Zelle to overtake Venmo


Some of you may recall my predicting a bright future for Zelle at last year’s Payments 2017. Indeed, Zelle has not disappointed—as you’ll see in my just-published article for The Financial Brand:

Zelle on Trajectory to Crush Venmo

in War for P2P Payments

Since this time yesterday, the number of people enrolled in Zelle increased by 100,000. By this time tomorrow, that number will have increased by another 100,000. On average, anyway. At this rate, according to eMarketer and others, Zelle will outstrip current market leader Venmo this year.

Until recently, digital banking options covered most of the bases save one exception. Consumers could make digital payments to businesses, and businesses could make them to one another. But when a consumer owed a buddy a few bucks, for too long the only option was to hand over cash or write a check.

In a digital world, that’s an inconvenience at both ends. To marketers, of course, inconvenience at both ends indicates a need waiting to be filled, so it’s not surprising that Google, Apple, PayPal, Venmo, Square, and others have … [click here to read the entire article on The Financial Brand site]

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The Six-cent Dollar

dollar-463380_960_720There’s something odd about money. Namely, that it has no intrinsic value. What gives it value is billions of people throughout the world agreeing that … well, that it has value.

Currency has come a long way since its start in the fourth century BCE. We have arrived at a time and place where you can trade between three and four slips of intaglio-printed paper with the word “One” printed on them for a gallon of gasoline, between one and two thousand of them for a new mattress, tens of thousands of them for a new car, and, in some cases, hundreds of thousands of them for your very own legislator.

The Sixth Cents

The total cost in labor and materials for producing one of those slips comes to just under six cents. Larger denominations are slightly more costly to produce because they require more security features. Counterfeiters, it seems, rarely bother with one-dollar bills.

In his book Sapiens: A brief history of mankind, author and historian Yuval Noah Harari refers to the agreed-upon value of money as a “shared myth,” which means pretty much the same thing as “agreed-upon value” but sounds decidedly more scholarly. Ayn Rand’s Atlas Shrugged, which contemporary politicians love to cite and, in so doing, reveal that they haven’t read it, describes the value agreement when Francisco d’Anconia responds to the “root of all evil” cliché with a pages-long diatribe. I shall excerpt only a few lines here (you’re welcome):

“When you accept money in payment for your effort, you do so only on the conviction that you will exchange it for the product of the effort of others … Not an ocean of tears nor all the guns in the world can transform those pieces of paper in your wallet into the bread you will need to survive tomorrow. Those pieces of paper, which should have been gold, are a token of honor … Your wallet is your statement of hope that somewhere in the world around you there are men who will not default on that moral principle …”

Rand’s insertion of “…which should have been gold” bears mention. Rand and others who rue the abandonment of the gold standard seem to overlook that gold, too, has a no less tenuous agreed-upon value than printed paper. Its high agreed-upon value is not due to its utility as an electrical conductor but to its coveted position as the stuff of royalty and the rich.

Likewise, diamonds have little intrinsic value yet an abundance of agreed-upon value. For the most part, the only practical uses for diamonds are things like polishing, cutting, and drilling. Diamonds’ popular value is tied to their use in jewelry, a carefully controlled supply, the fairly recent expectation that an engagement ring requires a diamond, and the near elimination of used diamond markets thanks to two sentiments: One, that diamonds are heirlooms not to be sold but kept in the family; and, two, that a “used” diamond is a sign of a stingy, insufficiently smitten prospective groom (even though used diamonds don’t exactly show wear and tear).

So much for gold-backed currency

Though no country has gold-backed currency anymore, currency’s agreed-upon value remains. The danger is that not backing currency with gold leaves a country free to print money at will. Unfortunately, at one time or another most countries have. Rampant overindulgence of the money-printing privilege can be a factor leading to inflation and devaluation. On the other hand, FDR’s letting go of the gold standard helped the United States pull itself out of the Great Depression.

Stocks are the epitome of agreed-upon value. The more people want a stock, the more its price increases—even if the issuing company isn’t doing well. A more recent example of agreed-upon value is cybercurrency. Much like stocks, a cybercurrency’s value depends on how many people are willing to pay for it, and how much they’re willing to pay. The most famous cybercurrency, Bitcoin, needs no introduction, but right now coinmarketcap.com lists 1653 other, actively traded cybercurrencies. How hot are cybercurrencies? Writing for Smithsonian magazine, Clive Thomas cites the case of  “… Billy Markus, a programmer who created a joke alt-coin called ‘Dogecoin,’ only to watch in horror as hucksters began actively bidding it up.”

Whether we’re talking dollars, stocks, cybercurrencies, or seashells, the fact remains that an unwritten social contract determines a currency’s value. Yet over the centuries, currency has proven itself a fairly solid house of cards. After all, we still use it. We likely will continue to do so long after we will have replaced paper and coin with ones and zeroes.

