Monday, September 15, 2014

An Open Letter to the ETSI, TIA, the Fed, BIS, and the ECB

I write this open letter to the European Telecommunications Standards Institute (ETSI), Telecommunications Industry Association (TIA), the United States Federal Reserve Bank (the Fed), the Bank for International Settlements (BIS), and the European Central Bank (ECB) to propose that you folks get together and create a tagged base data standard (like ISO 20022) for transportation of payment data to financial institutions (FI) from personal electronic devices (PED). 

It’s important the standard be flexible (allow many different types of encryption methods for example) and yet transport the minimum data to enable a push of funds from the payer account to the payee(s) account. If large respected institutions create an open standard that meet requirements for payments at least for the group of 20, then manufacturers can produce personal electronic devices containing acceptable applications that push funds to payees.

If on the other hand, manufacturers create their own specifications, large individual firms will produce proprietary schemes that lock out competitors and create a Tower of Babel for a vital communication network. Further a standard specification creates a minimum security posture for the initiation of payment pushes giving confidence that devices will not be lax creating a minimally acceptable effort to protect payer funds.  

It is in the best interest of financial institutions that have regulations in place to protect the public in a reasonable and unobtrusive way to specify a safe method to initiate payment instructions and receive notification of results. Further the current retail payment architecture creates monopolistic practices with banks and network providers setting fees as a single entity rather than competing by offering various fee structures to the purchasing public.

It should not take long to create an adequate specification with the right technical people sitting in a room with a strong financial interest to build a new small value payment infrastructure. The work I predict will take less than a year because most of the critical elements are part of current financial data standards. Some needs based architectures require redemption of goods by description of the goods and not of the value of goods and your new protocol needs to support this practice. 

I know there will be lobbyists and politicians in Gucci suits representing well-heeled constituents screaming that institutions such as you should not dictate protocols for good capitalists. I note that standards are not regulations, more like guidelines, and only provide a common language and not necessarily a regulated methodology.  Allowing innovation is good for all including people in jeans and a tee shirt, like me.

Thank you for your consideration of this request.


Ed Oppenheimer

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