alternative payment methods 03 2015 lerner consulting

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Pay Me Yesterday, Pay Me Today - Frictionless Transactions

Association of Finance Professionals Portland - April 2015


What is Friction in [Consumer] Payments?

•  Why do we make payments? •  Payments were/are an awkward mechanism

for resolving debt •  What and whose problem are we solving?

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Payments Resolve a Debtor-Creditor Relationship

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First “currency” is in the form of receipts for grain ~2000BC First coins around ~650BC

Problem Starts here


Credit Cards Turn Up the Heat

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Commerce Friction: Measured by number of payment touch points in a

transaction

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Reducing Friction: What Problem are we solving?

Consumer •  Convenience •  Value added Services

Merchant •  Reduce number of back end processes for

Merchants and others •  Fixed number of hand-offs •  Creates a “closed economy” for Merchants

•  Limited value add loyalty program •  Data mining •  Fraud reduction •  Reduced chargebacks

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Cashless = More Spending? •  People tend to be more thrifty when using

cash or tokens –  “Coupling” – Associative properties are strong with people

•  Many anecdotal stories related to spending –  “Famous” D&B reporting citing 12-18% more

when using credit cards instead of cash – Psychology of “no limit” credit spending – Prospective Accounting – Pre-pay

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Money in the Bank •  Pre-paid and SVC (Stored Value

Cards) •  Reduce risk due to theft or loss •  Eliminate the cost of securing,

transporting, and accounting for cash

•  Remove manually intensive back-end processes

•  Get rid of financial float-loss/currency value

•  Better quality of life for select recipients

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Pay Me Yesterday…

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•  Apple Pay –  700,000 Merchants –  800,000,000 iTunes [Credit Card] Accounts –  Showmanship

•  Uber –  Has no cars –  Base rate + Time (penalties for traffic) + Distance

•  Both work on the “psychology” of spending


The Money of Math

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•  Cryptocurrencies are a digital financial instrument, the most well known is Bitcoin.

•  Bitcoins can be traded like currency for the payment of public and private debts

•  Transactions are performed without the need for tradition credit card or Central (government backed) Bank

•  It's designed to enable users to send money over the Internet in a user friendly and simple manner


Three Things to Remember 1.  The value of a bitcoin is

volatile -  Like stocks

2.  Bitcoin transactions are not reversible -  Like cash

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3.  There are no bitcoins –  There are only bitcoin transactions


Lifecycle of Bitcoin Transactions

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Transactions are visible and recorded for everyone to

see and examine


Steps in a Transaction •  Only transactions may be traded •  Wallets create the transaction details •  Networks in bitcoin transactions create

transparent ledgers •  Identity is ensured by a “key” system •  Proof not trust is what the system relies

upon – Proof establishes identity (of the transaction) – Proof of work established in a hash

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Non-Repudiation

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In cryptography, it means preventing an individual or entity from denying that a particular action occurred

related to data


What is the Block Chain Ledger?

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Linear and sequential list of [bitcoin] transactions. Validation of entries in the ledger

are derived from previous ones


How does the Block Chain get updated?

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•  Transactions or “messages” are part of the encryption input

•  Approximately six times per hour transactions are committed to the ledger

•  Cryptographic standard SHA-256 –  Mathematically “hides” the incoming

message –  One way encryption

•  Nonce (Number used once) •  Proof-of-Work

–  Paying for accounting


Digest Results from SHA-256

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fox =

776cb326ab0cd5f0a974c1b9606044d8485201f2db19cf8e3749bdee5f36e200

fxo =

fbf7443c4238ad48b4d28226ff7dcca5e5ab467b2c37b960ebc860703d925f52

The quick brown fox jumped over the lazy dog =

7d38b5cd25a2baf85ad3bb5b9311383e671a8a142eb302b324d4a5fba8748c69


What problem(s) can we solve for our customers?

1.  Always have proof of a transaction 2.  Global and transparent ledger system 3.  Secured ledger 4.  Portable and lightweight

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Identity can be guaranteed

Distributed Database


Dash – Never, Ever Leave Home Again

•  Amazon One-Click made eCommerce an every day service

•  Dash allows consumers to shop for and purchase everyday items without effort

•  Women shop, men buy – reduces friction to almost zero 18


WIFY (What’s in it for You) •  Opportunity comes from inspection •  Data mining from closed audiences – Smaller merchants benefit more

•  Loyalty Programs and loyal users •  Better? –  “Off the network” – Closed Systems – Fraud reduction – Fewer chargebacks

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Thank You!

Direct: +1.630.248.0663 Email: [email protected]

Twitter: @RevInnovator


Bio – Lawrence I Lerner

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Lawrence is a corporate entrepreneur with a keen eye for market relevance who envisions and builds digital products and services across the globe. An early interest in taking apart complex problems honed his mulK-‐disciplined soluKon approach. He’s launched more than a dozen $10MM+ corporate products across industries (Retail, High-‐tech, Media and Entertainment) and IT services. With a passion for growth and transformaKon, his experKse is in Process Engineering, Strategy, Enterprise Architecture, Big Data, Mobile/Social Media, IT Security and Product MarkeKng.

While successfully creaKng businesses on three conKnents, Lawrence served as a change leader on execuKve teams. He has created $100MM business lines and launched new product/services for some of the worlds’ top brands (Motorola, Catalina MarkeKng, Macrovision, DHL, Debenhams). Over the past 20 years, he’s helped launch eight early stage companies.

Leadership roles:

•  Board of Directors – PNI Digital Media (TX: PN now Staples) The premier provider of digital soluKons for Retailers. Assisted execuKve team in strategy, new product launches (social staKonary, expanded photo sharing) and governance.

•  Global Head Services – UST Global. UST is a privately held $650MM outsourcing leader. Developed business service lines and grew to $100MM P&L poreolio in North America, Europe and Asia.

•  PricewaterhouseCoopers – Global PracKce Leader responsible for development day-‐to-‐day operaKons of nine lines of business including a $60MM venture fund for early stage companies.

•  Interim Chief Revenue Officer – Turnaround of mulKple organizaKons with misaligned technology, process and organizaKonal structures.

Lawrence’s work is repeatedly recognized for organizational transformation. Dun & Bradstreet recognized his transformation of their core business, DnBi, in their Annual Report, which netted 35% revenue growth. Gartner recognized his solution for Business Process Management as “best in class” for Catalina Marketing.

–  Examples of digital products Lawrence has defined, designed and delivered: –  Conceived and developed loyalty programs for Discover Card, The New York Times and Safeway resulting in $10MM+ revenue streams. –  Developed point-of-Sale Credit and Debit cards platforms for Follett (installed across a base of 1,800 college campuses). –  Developed first smartphone eCommerce strategy for Motorola. –  Created first Merchant program for Discover Card.

Lawrence is a thought leader in Change Management, Payments, Social Media/Mobility, and Retail. He is a contributing writer for Wired, The Christian Science Monitor and PSFK magazine. His book ‘Facebook for Your Business’ was among the first to describe how the social media platform could grow businesses. He is a frequent speaker and media guest expanding audience perspective on the New Normal of business and IT.

excel lence.perspect ive. innovat ion.