Begging for Change

These days, it's all about workflow optimization. Whether we're talking about e-mail workflows and Inbox Zero, workflows for Photoshop, workflows for paying bills, or even just writing, the goal today, as it has always been, is to find the most efficient way of accomplishing the objectives at hand. Recent advances in technology have forever changed some workflows. E-mail changed how an office works and how information flows within an organization. The cell phone changed the workflows of virtually every industry, from plumbers and pizza delivery to police investigations and political polling. The combination of e-mail and the cell phone took those workflows and integrated them even more deeply with our minute to minute lives. The introduction of realtime mapping services and the spread of commercial GPS navigation systems has changed how we drive, or more importantly, how we prepare to drive. The mp3 and streaming audio technology has changed how we discover, purchase, and listen to music. Remember these??I'm just old enough to remember listening to the radio all day with a blank cassette tape in the deck, just waiting for that ONE song to come on so you could leap over chairs and cats  to hit the record button in time. I remember a world without the shuffle function, and I shudder at the thought. Virtually every aspect of your daily life has been honed by technology in some way or another. There is one daily workflow, however, that has been conspicuous in its ability to change slowly or not at all, and that is the monetary transaction. For most of us, not a single day goes by in which we do not make some sort of purchase, either for ourselves or on the behalf of our employer. Whether it's gas for your car or coffee for you, money changes hands all the time. Many of those transactions are completed with the physical exchange of currency. This incredibly low-tech system (granting that U.S. currency is the most high-tech paper money can buy) has been around forever and is terribly inefficient.

In order for such a transaction to occur one must first carry currency wherever you go, and in sufficient quantities and varied denominations so as to be able to pay for items of wildly varying cost. On top of that, the other party must also have currency on hand in order to make change for your currency. Change is made through calculations done in the head (the source of most innaccuracies) or with the aid of some machine. Finally a receipt is (usually) created for both parties as a record of the exchange. Not to mention that large amounts of currency makes itself a target for thievery and endangers those who tend it, and that it is expensive to continue printing year after year, just to keep sufficient amounts of it  circulation.

One way around the inefficiencies inherent in hard currency is plastic. Whether it's a checking account or credit, plastic cards with magstripe encoding eliminate the need for cash for most transactions. Plastic smoothed some of the edges on our purchases, but it's hardly a recent innovation--the concept of a "charge" or "credit" card is nearly a century old, and the encoded plastic debit card is decades old--and it is still incredibly limited. Plastic cards are (with the exception of a few bank cards at ATMs) tied to only one account. This means that one must carry multiple cards for multiple accounts, each of which are a monumental pain to replace if they are lost or stolen, not to mention the potential for identity theft involved. 

There have been attempts to better our transactions through technology. A few companies introduced RFID cards and devices that made transactions incredibly simple. But these were only successful where the RFID readers had already been installed and made with that one company. PayPal came along and has changed the marketplace for these transactions, facilitating them between otherwise mistrusting parties. Banks of all sizes have stepped up their online game, making it easier than ever to track spending and pay bills. TurboTax introduced their free tax filing software online in 2005 and the number of people paying TurboTax to help them file online has increased 36% from FY2007 to FY2008. All of these have been excellent innovations, but the real revolution is still to come.

 Why should I get a bank statement and multiple credit card statements only to have to match them up with the receipts I was handed and stuffed in my pockets (or threw away) and the insurance company statements and the auto-payment statements and my student loan payments and my pay-stubs? If ever there were a reason to invent the computer (Oh look, we already did that!) this was it! Why should I have to know whether I bought my girlfriend's Christmas present* with my credit card or my checking card in order to find out what day I bought it and how much I actually paid? It's all data, and it's all being tracked in a computer already, so it ought to be searchable by the information I do remember, which is where I bought it. The data that our transactions leave behind can be invaluable to us, so shouldn't it be coalesced and made usable?

 The future of money is in the unification of accounting and consolidation of transaction types. A Grand Unified Theory of Credit, if you will. That future is hopefully not far off. As with most changes in technology, its usefulness and safety will have to be proven to the public at large, and even then they will be slow to jump aboard. I'll admit that even I was cautious and thought long and hard before joining Mint.com when it launched its personal financial aggregation service. I was nervous about giving a company I didn't really know access to every single one of my transactions. But the more I thought about it, the more obvious it was to me that it didn't really matter much. They're using that same security protocols the banks are using, and even if they did gain access to my information via Mint, there's very little a malicious entity could do with it that they could expect to get away with--particularly since an aggregated system allows me to monitor my financial ins and outs much more closely and regularly than having to monitor four different systems would. I've been using Mint for four months now, and it has been nothing short of eye-opening. Beyond just having all of my finances in one place, it gives me powerful analytical tools I can apply to my spending history. I can see comparisons of my expenses on fuel from month to month or a trend graph of what I've spent on fast food over the last three months. Mint, which was recently purchased by Intuit, the same company that owns Quicken and TurboTax, only has about 700,000 active users today which is a small drop in the bucket, but their model for synthesizing your financial data into something you can actually use to make decisions about your finances is a huge step towards the unification of accounts.

The consolidation of transaction types is a far trickier problem. More precisely, it is a very simple problem with a great deal of complicated wrapping. The simple part is the transaction itself, which need only be a few bits of information swapped between the payer and the paid . Virtually any electronic device in the world these days could facilitate this. Since part of the problem with cards and currency is having to have them on your person, why not give the one device that is on your person at all times, the cell phone, the ability to send and receive all of your transactions? Even if you don't own a smartphone, the vast majority of handsets in production today have the processing power to do everything your wallet full of credit cards does, and then some. They also have the added advantage of being more secure. You can't put a password on your wallet or your purse, but every cell phone made today can be locked with at least a four digit pin. The complication, of course, is that in order for this to work, everyone--somewhat simultaneously--would have to agree on a secure standard to implement into the phones as well as the devices that would talk to them on the merchant's end.  This is the next hurdle, and it is one that likely will not be cleared until the number of methods for transaction grow so unruly that a governing body, perhaps the Federal Trade Commission or Congress becomes involved. If I had my wish, DARPA would be instructed to construct a protocol to which all transaction capable devices would comply, but even that would be a politically treacherous undertaking. In the meantime, there's still some hope that this will happen organically.  A company launched just this morning that is attempting to bridge that magstripe/cell phone gap . Called Square**, the company has developed a small card reader which attaches to any device with an 1/8in audio jack and allows any two users with Squared accounts to make and verify transactions to and from any account associated with the Squared account. The concept is intriguing and while I'm doubtful that it will be an overnight sensation, if it were to become a widely used method of paying for things, it would be a huge improvement. 

*This is just a helpful analogy.  No actual Christmas shopping has been accomplished yet.  Sorry, Liz.

**It's worth noting that the fact that I wrote this piece and published it today and that today was Square's launch, is a complete coincidence.  Great minds and all that.