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Net neutrality:
Now it’s official

Net neutrality protestThe FCC repeal of 2015 net neutrality regulations took effect yesterday, so this seemed like a good time to share the following, originally posted here on January 3, 2018.

• • •

It all started in 2008, when the people at Comcast noticed a curious thing. File-transfer giant BitTorrent was consuming more and more Internet bandwidth. More, it seemed, than Comcast cared for them to consume.

Comcast’s solution was to “throttle” BitTorrent’s and other large users’ bandwidth. That is to say, they slowed down their Internet speed.

When the practice came to light, the FCC slapped Comcast’s wrists. Or, rather, tried to. The rules were vague then, so Comcast emerged with wrists intact, albeit with a bit of mud on their face.

The BitTorrent case and others like it eventually led, in 2015, to the FCC’s lumping Internet Service Providers (ISPs) in with telecommunications service providers. ISPs could no longer, as NPR put it, “decide which websites load faster or slower, or charge websites or apps to load faster.”

Except, that wasn’t exactly true. ISPs have been allowed to do exactly that, and that’s not necessarily a bad thing. Moreover, the conversation may be less about ending neutrality and more about revising the rules.

Net neutrality matters for financial institutions

Having worked in the banking industry since age 17, I’m well aware of the burdens that overzealous regulators can impose. With banks in particular, it seems whenever Washington feels a need to regulate, overkill is part of the mandate. So I tend to look favorably upon any suggestion of simplifying or doing away with rules.

But net neutrality has implications for the banking industry. I probably don’t need to point out that digital banking rather relies on a fast Internet. Without net neutrality, banks couldend up paying extra to ensure speedy transactions, which doesn’t bode well for institutions not in eager pursuit of increased overhead.

Note that I said banks could end up paying extra. No one is entirely sure just what the repeal portends. As recently as November 22, @Comcast tweeted this promise:

We do not and will not block, throttle, or discriminate against lawful content. We will continue to make sure that our policies are clear and transparent for consumers, and we will not change our commitment to these principles.

That should reassure. Unless, like Ars Nova’s Jon Brodkin, you’re concerned about wording changes in Comcast’s stated positions over time, past abuses, and the fact that …

… Comcast has drawn a distinction between “paid prioritization” and “anti-competitive paid prioritization.” Paid prioritization should not be banned entirely, but “anti-competitive paid prioritization” should be limited, the company has argued.

Those who want to keep the current rules, and those who want to revise them

Besides the lion’s share of consumers, those who argue to keep net neutrality include the likes of Apple, Google, Mozilla, Amazon, Dropbox, Facebook, Microsoft, Netflix, Snap, and Spotify, to name a few. Here’s an excerpt from a statement by the nonprofit organization Mozilla:

Our position is clear: the end of net neutrality would only benefit Internet Service Providers (ISPs). That’s why we’ve led the charge on net neutrality for years to ensure everyone has access to the entire internet.

Apple had this to say in its Reply Comments to the FCC:

The result would be an internet with distorted competition where online providers are driven to reach deals with broadband providers or risk being stuck in the slow lane and losing customers due to lower quality service. Moreover, it could create artificial barriers to entry for new online services, making it harder for tomorrow’s innovations to attract investment and succeed. Worst of all, it could allow a broadband provider, not the consumer, to pick internet winners and losers, based on a broadband provider’s priorities rather than the quality of the service.

But let’s not be naive. Apple, Google, et al have shareholders to please, which means we shouldn’t assume they have only the public’s best interest at heart. Indeed, the issue is not as simple as they make it sound. These companies enjoy serious advantages under current regulations, so it’s no wonder they would want to maintain status quo. A recent post by science writer Brian Dunning points out that …

… from an infrastructure perspective, there is no such thing as a “fair” Internet. The biggest content providers—Google, Facebook, Netflix, Akamai, Amazon, and others—are directly connected to Tier 1 networks, the highest-level networks over which data flows worldwide without having to go through anyone else’s routing, negotiation, or settlement. You and I don’t have that …

… Facebook is already enjoying “king of the hill” status as a Tier 1 service. Theirs is an easy position to take from where they sit.

Not surprisingly, ISPs are keenly interested in revising net neutrality rules. And they have their allies in the press. Writing for ForbesNelson Granados observes:

… the internet as a neutral platform for content providers and consumers has pretty much remained so during three regulatory regimes: One with no specific rules of anti-discriminatory behavior, one with explicit rules, and 2017 with an FCC that had no intention to enforce the rules. So there’s no major reason to fear a doomsday scenario going forward.

