Online payment

Also on the BBC News website, as usual]
The latest Google service, Checkout, launched at the end of June and within a week had been banned by eBay on the grounds that Google does not have a “substantial historical track record of providing safe and reliable financial and/or banking related services.”

The resulting fuss has guaranteed that anyone interested in online payment services knows that Checkout is out there, though the current obsession with Googleology – the art of interpreting Google’s announcements – meant that this was hardly ever going to be a stealth launch.

And it seems reasonable to give eBay the benefit of the doubt over blocking Checkout, at least for a period, since the new service is unproven. Since Checkout doesn’t seem to be competing directly with PayPal in small-value consumer payments there would seem little point for eBay in generating such bad publicity.

Unlike eBay’s PayPal, Checkout seems intended to support Google advertisers, largely small businesses rather than private individuals, so perhaps eBay was just being consistent in its approach to a new service.

The squabble between the two companies isn’t really what matters here. In the longer term, whether Google Checkout, eBay’s PayPal or other online payment services like WorldPay survive is less important than the fact that they are out there and innovating in the financial world in a way that established players cannot or will not.

Because online payment matters, and better and easier payment services are one of the key requirements for the continued growth of the internet.

It’s already clear that having a fast, convenient service can change your online purchasing habits almost without you noticing.

One of the reasons iTunes Music Store is successful is that once you have an account then you don’t really notice that you’re spending money, and of course Amazon has a US patent on its one-click payment service and sees it as a major source of competitive advantage.

It’s the same for other forms of online purchase.

I’m currently working on a daily podcast for the Cambridge Film Festival, and I needed something to let me record Skype conversations efficiently so that we can do interviews with directors in advance of their trips to Cambridge.

I found Call Recorder online, and it seemed to do what I want, so after trying out the demo I decided to pay the $12.95 they asked for through my Paypal account. If I’d had to fish out a credit card and take the time to enter all the details on yet another payment page I may not have bothered.

Certainly when it comes to shareware, where the imperative to hand over the money is purely a moral one, having an easy way to pay makes us more likely to be honest.

If Google lets more online retailers take money from customers without the customers having to think about it, then it will help the online economy grow and fuel even more innovation. I do not think this is a bad thing, and it may even trigger the final stage in what I see as the financial equivalent of the ‘Negroponte switch’.

In the 1990’s Nicholas Negroponte, founder and ex-director of Massachusetts Institute of Technology’s Media Lab, predicted that data that was broadcast by radio, like TV, would increasingly be transmitted over wires while wired networks like the Internet become wireless.

In the financial world, the switch is from money as a token of value, something that represents access to a real-world commodity like gold, into money as an access key, something which simply enables the owner to manipulate records in financial databases.

Banks and financial institutions have taken the second view of money for some years now. Now,  as more and more of us in the West move large chunks of our lives online, payment services like PayPal become more important than the cash in our wallets.

This is happening because we finally have innovative online companies at the centre of people’s financial matters, and they can do things that the banks won’t.

Online banking is very much an attempt to implement a good old-fashioned bank account on a computer screen, and as a result they are remarkably dull and uninteresting.

And banks have offered only the most basic mobile services, like access to statements and balance reminders. Yet PayPal has a fully-functional mobile payment service, and we can expect Google and others to follow suit.

Whether Checkout is a brilliant strategic move by Google to lock its users and advertisers ever more closely into its worldview, or another example of an online behemoth with far more money than strategic sense overextending itself is less important than what it shows about online payment services.

While the small-value payment systems which we are building today may primarily serve the interests of eBay traders or small businesses in the US, they will also prove useful to the next five billion users, those for whom existing financial services and banks have little to offer.

They may well find that they can make good use of them for micro-payments, local business ventures and even transferring money to family overseas.  And as they do, they will start to embed the network into their daily lives just as those of us in the privileged parts of the world are doing today.

And then they’ll start to think of their own ways to use the technology, and we may find that their interests and desires are very different from ours.

Links:
Google Checkout: http://checkout.google.com/
Checkout launched: http://news.bbc.co.uk/1/hi/business/5128126.stm
Call recorder: http://www.ecamm.com/mac/callrecorder/
Amazon patent: http://cse.stanford.edu/class/cs201/projects-99-00/software-patents/amazon.html
Negroponte Switch: http://www.answers.com/topic/negroponte-switch
PayPal mobile: http://www.techcrunch.com/2006/03/22/paypal-mobile-launches-and-its-awesome/