tooling around in space with a dummy at the wheel would be a red Tesla Roadster, Musk’s favorite sports car.

Musk, you may recall, made his fortunes selling Zip2 to Compaq and founding an online payment company that morphed into PayPal, which eBay picked up for a mere $1.5 billion. Since then, he has turned the automobile industry on its head, which he now hopes to do for broadband Internet.

Just two weeks ago, SpaceX sent two test satellites into orbit, literally and metaphorically launching its Starlink satellite network.

The purpose of Starlink? According to CNBC:

Starlink will offer broadband speeds comparable to fiber optic networks, according to FCC documents, by essentially creating a blanket connection across the electromagnetic spectrum. The satellites would offer new direct to consumer wireless connections, rather the present system’s redistribution of signals.

Assuming the test satellites work as hoped, SpaceX plans to have a total of 800 of them in orbit by the end of 2019. And assuming they work as hoped, CNBC reports, SpaceX plans to launch “… an additional constellation of 7,518 V band satellites, situated in a ‘very low’ Earth orbit at just over 200 miles.”

The Starlink system could bring three important changes to the digital landscape.

First, Starlink promises to make broadband Internet available in geographic pockets where laying cable has to date not been economically feasible. This is no small thing. About a year ago, the FCC reported:

10 percent of all Americans (34 million people) lack access to 25 Mbps/3 Mbps service …  39 percent of rural Americans (23 million people) lack access to 25 Mbps/3 Mbps … [and] … only 4 percent of urban Americans lack access to 25 Mbps/3 Mbps broadband.

Second, it will offer an alternative in markets now dominated by a single major broadband provider.

Third and perhaps most threatening to existing broadband providers, Starlink won’t just be an alternative. It will be a blazingly faster alternative. Its speed and quality are predicted to rival those of a fiber optic network.

I might predict one of two fourth changes

Somehow I don’t expect the likes of Comcast et al to take the new competitive threat lying down.

If they respond the way Adam Smith would have preferred, they will move fast to improve their own delivery and pricing. I hope that happens.

Unfortunately, another option exists. They may seek legislation tying SpaceX’s hands. Musk is no stranger to this method. When the Tesla automobile was ready for market, established automakers and dealer associations went straight to work keeping Tesla out of their states. The battle is ongoing.

Why I’m cheering Musk on

On the philosophical side, competition is the foundation of our economy. That alone is plenty of reason to cheer him on.

Moreover, making broadband access available worldwide should strengthen economies, improve communications, and raise education levels for all.

Musk’s success would be great news for digital banking.

It would allow us to deliver digital banking services to once inaccessible markets. Moreover, Starlink’s fiber-optic quality and speed will mean better service, less waiting time, and, therefore, less frustration for digital banking clients.

Let’s hope the likes of Comcast et al respond by improving their product and service rather than through legislative tampering. Then, everyone wins.

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Smartphone sales slowing
My two cents as to why

PhonebrakesThe data on smartphone sales for Q4 2017 are in, and it looks like two Chinese companies have reason to celebrate.

In a recent press release, research company Gartner, Inc. reports that …

Huawei and Xiaomi were the only smartphone vendors to achieve year-on-year unit growth (7.6 and 79 percent, respectively) and grew market share in the quarter.

Having thus opened on a positive note, I shall now proceed on less positive one.

While Huawei and Xiaomi did well, 2017 marked a drop in Chinese smartphone shipments overall. That’s according to global technology market analyst firm Canalys. In a recent press release, Canalys reports:

The growth story of the world’s largest smartphone market, China, came to an end as it suffered its first-ever annual decline, with shipments down by 4% from 2016 to 459 million units in 2017. This drop was partly due to China having one of its worst year-on-year performances in Q4 2017, with shipments plummeting by over 14% to just under 113 million units.

