Captain Kirk and the
value of not working in
a (figurative) vacuum

Trek imageWe’ve come a long way since the 23rd century.

Back in those days, Captain Kirk’s “communicator” was nothing but a flip phone. Not only that. He used it to place voice calls, of all things. The ship’s computer answered to “Computer” and spoke in a monotone. Only in one episode did it sport a personality. The work of saboteurs, it was deemed a problem, if you can imagine.

One can only guess what Kirk would have given for a smartphone from three centuries earlier. No flipping the darned thing open, no knob to turn—just call out “Alexa” or “Hey Siri.” He’d have had instant access to humankind’s accumulated knowledge (who needs a ship’s computer?), delivered by a voice with at least something of a personality. He could have used it to shop. 

Best of all, he could have used it to better manage his Federation credits—his money.

That’s the problem with science fiction. The writers of “Star Trek” lived in the 1960s, when QWERTY keyboards accessing house-sized computers were cutting-edge. Magnetic tape had only begun to edge out punch cards. Gene Roddenberry et al had no basis to imagine portable devices, much less portable devices with touchscreens. And even if they had, leaping to voice-activated personal devices (obviating a ship’s computer), social media, and digital banking would have been too much to ask.

Yet the very inability to see into the future helps make today’s technological whirlwind all the more exciting. We cannot foresee what will launch next week, let alone next year, so there’s no anticipating the technologies that they may in turn make possible.

Not that foreseeing what will launch is the same as foreseeing what will catch on. Markets continue to surprise us. For instance, while marketers were sure QR codes would be the rage, consumers greeted them with a collective yawn; meanwhile, consumers are going nuts over fidget spinners, which no one saw coming.

Exciting or not, uncertainly can be expensive—and consequential. Financial institutions decide at their peril which technologies to invest in, which to ignore, and which to file under “keep an eye on this one just in case.” At the same time, bankers must carry on with the business of banking.

But now I must confess to having exaggerated.

It’s not true that “we cannot foresee what will launch next week, let alone next year.” Despite appearances, no technology is born overnight. There’s an inception period, a development period, a beta testing period, backing up and finessing, more beta testing, a market testing period, more backing up and more finessing and more testing, and finally, hopefully, a market release.

So while the outcomes of these processes may take markets unawares, those plugged into the process are never taken by surprise.

That’s one of many reasons it’s a good idea not to work in a vacuum—a figurative one, not Kirk’s vacuum of space—but to rub shoulders with outside fintech companies. Fiserv and others stay immersed in technological advances and keep close tabs on market developments. To do that would be a lot harder, perhaps impossible, if we were also trying to run a bank. Since we’re not, we can offer needful insights, perspectives, and products to those who are. (Full disclosure: I’m Fiserv’s Marketing Strategy & Innovation SVP.)

It goes both ways. We, too, know better than to work in a vacuum. That’s why we regularly partner with banks when we conduct studies. It’s why we share information with publications like The Financial Brand to help keep everyone abreast of what’s happening in this fast-changing world.

It’s a shame Kirk missed all that we’re doing these days. Imagine the innovations he could have brought back from the past to the 23rd century. Trouble is, his first and second trips back in time were, respectively, to the 1960s and the 1980s. If only he’d stuck around for a few decades.

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$11k and counting

Bitcoin skyrocketsLast week, digital asset broker Coinbase’s vice president and general manager of GDAX Adam White took the podium at the Consensus Invest Conference in New York City to extoll the performance of cryptocurrency. Later that evening, the news was everywhere: Bitcoin had surpassed the $10,000 mark.

Of course, that’s old news. As I was preparing this post, Bitcoin vaulted over the $11,000 mark.

About this time four years ago, Bitcoin made news by climbing past $1,000, up from $200 a month earlier. Then as now, pundits warned against investing in cryptocurrency. Representative of the cautionary side was this piece by Kerry Close, which ran last January in Money:

As bitcoin prices dominate headlines, you might be wondering whether you should invest in the popular cryptocurrency. Probably not: It’s just too volatile. The virtual currency is known for wild fluctuations in price … Those sudden ups and downs would be bad news for your portfolio … “You try to sell it, and by the time the order goes through, the price may have dropped,” said Matthew Elbeck, a professor of marketing at Troy University. “It’s really, really not worth it for the ordinary consumer.”

Or, take this warning from the UK as reported just three months ago in The Guardian:

The financial regulator has issued a stern warning against a speculative frenzy over initial coin offerings (ICOs) in cryptocurrencies such as bitcoin that have been promoted by celebrities including Paris Hilton.

The Financial Conduct Authority said anyone investing in ICOs should be prepared to lose all their money, with some of the schemes floated potentially outright frauds.

ICOs use the language of conventional initial public offerings (IPOs) and are designed to raise money for internet-based startups. But their similarities with IPOs end there.

