Money2020 is a conference taking place in Las Vegas from October 6-10. It is dedicated to the discussion of the payment industry -- its past, present, and future. Panels, talks, and keynote speeches are held all day, along with discussion about the global expansion of the payments industry, the growth of mobile payments, digital currencies like Bitcoin, gift cards, and the criminal ramifications of having online and mobile payment options. (See coverage from the first day of the conference in Money2020 Conference: Is the Solution to Cyber Crime a Physical Device?
In a keynote speech given yesterday, Kausik Rajgopal, Director at McKinsey & Company, said in his opening remarks, "If we had been here 10 years ago, this would have been not one, but many conferences." He explained that the payment industry now interacts directly with banking, telecommunications, retail, and marketing. Because of that developing intersection, his firm projects that the payments industry will continue to grow at a rapid pace. Rajgopal believes that Latin America will grow at the fastest rate, but he also noted that China has, by far, the most revenue from online payments.
Selling Online in China: It's All About Trust
In 2012, online retail sales in China totaled 1.3 trillion RMB, which is equivalent to $212 billion USD. By comparison, total online retail sales in the US for 2012 came in at $186.2 billion. In the panel discussion "Selling Online in China," Tom Zhang, the Senior Director of Business Development at Alipay, the Chinese equivalent of PayPal, discussed the huge market for online payments and shopping in China, using Taobao, the Chinese equivalent of eBay
(NASDAQ:EBAY), as an example.
He believes that continued growth will be about one thing: trust. Zhang explained that, at first, people in China were buying only very small items on Taobao -- products so insignificant that it wouldn't be a big deal if they never actually got delivered. However, when those items did arrive, people began to purchase bigger items. Now they buy furniture and cars on Taobao, which contributes to the growth of Taobao and total online revenue in China.
Simple, Secure, Smart
"It has to be incredibly simple, it has to be secure, and it has to help [consumers] pay smarter."
Echoing Zhang's comments about trust, Mike Abbott, the CEO of mobile payment company Isis, made this statement, describing the ideal mobile payment system for consumers. Put simply, consumers must have as much faith in a mobile payment system as they do their credit cards. "The competition is plastic, and plastic sets a really high bar for user experience," he said. (You can decide for yourself whether or not you agree with him, but certainly Mastercard
(NYSE:V), and American Express
(NYSE:AXP) are more trusted and accepted by consumers than digital wallets like MPesa and Isis, or digital currencies like Bitcoin.)
Abbott and Isis are trying to incorporate plastic into the mobile wallet experience. During his keynote speech, Abbott demonstrated the new Isis mobile payment app, which allows users to put all of their credit and debit cards in one place. With the app, an actual picture of each card is displayed, and a user can simply swipe between each one. Moreover, any card can be flipped with a tap to see balance information, transfer funds to the card, or transfer funds from the card to someone else.
"Why the Hell Is Google in Payments?"
The next keynote started with this excellent hook, delivered by Ariel Bardin, Vice President of Product Management for Payment at Google
(NASDAQ:GOOG) and self-professed "new kid on the block." Later in his speech, Bardin offered an answer to his own question: value for users and value for merchants. Interestingly, I tweeted this question during the speech, and one of the responses I received, from @TenderFuturist, was "DATA!" In truth, Google can serve both consumers and its data needs with Google Wallet; it's up to consumers to decide whether that's scary or not.
Since its launch three weeks ago on Androids and iPhones
(NASDAQ:AAPL), Google Wallet has had 2 million activations and 200,000 cards added, most of which have been loyalty cards. But Wallet is not the only payment system at Google: The tech company now allows you to make payments on all of its services -- including YouTube and all apps on Google Play -- via Gmail. You can even send money to other users using your Gmail account.
Online Currency Exchanges and Organized Crime
Taking a break from the teeming convention room and wide, carpeted hallways, I sat down for a conversation with Scott Dueweke, Senior Associate at Booz Allen Hamilton
(NYSE:BAH). Our conversation covered online currency exchanges. We discussed how organized crime is using these exchanges to move money, and the fact that this is slowly weakening people's support of conventional banking and has the potential to undermine the very notion of the nation-state in the long term.
Dueweke and I discussed Bitcoin, which he believes is overhyped since it represents only a small portion of digital currencies that are actually being used. We also talked about Islamic Mint, an organization that verifies the compliance of currencies in Islamic countries with standards set by Islamic law (for example, interest cannot be charged, as stipulated by the Koran). Islamic Mint has the lofty goal of ending the Western way of banking. When I asked Dueweke if it was anywhere near reaching that objective, he said it was most likely not, but the point is that there's an organization out there that tasks itself with changing banking and how money transactions work.
And does Dueweke have any solutions for combating criminal organizations and their uses of anonymous digital currencies? For starters, he said, digital law enforcement must put a great deal of effort into learning how these systems work. Criminals have been using digital currencies like Bitcoin for more than five years now, perhaps much longer. We've got to catch up with our understanding, and that will be no easy task.
Digital Currencies Are Here to Stay
The last panel of the day boasted an impressive cast of digital currency players: Jered Kenna, founder of TradeHill, which was at one time the second most popular exchange for Bitcoin; Chris Larsen, the CEO of online exchange system Ripple; and Marc Brule, the CFO of Royal Canadian Mint, which produces all of the coins used in Canada, as well as some used by other countries. Brule may seem like the odd man out on the panel, but in fact, he is the head of Royal Canadian Mint's digital currency project, MintChip.
One important takeaway from this panel discussion was how digital currencies work together. Kenna said that he personally uses Ripple to transfer US dollars between the various Bitcoin exchanges. (Bitcoin is the currency he uses; Ripple is his means for transferring funds from one currency to another, such as from Bitcoin to USD, or vice versa.)
Another important point made had to do with the potential that lies in digital currencies. Kenna explained how the cost of Visa is prohibitive: A merchant has to sign a contract and pay an initial startup fee for the card reading machine. On top of that, there are additional fees for each transaction that occurs. With Bitcoin, there are no fees; all that's required is an Internet connection, so effectively, an $80 smartphone can be used to conduct Bitcoin transactions.
Ending the session, Brule asked a question: "The Internet is global -- why shouldn’t there be a currency that goes across all markets?"
Whether they are being used by startups in Africa or by massive crime organizations in Russia, digital currencies allow a free flow of money, just as the Internet allows a free flow of information. Major corporations like Visa and Google will do better in mobile and online payments if they accept this evolution.
Follow me on Twitter: @JoshWolonick and @Minyanville