Yeah, you might say, but that’s just in China. Worldwide, sales climbed from 1.496 billion units in 2016 to 1.537 billion units in 2017. That is true, and that’s great. Unless, that is, we zero in on Q4 2017, the time of year when things are supposed to be picking up as a sign of hope for the year to come. Reports Gartner:

Global sales of smartphones to end users totaled nearly 408 million units in the fourth quarter of 2017, a 5.6 percent decline over the fourth quarter of 2016 … This is the first year-on-year decline since Gartner started tracking the global smartphone market in 2004.


There is no shortage of proffered explanations for the slowdown.

Gartner’s research director, Anshul Gupta, offers this one:

First, upgrades from feature phones to smartphones have slowed down due to a lack of quality “ultra-low-cost” smartphones and users preferring to buy quality feature phones. Second, replacement smartphone users are choosing quality models and keeping them longer, lengthening the replacement cycle of smartphones. Moreover, while demand for high quality, 4G connectivity and better camera features remained strong, high expectations and few incremental benefits during replacement weakened smartphone sales.

International Data Corporation (IDC) mobile phone research manager Anthony Scarsella suggests:

The latest flock of posh flagships may have had consumers hitting the pause button in the holiday quarter. With ultra-high-end flagships all the rage in 2017, many of these new bezel-less wonders proved to be more of a luxury than a necessity among upgraders. Even though we have seen new full-screen displays, advanced biometrics, and improved artificial intelligence, the new and higher price points could be outweighing the benefits of having the latest and greatest device in hand.

If wading through the last two excerpts tested your patience as a reader—you’re not a marketing professional unless your sentences are complex, right?—you’ll appreciate ZDNet’s senior reporter Danny Palmer’s refreshingly plain English:

… it’s because consumers increasingly don’t see good enough reason to spend money on upgrading to a new handset.

Short and clear. No wonder Palmer is a senior reporter.

If the decline has taken people by surprise, it shouldn’t have.

Notwithstanding the recency of the other above-cited comments, Palmer penned his warning back in June. And two months before that, under the headline “The smartphone market declined for the first time EVER,” Arjun Kharpal, reporting for CNBC, wrote:

Global smartphone shipments fell 3 percent year-on-year in the first quarter of 2016 to hit 335 million units, according to a Strategy Analytics report on Wednesday.

I have my own thoughts about the decline. A new product can take the world by storm only until it reaches a saturation point, which the smartphone may be approaching. And, to echo Scarsella, non-essential, incremental improvements may not be worth the price of an upgrade.

But here’s a possible reason I haven’t seen addressed.

Superfluous technological changes in smartphones aren’t new. If that failed to slow sales before, why would it slow them now? Maybe it’s because phones have ceased looking like new models.

Portable phone marketers took a page from the auto industry’s playbook in making phones not just tools but fashion items. In much the same way you can tell with a glance if your neighbor drives a later model car than yours, it used to be easy to tell a current from a prior year’s phone. Features aside, there was motivation to upgrade just to avoid pulling out a phone that was “so last year.”

But in the last few years, not so much. Recent variations in size and dimensions have been insignificant—there is, after all, only so much you can do with a rectangle—and just about every color option is out there. It takes a keen eye to pick out the vintage of a smartphone purchased within the last four years, to the point that these days most people have to ask what model you’re using. The result is that, for the first time in years, you can hold your head high while hanging on to your older phone.

Still, it’s important not to confuse sales of smartphone units, which is slowing, with smartphone usage, which is accelerating. Only a few weeks ago, Pew Research Center reported:

The vast majority of Americans – 95% – now own a cellphone of some kind. The share of Americans that own smartphones is now 77%, up from just 35% in Pew Research Center’s first survey of smartphone ownership conducted in 2011.

Or, as a very smart guy wrote—well, okay, actually, it was me—not long ago for The Financial Brand:

The day is nearer than anyone thought when children wonder aloud what on earth their forebears did with those folded, leather things — “What’s a checkbook? What did you use wallets for?”

Saturation may be bad new for phone marketers. For those of us in the digital banking arena, it’s good news. There’s nothing we’d like better than a market saturated with smartphones.

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Digital World

Digital worldSometimes Americans are accused of failing to realize there are other countries outside its borders. Whether or not the reputation is deserved, this American is well aware of the rest of the world. This week, I’m taking a look at the state of going cashless in others’ backyards.