The cautions are well-taken. Cryptocurrency is volatile by nature, in many ways more of a gamble than an investment. History bears out that rapid price acceleration can presage a crash. For instance, those not living under a rock or on Mars may have heard something about a certain real estate and investment bubble that burst in 2008. That Bitcoin’s gains are legendary is true enough. But Nassim Nicholas Taleb provides an analogy in his book The Black Swan that explains why predicting the future based on the past may be unwise:

Consider a turkey that is fed every day. Every single feeding will firm up the bird’s belief that it is the general rule of life to be fed every day by friendly members of the human race “looking out for its best interests,” as a politician would say. On the afternoon of the Wednesday before Thanksgiving, something unexpected will happen to the turkey. It will incur a revision of belief.

Volatility aside, the utility of cryptocurrency suggests that it is here to stay. Blockchain technology, which underlies cryptocurrency, is transparent and incorruptible (although, per Taleb, I think it’s wise to hedge with words like so far). As Blockgeeks explains, blockchain technology functions by storing identical blocks of information across a network, so that no single entity has control over it, which ensures no single point of failure.

That’s why cryptocurrency has proven (again, so far) immune to counterfeiting, obviates identify theft dangers, reduces or eliminates transaction fees, speeds up larger transactions, does away with foreign exchange complications, and permits anonymous transactions. That last feature doesn’t hold much appeal for law enforcement and the IRS, which is precisely why it’s so popular, and not just among criminals: Many above-board people just don’t like the idea of having their activities tracked by government or any other third party.

Despite its promising growth in use and its meteoric growth in value, Bitcoin must overcome hurdles if it is ever to attain regular, household currency status. The whole concept of blockchains and cryptocurrency, not easy to conceptualize, can be daunting to the average consumer. Even “getting started” sites like this one, though friendly in language and design, can intimidate.

Bitcoin and other cryptocurrencies are a long way from universal acceptance. This presents something of a circular problem, namely, that Bitcoin will not be more widely used until it is more widely used. Still, such problems have a way of solving themselves, Apple Pay and Google Wallet being good examples.

As for blockchain, it proves itself useful beyond cryptocurrency. Nasdaq reports promising applications such as improved cloud storage, linking personal computers into supercomputer-like configurations, more secure transmission and execution of legal documents, and others.

Bitcoin and blockchain technology are here for the long haul. Much like the smartphone, they may turn out to be examples of invented-within-the-last-decade technology that change the world.

Meanwhile, Bitcoin’s price tag keeps skyrocketing. At least, as of this writing. By the time you see this post, things may have changed.

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Of placebos,
wine, and Eeyore

winnie-the-pooh-437940_1280 copy

Most people know about the placebo response. Tell patients to expect to feel better following what they don’t know is a sham treatment, and, often, they will. Less known but equally powerful is the nocebo response, where telling patients they’ll feel worse can be just as self-fulfilling.

Non-medical products can induce placebo and nocebo responses, too. Not long ago, researchers at Stanford and Cal Tech asked test subjects to undergo fMRI scans while sampling one brand of wine retailing at five dollars a bottle and another brand retailing at 90 dollars a bottle. Subjects said they preferred the more expensive wine, and their brain activity per the fMRI scans seemed to confirm it.

But the researchers had pulled a fast one. Both bottles, it turned out, contained the same stuff.

The moral is that our expectations influence how we are going to process our experiences. We all understand that at some level. Even our everyday rhetoric reflects it, in phrases like never underestimate the value of a first impression and dress for success. 

Right or wrong, an airline pilot in a crisp uniform makes us feel safer than would the same pilot in cutoffs and a tank top. A Mont Blanc pen makes an entirely different expectation than a Bic. A firm handshake evokes greater competence than a dead fish.

Likewise, a digital banking app that makes a positive first impression is more likely to deliver a better perceived experience. 

Mind you, basic mobile banking functions such as balance checks, transfers, bill pay, and check deposit do not set apart an app any more than an inventory of baked goods sets apart a neighborhood bakery. But step into a spotless bakery wafting that fresh-baked bread aroma, where the help sport clean aprons and actually smile at you, and chances are you’ll rate their products higher than you would have in a blind taste-test. 

I check out a lot of digital banking apps in my job. I have seen apps whose design, accessibility, and copy seem to call out the moment you open them, This is going to be great. But I have to tell you, I have also seen plenty of the other kind. The kind that, although equally functional, greet users with an Eeyore-like, Meh.

I’m not out to embarrass or offend, so I’m not going to name names or provide links to the meh sites. My goal is to encourage digital bankers to take a second look at their apps. An otherwise great app that fails at first glance to create a positive expectation risks an inadvertent nocebo effect, doing itself, the financial institution, and its clients a disservice.

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Grateful Act of Congress

The making of a legal holiday

The making of a legal holiday

THE FOURTH THURSDAY of November is a legal holiday in the United States. Designated as a national day of thanks, it is named, appropriately enough, Thanksgiving.

Observing Thanksgiving in autumn has been around since the early 17th century. An act of Congress signed on October 6, 1941 established it as a legal holiday and designated the last Thursday of November as the day.

