In Trust We Trust

By Jonathan Vaux, Executive Director of Innovation Partnerships • Visa Europe

July 13, 2015

When I moved house recently, I took the opportunity to clear out some stuff and placed some unused boxes of Star Wars Lego my son had never opened onto ebay. Having sat in my attic for three years, I wasn’t expecting much, started the sales at 99p, and waited a week. My delight at the unexpectedly high price they fetched was short-lived, for the box quality of one set did not meet the expectations of the hardcore Lego collector who placed the highest bid. With a 100% seller reputation, I became seriously concerned that this pristine score could be damaged by this disgruntled buyer – I had mental images of the Simpsons’ Comic Book Guy declaring “Worst … Lego…ever”. What struck me was how much my ebay seller score mattered to me and how precious one’s online rating has become as we increasingly transact virtually.

A friend recently told me how upset she was that she could no longer rent an Uber cab after she had provided access to her Uber account to her father so he could ferry her kids during a half term holiday. After the kids used the car as a jungle gym during the ride, the driver had given her such a poor rating that she was now unable to entice any Uber drivers to pick her up.

In an increasingly connected world, our online reputations are becoming critical to our ability to transact and interact with others. Social network technology has now been adapted to morph from conversations to financial transactions. Initially these transactions have occurred between known parties with peer-to-peer payments between friends using technology such as Venmo.

With the emergence of Bitcoin and the Blockchain, it now feels like we are at a tipping point for emerging technologies seeking to facilitate digital payments between unknown parties. Technologies such as Blockchain will enable rapid transfer of digital currencies but will this be enough? Once funds are transferred they will be irrecoverable and transactors will not benefit from the protections they expect under payment schemes such as Visa.

Many of these services are designed with the millennial customer in mind, but is that demographic truly representative? These early adopters may well have different concerns about the safety of their payment experiences, but will they still feel the same as they grow older and possibly begin to settle and save, or when they want to use the service for more consequential transactions such as buying a car?

One of the key questions for these new challenger services will be whether they can scale without the inherent trust in the system provided by the very incumbents or authorities many of them seek to topple. There are interesting analogies between the development of online music and the Blockchain. After developing a compressed music file protocol (the MP3) that enabled simpler transfer and sharing of songs, the technology was originally championed by the “pirates” as a way to fight the establishment (in this case, the record companies). In turn, the record companies tried to resist strongly, looking to the legal system for protection against the monumental change the mass adoption of the file-sharing technology could (and did) bring to their industry. Today, the technology has been adopted by the mainstream and legitimised by large organisations such as Apple, Spotify and Google. Over time, the situation normalized and new commercial models were developed to reflect the new ways consumers wanted to consume their music – shifting from music as a commodity to music as a service.

Today, many Bitcoin advocates revel in their anti-establishment stance, positioning the lack of regulation or bank involvement as a virtue not a limitation. However, many of the earlier challenger banks are now partnering with larger banks to gain scale. The Visa brand, one of the top five in the world, has been driven by developing services that ensure the right balance of convenience and security, leading to a high level of consumer trust in our acceptance mark. Like the MP3, the new technology is more likely to find rapid widescale adoption – and there are some potentially compelling applications of Blockchain technology in areas such as identity and verification – through evolving from the “underground” and maturing and scaling through integration with the “mainstream”.

At a recent Wired conference, a Bitcoin proponent resisted any establishment involvement – “Bitcoin is Punk Rock, you can’t control it” – but even the Sex Pistols have gone from “Anarchy in the UK” to lending their image to sell credit cards.

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