Going cashless seems to be moving forward at a rate that suggests the word snowballing. I should add a note of caution: It can be in a country’s and its banking system’s best interest to produce glowing reports, so it may be wise to filter claims through an appropriately skeptical lens here or there.

I’ll start with the United Kingdom, for which the Daily Mail predicts 2018 will be “… the year that the UK reaches “‘peak cash,’ in which debit cards are used for more purchases than coins or notes.”

In 2006, 62 percent of payments in Britain were made [using] cash, while in 2016 this figure had dropped to 40 percent, the data shows. By 2026, its predicted cash transactions will make up just 21 percent of the UK’s payments, according to UK Finance, which represents leading banking firms. …

Bank of England data shows that while the volume of cash in the economy continues to rise each year with inflation, it is now doing so at the slowest rate since 1972.

Speaking of the UK, British Overseas Territory and picturesque island nation of Montserrat has signed a “memorandum of understanding” with Barbados-based cryptocurrency company Bitt. The goal is “… to launch a digital payments ecosystem in the Caribbean island.”

Montserrat Premier and Finance Minister Donaldson Romeo said: “The decision to move closer to a cashless society is in keeping with our overall development strategy, and also that of the ECCB [Eastern Caribbean Central Bank].

Looking to the Middle East, the United Arab Emirates (UAE), according to Mastercard’s Girish Nanda, GM, UAE & Oman, as quoted by, is “…fast emerging as the FinTech hub of the Middle East.” Futhermore,

“There isn’t a more fertile ground for digital transformation than the UAE,” according to Promoth Manghat, CEO, UAE Exchange …

… the UAE being an expatriate hub with travel requirements rampant, Gocash is just the answer to the market’s needs, according to Manghat. Users of the Mastercard-powered card have a choice to load up to six different currencies from a bouquet of over 20, providing a boon of convenience to travelers.

In Venezuela, digital payments may offer not just an alternative but a much-needed solution. With the country’s ongoing hyperinflation, every day the same transaction requires more bolívars (about 4¢ U.S. as of this writing) than the day before. Unable to crank out currency to keep up with demand, Venezuela’s central bank has capped the amount of currency that can be withdrawn in a day. Digital payments, which I need hardly point out do not require physical production, alleviate the problem.

An exception to the glowing-claims trend is a recent study by the Internet and Mobile Association of India. As I reported last year, the Republic of India has committed to a cashless future, but the study reveals that “only 16 percent of rural users access Internet for digital payments.” As reported by LiveMint, the cause may be identifiable:

Lack of electricity to charge devices, poor network quality and affordability of Internet service packs are the reasons for such behaviour and unless this trend is reversed, usage purposes will remain skewed and offtake of digital payments will remain restricted, the report said.

While reports are for the most part encouraging, each contains a caveat: Concern for populations whom going cashless threatens to exclude. Usually that’s the elderly, the poor, and the unbanked.

In that regard, reports Emily Price in Fortune, progress toward digital payments in Sweden has been perhaps too good. There, a proliferation of retail businesses no longer accepting cash threatens to place in a bind the elderly, many of whom may not be technologically adept, and the poor, many of whom don’t have bank accounts at all.

Yet in Rwanda, Dr. Jaya Shukla, writing for The New Times, claims that digital payments could ultimately put more money in the pockets of the poor—or at least take less money out:

One of [the] reasons for success of mobile payments is low transaction costs. In Kenya M-Pesa was routinely one-third to one-half as expensive as alternative systems. Lower costs directly translate into money the poor can keep …

… digital payments are making financial services more universally affordable and accessible and, therefore, have the opportunity to drive financial inclusion in developing countries.”

Shukla does not address one sticking point. According to Internet World Stats, in mid-2017 only 30.6 percent of Rwandans had even Internet access, let alone mobile devices. Shukla may be promoting an official state position, not necessarily a research-based one.[1]

Overall, the trend toward cashlessness in general and digital payments in particular appears strong. Even outside my home country.