However, he adds, “That doesn’t mean there are no reasons to worry in the longer term.” He goes on to name a few, including “a more competitive environment in industries that could clog the internet pipes, like video streaming services.” Moreover,

… since 2015 ISPs have increased vertical integration into content (e.g., AT&T acquired DirecTV and Time Warner; Verizon acquired Yahoo and launched Go90) and they have natural incentives to favor their own content.

The net has never been neutral

“Unfettered access” may sound pleasing to some, but in fact it’s not possible. One of the problems in conversations about net neutrality is that the subject is too often treated as an all-or-nothing proposition. Workable solutions to managing the Internet are to be found between extremes on more than one continuum.

The Internet is a limited resource for which demand varies throughout the day. Without some form of “traffic shaping,” highest level users would utterly consume capacity, such that there would be no so-called free access at all. To wit, Dunning addresses the ins and outs of Internet traffic, taking into account not just ideological and economic factors but technical ones as well:

Let’s look at the basic example of Internet on a plane. You buy the service, and you find out that streaming video is blocked. No YouTube or Netflix on a plane. Why not? Because you would suck up all the bandwidth, and nobody else on the plane would be able to check their email or work on a Google doc. It’s necessary for the airline provider to impose this restriction to keep the service more useful for more people. It’s an example of an absolutely necessary fundamental violation of net neutrality.

The airline example is a microcosm of every other Internet environment. Your neighborhood broadband provider has to do this too. They generally do slow abusive users, peer-to-peer file sharing networks, denial of service attacks, even streaming video. It’s called traffic shaping. It’s done on a dynamic basis all day long, and it’s the basic principle for maintaining network quality of service. Your home broadband service would be terrible if your provider was not, right now, prioritizing some traffic, and delaying other traffic.

To Dunning’s point, The Palmer Group CEO Shelley Palmer writes in AdAge that what we’ve been calling net neutrality for the past two years hasn’t been all that neutral anyway:

Under net neutrality there were fast lanes and slow lanes, and a loophole called zero-rating which allowed services like T-Mobile’s “Binge On” to exempt certain streaming services from its data counts. There were other loopholes written into the rules where specific clauses included phrases such as, “Subject to reasonable network management,” which basically meant ISPs could throttle traffic if they thought they had to.

What the real debate needs to address

It’s important to avoid treating net neutrality as a choice between two extremes. No one wants absolutely free trade—the need for rules is understood—and no one who is informed on the subject wants absolute net neutrality. The debate should not be whether or not to have rules. It should center around what the rules should be, how far they should go, and who gets to make them.

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Effects of digital media

system-3382515_1280I approach this topic with some reluctance. In no way do I wish even to appear to side with doomsayers who in every technological advance see the end of humankind. Not enough can be said about the wealth of important advances that digital technology has brought to modern life, from the convenient to the lifesaving. Besides, I make my living in digital banking.

Prophets of technological doom have been around a lot longer than you might think. A little over 2,400 years ago, none other than Socrates warned that the written word would bring about the demise of human memory. And five hundred years ago, physician and scientist Conrad Gessner foresaw in the nascent printing industry an avalanche of data that would prove “…both ‘confusing and harmful’ to the mind.”[1] In the last century, radio and television were going to render us illiterate. (That, and “TV will ruin your eyes if you sit too close.”) Today not a few blame video games for violent behavior despite no evidence of causality.

Still, some concerns about our emerging digital world are worth attention.

Literacy—Purists, pedants, and the obsessive-compulsive fret that keyboarding obviates the need for penmanship, and that texting makes u forget how 2 spell & punctuate lol  But perhaps of greater concern is the diminishing need to get out the door and interact face-to-face. 

Interaction—We can shop, attend college, do our banking, see movies, check out library books, research, work, converse, share photos, make friends, and more, all while cloistered within our homes. As a result some erosion of interpersonal skills may be going on.[2] And there’s no question that digital anonymity opens a door to untoward behaviors many would suppress in person.[3] While there’s nothing new about bullying—which is not meant to condone or trivialize it—the cyberbullying phenomenon belongs uniquely to this millennium. Its solution is not as simple as blogging or not logging on. And as has been amply and repeatedly demonstrated, social media have the power to bring undo attention and spark over-the-top outrage. For an example, look no further than the Herriman, Utah, teen whose “crime” was to wear an Asian-style dress and assume an Asian stereotype pose for a photo. Regardless of which side of the argument one endorses, surely we can agree that the attention brought upon the teen was out of proportion.

Feedback loops—According to a recent Pew poll, 62 percent of U.S. adults get their news from social media. That doesn’t bode well for those of us who value an informed public. Social media and search engines create a feedback loop by learning and playing to individual biases.[4] They create an illusion that marginal views are widely shared and supported by fact. They can lead to dehumanization of those with opposing views by use of one-dimensional dismissals such as snowflake, libtard, bigot, right/left winger, or Nazi. Moreover, it’s all but impossible to detect a feedback loop from within.

