When we at Modo kick around a list of the defining movies of the 20th Century, we admit we may be a bit biased. We’re in the payments industry! For us, Citizen Kane has nothing on the lesser known “classics” Superman 3, Hackers, and Office Space (we’re pretty sure Milton’s stapler is sitting on our CEO’s desk) [1].
Why, you might ask, would these particular movies resonate with us? Because they all share one thing in common: payments. Oh, and penny shaving.
Penny shaving uses technology to embezzle company profits by skimming a small, virtually unnoticeable amount of money off the top of every transaction. Although precious little is taken each time, tremendous sums can ultimately be gained through sheer volume. We would never shave pennies of course [2]. Because it is illegal and unethical, yes, but also it sounds a little bit creepy. Like shaving cats [3]. But people (not us) DO get caught penny shaving, and the temptation is understandable for people in the stressful monotony of the payments industry.
Just How Bad Can Life in the Payments Industry Be?
If you want to know just how tedious and uncomfortable working in payments can be, look no further than the Wernham Hogg Paper Company of the original British The Office. Before its co-creator and star Ricky Gervais suffered a fateful paper cut [4], the cast of this iconic television show was set against the similarly humdrum backdrop of the payments industry [5].
It’s a 20th Century Thing
Like the movies and television programs that reflect them, payment services are very much a product of the 20th Century. The payments industry along with the technology industry that supports it simply didn’t exist in the 1800s. Today, both industries are foundations of modern society that generate annual revenues in the trillions. Yet while you are undoubtedly familiar with technology sector leader Steve Jobs, you probably know nothing of the person who invented Visa [6]. Why? Steve Jobs was flashy. He sold shiny things. He was like a star quarterback. The guy who invented VISA? He’s more of a water boy [7]. His invention was important, too – vital even – but who really cares? In short, payments are nothing if not BORING [8]!
A Walk Down Payments Memory Lane
But those of us who are consigned to our fate in the payments field think longingly of the 20th Century in the much the same way that our high-tech contemporaries might reminisce about the development of the microchip, the personal computer, and the cell phone. That’s because all of the major systems that we use in payments were created in the 20th Century. Taking time out for the depression-ridden and war-torn 1930s and 1940’s, let’s take a look at the major industry advancements of each decade.
- 1910s – National Check Clearing Infrastructure [9]
- 1920s – Wire Transfers (real-time gross settlement/RTGS) [10]
- 1950s – Credit Cards (Diners Club, Visa, MasterCard, and American Express) [11]
- 1960s – Automated Clearing House (ACH) [12]
- 1970s – Debit Cards [13]
- 1980s – Prepaid Cards [14]
- 1990s – PayPal [15]
Despite these periodic innovations, the pace of evolution in the payments industry hasn’t exactly been at light speed. Unlike those of our high-tech contemporaries, our systems simply don’t change that much or that often. We might dress them up in fancier clothes or get them a spray tan, but the fundamental principles of our basic operational systems have evolved little since their implementation. Therefore, we still speak fondly of cash letters in the check system, wire operators (the direct decedents of telegraph operators!) in the RTGS system, captures and knucklebusters in the cards system, and daily originations in the ACH system. Although many of these terms may seem arcane and outmoded, the essential concepts and methodology that underlie them still remain relevant.
Did the Payments Industry or the Oyster Industry Invent Co-opetition?
In addition to sharing a common tongue, payments industry professionals share a common infrastructural heritage. Although modern payments systems are the result of hundreds of billions of dollars of investments by banks globally, they were not historically driven by private capital gain. Until recently, the vast majority of these systems in the United States and other major markets throughout the world were owned and operated by nonprofit/public entities. In order to function as they should, they required the participation of huge coalitions of otherwise avowed competitors [16].
For those who might be unfamiliar with the term, businesses that engage competition and cooperation at the same time are said to be in “co-opetition.” Most people think that the word “co-opetition” was coined by some geeky millionaire in Silicon Valley [17]. However, the history of the word stretches back to the very earliest days of the payments industry. While we were busy setting up the first national check-processing infrastructure, the Sealshipt Oyster System was telling its various dealers: “You are only one of several dealers selling our oysters in your city. But you are not in competition with one another. You are in co-opetition, not in competition. What competition there is, is of the kind that you all can fight to common advantage.”
So did the payments industry or the oyster industry invent co-opetition? In either event, we beat Silicon Valley by nearly a century!
Looking Forward is Sometimes Looking Back
Whether you’re talking about music, fashion, or the payments industry, its hip to be retro. Okay, so maybe the payments industry has a hard time playing it cool [18], but we can’t help looking back on our forbearers with a certain amount of pride. The systems that we use today were gifts that came roaring through the 1920s, were perfected by the Greatest Generation, got an explosive burst from the Baby Boomers, and received a cynical nudge by Generation X (they were the first to truly emphasize the value of getting paid).
No matter what their motivation for innovation, we love our forbears. They changed economics as we know it, making the world a far more liquid place (monetarily speaking). As we look forward to the awesome opportunities of the 21st Century, we will be building on the extraordinary foundation that they left us. And, let’s face facts, we will probably round out the next century with the exact same foundation. It’s just too damn hard to change! Oh well…as long as you leave our red stapler right where it is, we’re all going to be just fine [19].
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[1] The holy trinity of movies about the payments industry. Who doesn’t love Richard Pryor, Angelina Jolie Pitt, or the greatest of them all Stephen Root?
[2] Goes without saying. But here we are. Saying it. Greed is NOT good.
[3] Actually, less certain about the immorality/illegality here.
[4] This didn’t/shouldn’t happen.
[5] Total fabrication. But after watching some of Mr. Gervais performances, we feel comfortable that he’s comfortable with us taking “a bit of a risk”.
[6] Dee Hock people. Dee – FREAKING – Hock. He’s the Neo of the payments world and brought us to chaorder.
[7] Yeah, like just like Adam Sandler.
[8] This is where you should disagree strongly. It’s a literary device.
[9] Hello Fed! Oh, and we see you there too (The) Clearing House.
[10] RTGS services actually started life in the 1850s as Western Union “wire” telegrams. Who doesn’t love a bit of nostro net settlement in the steam age?
[11] Diner’s club has the pride of place in this list.
[12] Today’s big winner by dollar volume, started life as a way to improve the operational efficiency of check clearing.
[13] Long long run to becoming the undisputed transaction volume champion. Maybe the runt wins in the end?
[14] Prepaid is like the bad boy of payments.
[15] And PayPal brought us the PayPal mafia: Elon Musk, Peter Thiel, and Reid Hoffman, among others.
[16] There are other businesses that operate this way too.
[17] But definitely not this guy.
[19] Seriously. Otherwise Bruce may burn the building down. Again.
