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PaySwarm: the most disruptive innovation in payments

PaySwarm has the potential to fundamentally change the way payments are made online.  But why is this one different from the umpteen other funky web based payment innovations?  Firstly, it is free.  Open source, patent free and royalty free.  Second, it is a web standard that is being adopted by the World Wide Web Consortium payments group, a forum backed by players such as Google and Apple (but no banks, interestingly).  Thirdly, this is the model that led to the adoption of HTTP for web browsing, SMTP for email, etc. 

Manu Sporny chairs the W3C group and he pitched today at the Innotribe session at Sibos.  Despite the obvious disadvantage of being introduced to a roomful of bankers as a bloke who goes skydiving in a hand-stitched monkey suit (honest), he very quickly grabbed the attention of everyone in the room.

It is being adopted early by FireFox and offers one-click payment embedded in a web browser.  The early adopters will be based on micropayments, and for them the benefits are obvious – frictionless in-browser payment of a few pennies for online content, and very low risk on both sides of the transaction. 

The challenges for them will be twofold.  Firstly, it relies on decentralised, portable KYC identity.  This is absolutely fine for micropayments but will quickly attract a lot of challenge once values start to rise.  Manu suggested that governments and large corporates may be willing to validate that identity but my experience tells me that this is much harder to achieve than he thinks.

The second challenge is around clearing, where a lot of these ideas stumble.  At the moment they are clearing through crypto currencies like Bitcoin and Ripple.  This is not a viable long-term solution, but if you get a large global bank involved, and a few large ACHs, then it could really take off.

Watch this space.  I’m very impressed and I think this one has legs.

Comments: (1)

A Finextra member
A Finextra member 20 September, 2013, 16:28Be the first to give this comment the thumbs up 0 likes

Nice post Chris.

The two key challenges are spot on, but probably look a lot smaller in scale from the perspective of

  1. the always-on, internet savvy, ‘born global’ population
  2. those developing economies that lack the legacy infrastructure and with it the traditional thinking sometimes found in developed economies
  3. 'silicon valley' developers. In one of the Sibos sessions, Scott Bales (CIO Moven) interjected that today's developers engineer in a different way and at a far different speed.

As we all know, with M-Pesa Kenya has produced the mobile payments global poster child, now processing about a third of its GDP. There's plenty of motivation for African countries to innovate. According to SWIFT (who should know)

  • nearly half of settlements WITHIN Africa involve banks outside of Africa. No wonder transaction costs are high.
  • of all commercial payments sent from Africa, 49% are dollar-denominated. This trend may look unsustainable when less than 10% of the underlying trades have their final destination in the United States.

Might Africa be the melting pot in which these new innovations get their foothold? McKinsey lists 'developing infrastructure capable of leapfrogging legacy systems' as one of three particularly promising opportunities in Africa in 'Putting growth back on the agenda’.

Chris Dunne

Chris Dunne

Payment Services Director

VocaLink Limited

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London

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This post is from a series of posts in the group:

Innovation in Financial Services

A discussion of trends in innovation management within financial institutions, and the key processes, technology and cultural shifts driving innovation.


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