[1] The New Times claims it is an independent newspaper, however, the Human Rights Watch has called it a “state-owned newspaper.” Clicking the Times’s About us tab wasn’t terribly helpful in sorting that out. Here is the page’s text in its entirety: “Saturday 25th June, 2011 / Page being updated.”

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In celebration of tax season: How alcohol and women’s rights helped create the IRS

Toasting the IRSI’m going to go out on a limb here and suggest that one of government’s brand values is not “up-to-date office equip­ment.” If you don’t believe me, ask if a PDF will do the next time your local government requests a fax. There’s a good chance the answer will be, “What’s a PDF?”

But when it comes to collecting money, the United States government keeps fairly well up with the times. In an age where our best prospects for digital payment adoptions are Millennials and younger, the folks in charge of the Internal Revenue Service introduced electronic filing way back in 1986. (Little known fact: Many working at IRS headquarters back then were not spring chickens.) Though taxpayer convenience may have been a motivator, I would suggest, at the risk of cynicism, that speeding collections and lowering costs may also have played a part.

Of course, you knew the IRS uses direct deposit. Here’s what you may not know:

The curious tale of how alcohol and the women’s movement led to the IRS

In 1933, a scant 73 years before the IRS began accepting direct deposit, the United States ratified the 16th Amendment, permitting Congress to impose an income tax.[i] But the proposal was no simple matter, such that ratification took 24 years. During that time, the “income tax amendment” found a pair of allies who might, at first glance, seem unlikely: the Prohibition Movement and the Woman Suffrage Movement.

It was largely women who championed the Prohibition Movement, at least at first. By the time they started winning over the then all-male Congress, an inevitable, practical question arose. Alcohol taxation, permitted under the Constitution as an indirect tax, accounted to a good 30 to 40 percent of the nation’s revenues. If it was going to pass Prohibition, clearly the government would need a new revenue source. Decades earlier, the Women’s Christian Temperance Union (WCTU) had already suggested an answer. Author Daniel Okrent cites it in his book Last Call: The Rise and Fall of Prohibition:[ii]

… to those in the dry movement who understood political and governmental reality, imposition of an income tax was also an absolutely necessary step if they were going to break the federal addiction to the alcohol excise tax. This had been obvious to the leadership of the WCTU as early as 1883, when the editors of the organization’s official organ, The Union Signal, coyly asked their readers, “How, then, will [we] support the government” if the sale of liquor is prohibited? The editorials had a ready answer for their own question: an income tax, they wrote, was “the most just and equitable arrangement ever made for the equalization of governmental burdens.”

To understand how forces intertwined, it’s important to recall that Amendments 16, 17, 18, and 19 weren’t ratified in order of their numeration. First to win ratification was the 17th Amendment, in 1913. The amendment took the election of the U.S. Senate and House out of the hands of state legislatures and placed it in the hands of voters. It’s important to remember that, at the time, only men could vote.

Next came the 1919 ratification of the 18th Amendment, which banned the manufacture, sale, import, and export of alcohol. It was not lost on members of the U.S. Congress that Prohibition would displease a good deal of men, who now had power to vote them out of office. Hurrying along passage of the 19th Amendment, which gave women the vote, may have been for Congress an act of job retention more than of fairness. The states ratified the it in 1920, which just happened to be the year Prohibition went into effect.

With alcohol banned, the United States took the expected, severe financial hit. In his PBS series Prohibition, Ken Burns says the alcohol ban cost the U.S. government “$11 billion in lost tax revenue” and cost “over $300 million to enforce.” This loss added impetus to creating an income tax. Congress dusted off the 16th Amendment, which had been proposed 24 years earlier and left to sit. The states ratified it in 1933.

Prohibition, as you surely know, was an abject failure. About 11 months after the 19th Amendment accorded voting rights to women, the newly ratified 21st Amendment repealed the 18th Amendment. Once more, alcohol flowed freely through the land.

The repeal, however, wasn’t a complete reversal. Congress left the federal income tax in place. So it is that the United States Treasury is able to have its tax and drink it, too.