Which, believe it or not, caused a controversy. Larger merchants argued for establishing the fourth Thursday, fearful that in years in which November had five Thursdays, the last Thursday would leave too little time for Christmas shopping. (This was long before Christmas sales began popping up in September.) Meanwhile, smaller merchants liked the idea of reduced shopping time, hoping to attract shoppers unwilling to put up with too-crowded department stores. Adding to the tumult were not a few citizens who objected to letting commercial concerns move their holiday.

The matter was finally settled two months later, when on December 26, 1941 President Franklin D. Roosevelt signed H. J. Res 41. Henceforth the legal holiday would be on the fourth Thursday.

Thanksgiving is a popular time for authors who like debunking tales of “the first Thanksgiving.” True enough, most of the stories we learned in grade school are exaggerated, whitewashed, or outright fabricated. Dig around and you’ll find that the original meal bore no resemblance to today’s feast, and that, overall, the interaction between European immigrants and Native Americans is more to be regretted than celebrated.

History aside, I like the idea of setting aside one day—at least one—to ponder what has gone right for us. Whether we stumble into opportunities or make them, we must at some level concede that something out of our control put us in the right place at the right time, not to mention gave us the wherewithal and skills needed to seize it. Remembering as much can ground.

I do not embrace the cliché that everyone has something to be thankful for. There are many who mourn, and it is not for me to insult them with a pep talk. Nor do I embrace relative gratitude, the idea of feeling blessed because there exist people not as well off. It is not another’s ill fortune that makes mine good. Recognizing that there are less fortunate people serves best when it motivates empathy and compassion.

Now, please pass the gravy.

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The “War on Cash”
(A Report from the Front)

War on Cash MEDIUM

DON’T THROW AWAY your cash just yet. If the International Currency Association (ICA) has its way, cash will never be found on the abandoned products pile next to the likes of eight-track tapes, dot matrix printers, and 16 ounces of coffee for under six bucks.

The ICA, which came into existence last year and sometimes refers to itself in the third person as “the cash lobby,” says its mission is to “support and promote currencies worldwide,” “provide a framework to foster innovation,” and “encourage the highest ethical standards.”

The ICA is not the sole pocket of resistance in “the War on Cash.” Last year Steve Forbes wrote,

The real reason for this war on cash … is an ugly power grab by Big Government. People will have less privacy: Electronic commerce makes it easier for Big Brother to see what we’re doing, thereby making it simpler to bar activities it doesn’t like, such as purchasing salt, sugar, big bottles of soda and Big Macs.

If you detect more than a hint of paranoia in Forbes’s remarks, I am with you. Still, his take is rather muted compared with that of people who see in digital banking no less than a prophecy-fulfilling harbinger of doom. One such warns:

Over the last several years, the banks, financial institutions, and governments have all colluded to remove the last traces of cash transactions … this war on cash is nearly complete. These developments show just how close we really are to the complete elimination of the paper money in your wallet and the rise of the Antichrist’s system!

Ideology and religion aside, there are a number of companies whose survival depends on keeping hard currency in circulation. These include marketers of paper, ink, holograms, sorting and counting devices, counterfeit detection training and products, intaglio printing presses, and, ironically, cash-shredding machines. Such account for a good deal of the ICA’s membership.

Yet the alleged war on cash hasn’t taken as many casualties as alarmists might have us believe. In its 2017 “State of Cash” report, the Federal Reserve Bank of San Francisco provides surprising information about the endurance of cold, hard, tangible currency:

Despite innovations in smartphone technology and mobile payment apps … The amount of currency in circulation has increased steadily over time, and demand for higher denominations has accelerated in the years since the 2008 financial crisis.

It also reports that:

In 2015, cash remained the most frequently used retail payment instrument, used in nearly one-third (32 percent) of all transactions, including bill payments … Consumers used debit cards for 27 percent of their transactions, followed by credit cards for 21 percent of transactions.

And that:

Despite its decline in share of reported transactions, cash was used for a variety of merchant categories, even when other payment options were available … Gifts and transfers to people, where cash was used for 75 percent of transactions, was the category with the highest share of cash transactions. Other cash-intensive categories included government and nonprofit purchases (40 percent), food and personal care supplies (39 percent), and auto- and vehicle-related purchases (39 percent).

So despite the histrionics of Steve Forbes and the ICA, it doesn’t look like cash will diminish to the point of being used only by contemporary Luddite holdouts anytime soon. It still has its uses. Legal ones, even.

Notwithstanding, consumers are discovering that digital transactions are more convenient than handling hard currency. P2P is obviating resorting to cash for gifts and personal reimbursements. And as digital wallets become more popular and easier to use, they are proving preferable even for smaller purchases, to date the cash transaction’s main stronghold.

It will be a long time before cash becomes obsolete, but I don’t think it’s irresponsible to suggest that it is in the early stages of obsolescence. The day may yet come when retail clerks need no longer be trained in the art of counting out change.

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