How extra demand for cashless payment services is changing the banking world [Q&A]
One of the side effects of the COVID-19 pandemic has been a marked reduction in the use of cash as people have shifted to using cashless and contactless payment methods.
This has put increased pressure on financial institutions to offer digital services, but it’s also shone a spotlight on the measures needed to prevent fraud and on initiatives to integrate cryptocurrency into everyday transactions.
To find out more about what all this means, both now and into the future, we spoke to Eric Solis, CEO of digital cash network MovoCash who has over 20 years experience in the fintech sector.
BN: You started your fintech career with a micro investing platform, what drew you to the payments sector?
ES: When you have an industry that is built on silos you require latency in order to move data from one place to another, so you end up with a porous tech infrastructure that is prone to security breaches. I noticed that there was a lack of compliance by companies like Venmo and even PayPal. And I noticed that there wasn't really a clear path or seamless way in which a dollar could move from point A to point B without a lot of friction. So I got to work on applying some of the principles that we used in building stock and bond trading. It's been digital for a lot longer than many industries, when we created the hyper capability of micro investing I felt that it acted a lot like savings or spending, because you've got a ledger or you've got a sub-transfer agency established on that ledger, you're creating pooled funds accounts and so on. I applied a lot of those principles to payments and lo and behold we ended up getting a patent on the solution in early 2018.
When I got here I knew very little about payments specifically but I knew a lot about how to build systems around how to make payments more efficient, or how to make money move more efficiently.
BN: How is MovoCash different from platforms like PayPal?
ES: If I send you $10 on PayPal and tell you to go and treat yourself at a particular store, then when you walk in and tell them you want to pay with PayPal, the probabilities are pretty high that they don't take PayPal. You can get a physical PayPal debit card but that requires you to jump through quite a few hoops.
PayPal has created a phenomenal solution for online payments but it doesn't do a very good job in bridging the two worlds together in terms of online digital payments and offline real world payments. So that's where Movo has a very significant competitive advantage over PayPal. That said, we cooperate with the entire ecosystem. When you're talking about a $100 trillion global marketplace with money nobody's going to control it all, Visa isn't, MasterCard, isn't PayPal isn't, Wells Fargo isn't, they're all going to have unique positions and a place where they meet a need. We see ourselves as a part of that ecosystem, we certainly are not out for world domination.
BN: How do you square making those payments easier with keeping them secure?
ES: Consumers today demand the combination of simplicity and security. For a long time it's been weighted towards simplicity, people didn't really care about security. I was really kind of frustrated because Movo was built on the premise that you ought to care about the security of your money and the security of your information. Today, what's happened is that there's been a huge shift so more consumers do care, they actually value companies which go above and beyond to validate their identification and give them ways to continue to protect their ID and their money.
Shopping online generally means giving someone your 16-digit debit card number, but in doing so you're giving them access to your entire credit line or bank account balance. It's like rocking up in the good old days of cash, putting your entire net worth on the cash wrap and saying 'I'll be back in a minute, only take what you're entitled to.' But a third of all fraud is merchant fraud, even at a low level, they might overcharge you by $2 for example thinking you won’t miss it.
BN: Don't websites in particular sometimes make fraud too easy by offering to store your card details for other transactions?
ES: That's an excellent point and one of the things that we don't talk near enough about. If somebody gets hacked and you get a note from your bank that you’ve got to cancel that card, now you're forced to remember where else you stored that card. That's a major problem, I've had it happen to me where I'm sitting here one day and all of a sudden I get my auto insurance canceled because the card's bad.
With Movo you can create a unique virtual card for a particular transaction or merchant and load it with a specific amount. You create the card for $40.11 and if the retailer tries to charge you $40.12 they'll get a decline. And if you decide you don't want to use a service any more you don't have to worry about that merchant having your primary account number, which has all your money attached it.
A lot of people think that if there’s a dispute their bank will handle it, but banks are looking at disputes and chargebacks very differently today. We not only have to watch for the bad guys hacking in, we got to watch for the merchants doing their dirty deeds, but we also have to watch what the consumer is doing because consumer behavior matters in today's world.
BN: How do you secure the account opening process?
ES: There are layers, a little bit like an onion. If you have a one dimensional view of of this process you will experience a lot of pain. Identification is the way we've all thought about the world in the past, someone says, 'show me your ID' and you know your name, you know your address, you know you know your social security number, you have these certain pieces of data that essentially connect known pieces of information to who you are. But now you have to verify that that information is accurate and true and associated with who you say you are.
Some would say, for example, that the mobile number is the new social security number, because it's actually harder to replicate a mobile number than it is a social security number. For example, you can go out on the dark web and get a social security number. With a mobile I'm able to now tell what carrier it came from, I get the IMEI which will tell me who the manufacturer is, I can tell where that manufacturer is, in what country. So I can now start to get a sense of what IP that person came in on, what country that IP belongs to. The technology identification process goes five or six layers deep. Then you've got to create algorithms that allow you to understand where an acceptable veil lies.
So it's complicated and every step it seems that the industry takes the bad guys take three. and banks don't move fast. You know, we talk a lot about fintech companies, maybe that there need to be 'techfin' companies that start with the technology and put finances second, because the financial systems of the world are too slow.
BN: Are we going to see more integration of cryptocurrency and conventional currency and how might that work?
ES: Interoperability is really what we would define as the core of our digital cash network. To have a digital cash network and not include cryptocurrency blockchain technologies that are introducing new ways to think about money would be missing a major part of the future.
We need to go back to some of those core fundamentals that we talked about at the beginning. If you look at Bitcoin you would see it's clearly the most popular, tried and true crypto that there is but you would find that it doesn't easily convert back into goods and services. How can we take that store of value and easily convert that value, not necessarily just back into 'dollars'? We need to create a fluid environment, where currencies -- or the value now in storage in a particular container -- whether it's a Bitcoin, or a piece of paper you carry around in your pocket are all part of the same pool. These different ways in which people choose to hold value are irrelevant to the point of sale. We need to get to where the point of sale becomes a piece of technology that is cast to the side, it's agnostic in terms of your choice of value.
There are maybe 1,000 steps in that journey and we're like on step one or maybe two. In the grand scheme of things there's so much work to be done there, but it is exciting. I think that we can bridge from where we were in the security side to what some of these technologies offer by way of meeting a lot of the needs and filling a lot of the gaping holes that we've discussed. I think that there's a lot to learn from cryptographic nature of blockchain oriented currencies for the wider financial sector.