I for one am grateful for the 21st Amendment. The Super Bowl just wouldn’t be the same without the Clydesdales. 

[i] Utah, where I live, is one of six states never to have ratified the 16h Amendment. The other holdouts are Connecticut, Rhode Island, Virginia, Florida, and Pennsylvania. If you happen to live in one of them, I recommend against letting that stop you from paying.

[ii] Okrent, Daniel. Last Call: The Rise and Fall of Prohibition. Scribner, 2011.

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Darwin, cockroaches,
and payments

evolution-2780651_1280Everyone knows that Charles Darwin introduced the phrase survival of the fittest.

Well, almost everyone. It would take Darwin by surprise, however, since in fact he didn’t say it. He didn’t even imply it.

Which is just as well. Survival of the fittest doesn’t quite work. Fittest is a superlative, meaning there can be only one. If only the fittest survived, the world would have only one species of cockroach, not 4500, only one brand of airline, not 5,000, and only one football team, the Denver Broncos.

Survival of the fit-enough is more like it. You can have only one fittest, but you can have untold numbers of fit-enoughs.

I need hardly point out that we are seeing a proliferation of fit-enough payment options. Any list I could produce—Zelle, Google Wallet, Apple Pay, Venmo, Paypal, GoPayment, Square, and others—would not just fail to scratch the surface, but fail even to gently caress it.

I neither presume to know nor venture to guess which is the fittest of them all. But since they’re all still here, it’s safe to assume that they are all fit-enough to continue hanging on and duking it out. At least for a while.

Meanwhile, retailers keep complicating things.

Take Walmart. When the retail giant introduced Walmart Pay in 2015, it made the strategic decision not to play ball with Apple Pay. According to Torrey Kim in a recent article for The Balance, Walmart Pay …

… allowed customers to download the app to their phones and use their own phones as scanning devices.

Trouble was, Kim added,

The program was a terrible failure, with customers complaining about the app and its issues.

But Walmart stuck with it, which, when you’re as fit-enough as Walmart, you can do. Today, the gambit may be paying off. Walmart Pay is now within striking distance of surpassing Apple Pay in U.S. mobile payments.

Not bad for an app that can be used only in one store. Of course, it helps to have 5,412 U.S. locations of that one store.

Walmart recently announced that it is upping its game. A new version of its Scan & Go app is headed for testing in 100 stores. For consumers wary of downloading yet anther app, Walmart tells us that some of its stores …

… have been outfitted with Scan & Go kiosks where customers can pick up easy-to-use handheld devices. This allows them to try out the service before downloading it to their phones.

One reason retailers like having their own payment systems is to track customer purchases, which broader-base payments apps don’t permit them to do. Proprietary apps also relieve customers from having to stuff their wallets with loyalty cards and go through the hassle of presenting them at checkout. What remains to be seen whether consumers will go for trading a walletful of cards for a phoneful of apps.

“Phoneful of apps” is no exaggeration. From McDonald’s to Cinemark to Starbucks to CVS to Bestbuy to … well, and so on … there is no end to the number of retail apps you can stuff into your mobile device.

When will the proliferation end? Beats me, but it is sure sooner or later to at least slow. How soon remains to be seen. Right now, according to Retail Drive’s Chantal Tode, consumers seem to prefer retail payment options to Apple Pay and Google Wallet.

Like all species, payment options are subject to environmental pressures. These will inevitably lead to modified species, hybrid species, new species, and, yes, some extinctions. But since fit-enough is all that’s required to survive, there’s no reason to suppose the environment will ever prune the market entirely of all but one. On the contrary, there is ample reason to suppose that a wide variety, though perhaps not quite as wide, of payment options will persist. On a planet with billions of people holding billions of bank accounts, there are necessarily innumerable niches to fill. Odds are a one-size-fits-all will never be possible.

As for what Darwin never said, he’s not alone. Neither did Winston Churchill ever say, “Madam, if you were my wife I’d drink it.” But I digress. 

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