Forget payments, think value

When I began talking to banks many moons ago, everyone referred to payments as “Money Transmissions”.

Money Transmissions were the core service of the bank.

Money Transmissions were payments, and Money Transmissions locked customers into the bank because of their high frequency and regular contact with the customer.

Money Transmissions were the ultimate banking service and ruled the roost.

Over time, Money Transmissions evolved into Payments Processing and now Transaction Services.

It became less important as other areas, such as investment banking, became profitable and gained favour.

Nevertheless, as mentioned earlier this week, payments and everything about payments is very much back in vogue as a reliable source of revenue and profitability.

There’s a problem with this however, as the whole thing is still very much geared towards the same focal point of moving information about money between people and businesses.

This is still the heart of banking.

The thing is that the heart is being transplanted as we speak, and few seem to be noticing the change.

This only occurred to me recently when I realised that the reason we cannot get rid of cash is that it is a physical manifestation of value.

To steal my cash, you have to physically take it from me.

To steal my money transmissions however, you only need to access the data involved in the transmission.

Once you get hold of a 16-digit card number, combined with a valid name and address, you can raid someone’s account as much as you want. This is why we are so wrapped up in securing our data, and believe that by adding CVC numbers – another 3 or 4 digit secure code – and PINs to the card details, we can protect ourselves and our customers from fraud.

But this is missing the point.

The point is that we focus upon transmission, payment and the exchange of data about money.

But we do not need to think this way, and it certainly is not the customer’s focus.

Customers don’t think about exchanging money.

They think about exchanging value.

You have something of value that I need – goods and services – and I have something of value that you need – which might be money, but could just as easily be airmiles, labour, time, prizes ... you name it.

You see value can take many forms.

Value can be points collected in airmiles or loyalty programmes.

And value can be the ability to gain access to areas that are inaccessible, such as a backstage pass to a Beyonce concert.

And value can have different levels of value depending upon your view. For example, I believe that a backstage Beyonce pass has far more value than a backstage Britney Spears pass.

However, a Britney Spears fan would say the value of the latter is way beyond the former.

In fact, if we start thinking about value exchanges instead of monetary exchanges, we can start to think differently.

We can think about eBay as a value exchange for goods and services priced at the point of value for the buyer. But the buyer is not paying with money for goods, rather they are setting a value on the meaning of the goods to their life.

This is why some may pay $1,000’s for a backstage pass to a Liza Minnelli concert when most of us would pay $1,000’s not to have one.

Banks could re-engineer their business to be far wider, deeper and meaningful if they dropped the idea of money and replaced the thinking with value.

Banks as a safehold for value and valuable items.

Banks as a transaction service for exchanging value between buyers and sellers.

Banks as a secure processor of global value.

Maybe it’s semantics or maybe it’s not, for a value exchange moves the remit of a bank to be far more than just a transmitter of data about money.

It means the bank can be a transmitter of data about anything.

A bank could be a transmitter of ideas, patents, music, books, documents ... anything.

Aha, you might say, but isn’t that what the internet does?

Absolutely, but the internet does this without any guarantee of security.

This is why financial infrastructures are so important, building their businesses upon such secure foundations.

Secure transmissions of data about payments.

But some are changing that remit.

For example, I remember SWIFT releasing their 2010 vision back in 2006 with the following statement from the then CEO, Lenny Schrank:

“You don’t change visions too often, but for 2010, we’re considering modifying one word. Although it’s still work in progress, we might change ‘messaging’ to ‘transaction management’ or ‘business process management’. That is profound and deep. Many of our members have transaction businesses. We think we can move up the value chain from offering just messaging to offering messaging with transaction management services.”

It’s also what the European Payments Council is doing with the Single Euro Payments Area, as things like e-invoicing have related to, but is not actually part of the bank’s processing for making payments. Sure, it’s affiliated, but e-invoicing is far more to do with the secure transmission of data about goods and services.

Maybe this is why I’m thinking we need to get away from thinking about money as part of the financial transmissions process now.

Instead of money transmissions, it’s secure transmissions of things that hold value.

Interesting.

I wonder what new products and services a bank could unleash as a secure transactor of value.

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