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A real-time global pulse

As we use low latency systems, faster payments, twitter and other technologies, we silently watch the revolution of our world from local to global communities, and to a real-time global pulse.

The thing is, do you ever stop to notice?

The fact that you can trade in a millionth of a millionth of a second, transfer monies at light speed, and share news from Beijing to Birmingham as it happens, is the world we live in today.

You can find out what is happening in the economy, business, banking and life faster than the major TV news channels. Equally, as news is reported, you can supplant the news with feet on the street views by tapping into this global pulse.

This was brought home to me as I watched the April 1st G20 protests in Twitter, YouTube and live on the BBC News24 and Sky News*. The mind-meld of real-time social media channels with news media channels created a world of almost like being there, even though you weren’t. Like being omniscient, even though you aren’t.

This global real-time pulse is now as true for the world of finance as it is for the world of news.

We can operate a global brain pulse of knowledge about stocks and trading and investments.

We can provide real-time dashboards for cash management and pooling across corporate supply chains as an information service.

We can run a real-time money transfer service between migrants in America and their remote families in Asia.

We can even create a real-time pulse check for fraud and money laundering. That’s partly what the changes to cover payments is meant to achieve.

However, in financial services generally, this is happening and we are getting there …

… but it is happening very, v e r y, v  e   r    y     s      l      o       w        l         y.

What’s the issue?

If we can trade and socialise in real-time, why can’t we buy and sell in real-time?

Is it down to the very nature of fraud and all the legal meanderings that go around such commercial trading activities?

The fact is that if you pay in real-time and, later, want to revoke the payment, who is liable?

You pay in real-time and fraud occurs, who is at fault?

One view would be that, like cash, you should be able to make payments in real-time. This would make a transaction irrevocable. You do the deal and it’s done. This approach would revolutionise finance, as there would be no issues over trading any size of goods.

Once the money is transacted in real-time, it’s yours.

That was meant to be the point of the UK’s Faster Payments, but it hasn’t happened.

On the one hand, Faster Payments is only for standing orders, telephone and internet payments, where the security measures mean that most of the payments would need a personal authorisation to take place.

Therefore, if the payment was incorrect after the fact then … tough. It’s your fault.

That’s why card payments aren’t included, as they are far too open to abusive practices today.

On the other hand, you could take the view that a real-time payment doesn’t necessarily mean what it says on tin. It’s only trading bits and bytes of data you see, not real cash. No real money is actually moved between the accounts. Therefore, you could say that the electronic transaction takes place in real-time, but monetary movements are not signed and sealed until end-of-day.

Just transfer the bits and bytes of real-time data files between accounting systems and follow up with real-time monetary movements later.

Oh yes, that’s what we do anyway isn’t it?

Transact the data and then, later, settle the money.

So, real-time payments should be OK, shouldn’t they?

It’s only trading data after all.

And meanwhile, if you’re worried about the fraud of real-time payments then real-time fraud detection should overcome this. For example, if you suspect it’s a fraudulent transaction then, in real-time, a random security question can be generated at the POS or online.

Then who needs PINs and one-time passwords?

In real-time, if you want to spend 10,000 on a car on eBay … no worries. Just tell us, in real-time, what’s your post code, name one direct debit on your account and tell us your first pet’s name?

If you can't answer those, then choose from a list. 

So here's a near-term vision for real-time payments.

At payment time, whether online or offline, internet, telephone or POS, you no longer enter a PIN or password.  You just to answer a random question from a list such as:

– enter the number that represents the last payment from your account
– enter the data (DDMMYY) of the last ATM transaction you made
– enter an amount that leaves your account by direct debit each month
– enter your postcode/zipcode
– enter your main telephone number as registered on your account
– enter your main personal code (could be a PIN or passport number, birth date – your choice)
 … etc.

Note, this list would change every time you pay and would probably only
apply for payments over let's say 100 units of £, € or $.

Real-time everything, including real-time payments with real-time security.

Now we’re cooking.

* Just noticed I naturally phrased this line with the term "watched in" social media and "watched on" traditional media.  This shows how you are far more engaged "in" an interactive world of media, rather than the one-way receiving "on" traditional media.

About Chris M Skinner

Chris M Skinner

Chris Skinner is best known as an independent commentator on the financial markets through his blog, the Finanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal’s Financial News. To learn more click here…

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  • Jeremy Kidd

    Something that struck me reading this article is the side-effects of not having to work for things. Human nature will take things for granted if we don’t have to work hard for something. I think it’s a root cause of the mortgage crisis – lenders made it very easy for people to get cash and/or bigger houses and people became careless. We need to have an investment of time, effort, or money in something to really appreciate it and give it value.
    With the ridiculous ease of access to information on the Internet that’s been ballooning since the launch of Yahoo and then Google, and now with social media giving us more real-time news than we know what to do with, when will we just stop caring about news and information? Or has it happened already? Giving the world this kind of access to news should empower us all, but I fear that all it’s going to do is make news such a plentiful commodity that it starts to lose value as people stop caring about it. Maybe society would be better off in the long run if some things stayed difficult to come by…

  • Chris Skinner

    Ah Jeremy,
    Now you remind me of my old economics professor talking about the Law of Diminishing Returns, and how scarcity creates value.
    The less you can get of something, the more you want it … how true.
    Thing is that money is the one thing that for many is not plentiful … but other things are.
    Music is cheap and easy, and probably has less worth than it used to.
    Travel is cheap and easy, and probably has less excitement than it used to.
    Information is abundant and cheap and easy, and so reading has become less important.
    We could go on … and on and on.
    I only wonder whether it is just the musings of age, e.g. in my day lad, things were so much better. We knew the value of a sixpence and all that.
    Or whether it is true that abundance is devaluing the things we used to value in society?
    Interesting debate,
    Chris

  • JAnderson

    If you want real-time transactions, then you need strong authentication – so that there is no concept of repudiation of a transaction.
    The challenge is that strong authentication does not tend to be perceived as very “user friendly”. Since most systems were built before real-time was technically feasible they used weak authentication – which consumers came to see as the norm.
    New technologies have generally been introduced with increased levels of authentication (e.g., ATMs have PINs, home banking has usernames, passwords, SiteKeys etc.) but the balance of usability and security is a very real one – and is tough to balance for service providers.
    Strong authentication has been “embraced” in corporate situations (e.g., the RSA token generators most corporate types carry for remote WAN access), because it is the enterprise setting the conditions of access to its resources – not a consumer allowing a bank to make it harder for them to access their own money.