Tuesday, September 23, 2014

Storing Value on Personal Electronic Devices; Push Pay Nirvana

It is just a matter of time before people start storing monetary value on their personal electronic devices (PED); cooperative solution of a few architectural problems solution remains the only obstacle. Some of those problems include:

  • Lost, damaged, or stolen (LDS) PEDs
  • Foreign exchange
  • Standard data protocols
  • Communication Network availability

People solved these problems more or less with pull payment architecture and provided a common (and somewhat shaky environment) for payers and payees alike. A push architecture (moving value directly from payer to payee, not a payee requesting payment from the payer) requires less messages and less time, and so is inherently more secure. Storing value on a PED eliminates the need for payment networks and if designed correctly eliminates the need for any network if payer and payee share the same physical space.

Tying the value to the holder of the value mitigates the LDS threat. Foreign exchange occurs when the value arrives at a financial institution (FI). However getting makers of PEDS and network providers to cooperate and develop a data standard is harder than herding cats. Perhaps we do not need such a standard.  One FI will issue electronic value to its customers and the storage of that data on the device will become a de facto standard much as the VISA 1 standards evolved from the early attempts to negotiate a line and send a payment message.

If people share the same space then use of USB ports solves the problem of network availability. The problem of converting the ownership of value from payer to payee in a secure manner remains a delicate problem, however there are enough smart engineers out there to do it well. The German Geldkarte solves most of these problems; I wonder if the world will shake if Geldkarte move their solution from smart card to PED.

Next Blog: Payment Traffic Jams

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