The Intersection: Jul 2014

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The Uncertain Future of New Payments Technology

With insights from Ben White, POLITICO’s Chief Economic Correspondent

The world of payment technology is constantly evolving and no one can say for sure what consumers will embrace next. Some call Bitcoin the next big thing and warn that credit cards will be buried alongside cassette tapes. Others predict that it is going to be a long time before consumers are willing to give up their plastic. This lack of certainty creates a challenging environment for banks and other companies looking to move into this budding industry, uncertain of where or if they should hedge their bets.

At the same time, new challenges are emerging in the regulatory space. Banking is a heavily regulated industry, but regulators have not yet wrapped their arms around these new payment start-ups and the new technologies they offer. Consumer data security protections, for example, have yet to be addressed in much of the new payments world.

In an email exchange with Ben White, POLITICO’s Chief Economic Correspondent and author of “Morning Money,” I got his take on the future of new payments technology:

Q: Do you think that there will be a battle between banks and new payment tech companies/virtual currency companies over regulation and the idea that these new companies aren’t being regulated as strictly as the banks?

A: Banks will battle virtual currencies as well as tech companies such as Facebook that want to get into payments and other financial services without being under the same regulatory regime especially now that regulatory compliance costs for banks are so high.


Q. What do you see as the role of the banks in new payment technologies?  Will banks help drive change or will they have to play catch up?

A: I think big banks are doing pretty well here. It’s small to midsize banks that are playing catch-up on digital wallet and payments and probably cannot catch up and will have to merge.


Q: What are some future payment options that you think could have more potential than Bitcoin? Do you see the potential for a virtual currency?

A: I think existing digital payment options probably have more potential than a new lightly regulated currency that seems more like a fad than a sustainable thing that average people will actually embrace.


Q: What is the role of the media in all of this? How do the media influence the conversation around the future of payments?

A: I think the media, especially new media, tends to hype anything digital, especially bitcoin, because it makes you seem cool even if you have no real idea what you are talking about.