Evolution of retail space—The effects of digital commerce on retail aren’t hard to miss. Retailers are desperately looking for ways to tear customers away from online shopping for a visit to the store. And they must beware customers who arrive to check out products only to return home, find a better price online, and order.

Review site abuses—Retailers also have a healthy respect for, or, depending, fear of ratings sites such as Yelp. Ratings sites are useful for consumers looking for reliable feedback, but they are not necessarily bastions of fairness. Consumers with a grudge, whether reasonable, unreasonable, or fabricated, abuse them with abandon. The human tendency to complain when unhappy and clam up when pleased doesn’t help the situation.

On a more positive note

I haven’t scratched the surface of the perils digital media may enable. But equally long or perhaps longer would be a list of its positive effects. To end on a positive note, let’s remember the many ways in which digital technology is a boon to medicine, education, connectedness, efficiencies, commerce, communication, participation, savings, and more. 

In the end, technology is neutral; it is our use of it that turns out either beneficial or harmful. How technology serves or harms is up to us.

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Don’t be downcast
about podcasts

microphone-639192_960_720EVERY TIME a new communication technology emerges, people lose no time predicting the demise of an existing one. 

The printing press was going to ruin the human mind. Motion pictures, radio, and TV were all going to eliminate reading. TV and, later, streaming were going to do in movie theaters. Digital media threatens the death of printed newspapers. 

There may be something to that last one—time will tell—but the other doomsday prophecies never came about. But now podcasting has some people worried about the survival of radio.

If you listen to podcasts, you’re not alone. Last month, Fast Company reported that there are over a half-million to choose from. That number comprises some 18.5 million episodes in over 100 languages in 155 countries. Two months ago, Apple Podcasts alone passed 50 billion episode downloads and streams.

Not counting prototypes—because counting them would be something of a stretch—podcasting as we know it today had its start in 2004. It received a significant boost from Apple in 2005 with the ability to download podcasts via iTunes. Since then the growth has been explosive. 

Of course, iTunes isn’t the only game in town. Android device users can use Google Play to download podcasts. And iOS and AOS support SpotifyPocket CastsOvercast, and others.

Top ten podcasts of 2017

According to Podtrac, the ten most downloaded podcasts of 2017 were:

  1. S-Town
  2. Serial
  3. This American Life
  4. Radiolab
  5. Dan Carlin’s Hardcore History
  6. TED Radio Hour
  7. Invisibilia
  8. Freakonomics Radio
  9. Dirty John
  10. Wait Wait… Don’t Tell Me!

With hindsight, podcasting’s explosive growth shouldn’t be surprising. These days pretty much anyone can produce studio-quality music, on-demand books, movies, and radio-like content, all from home. And it’s almost as if pretty much anyone does. Of course, content and quality are all over the board, and not every podcast is a hit. Still, there is no shortage of hits, and that has traditional stations and networks taking note. Not a few wonder if podcasting is poised to put them out of business.

A number of factors make podcasting a tough competitor. Advertisers are lining up to sponsor them. Sheer volume and variety of content ensure programming for every taste and interest area. Podcast content is not under the same FCC restraints as radio content. Fans can tune in to podcasts when it suits them rather than according to a broadcast schedule. Podcasts allow for binge listening and catching up on past episodes. And a couple of people in a garage studio can be more nimble, more cost-effective, and more free of red tape than a major radio corporation. 

Still, I think it’s a bit soon to make funeral plans for radio.

For one thing, radio can and does steal podcasts’ thunder by making content available in podcast format at broadcast time or shortly thereafter. Perhaps you noticed that three of the above-listed top ten podcasts are NPR programs.

For another, there are things radio can do that podcasts can’t. Here’s a big one: Radio can provide up-to-the-minute news, but podcasts can’t. Even better, radio can provide up-to-the-minute local news, weather, and traffic, all of which local markets need. (For the same reason, satellite radio hasn’t done in local radio.)

For another note of encouragement, consider that the Pew Research Center found that radio listenership has remained more or less constant from 2002—a full two years before podcasting took off—to the end of 2014—a full ten years into the boom.

Podcasting presents an opportunity for financial institutions.

Short of starting your own podcast—which may not be a bad idea—banks can advertise on podcasts that are popular in their markets. It’s possible to run prefab spots or, even better, let the podcasters write and deliver spots for you. That gives you the advantage of an implied endorsement in the style of the very people the market tunes in to hear.

If you’re not a podcast listener, I recommend giving it a try, not least in order to keep up with the way your customers experience technology. With over a half-million available, there’s a good chance you can find at least one to your liking.

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