barter-like transactions can be extended to a global scale. The poor and unemployed can begin to trade with each other from across the world, using an “artificial” money supply to begin the climb out of poverty long before governments get around to increasing the money supply or doing anything else to help them.
But it’s not just the poor and unemployed who can benefit from alternative payments. Today, merchants grumble mightily about the fees they pay to the credit card associations, but they have no real alternative, as the number of credible retail payment systems can be counted on one hand. Imagine instead a world in which hundreds of payment mechanisms competed in an open market; it’s inconceivable that the prices paid by merchants wouldn’t come down with the competition.
Most important, however, are the new kinds of applications that might be opened up by a more diverse set of online payment options. For example, there have been dozens of proposals for solving the spam problem by using required or optional payment in one form or another. My personal favorite is the “attention bonds” proposal of Marshall van Alstyne, in which emails are accompanied not by postage per se, but by an enforceable promise by the sender to pay a penalty fee if the recipient considers a message to be spam. This kind of innovative idea will likely remain a pipe dream until the Internet has a robust infrastructure for alternative payments.
A cynic might say that, because of the power of the banks and card associations, such an infrastructure will never come to be. I’m a bit more optimistic; I think the powers that be will continue to resist any attempt to open up the world of payments, but they’re unlikely to succeed forever. At some point, the combination of a clever new payment system and a market niche that needs it will be so useful that the world won’t let it die. And then, “suddenly”—after decades of waiting—we’ll see people sending money by email, new institutions floating their own currencies, and micropayments enabling sub-penny transactions that accumulate to form the basis of whole new industries.
I’m confident that such a change will come, because the value of democratizing and diversifying payment systems will be too great, in the long run, for society to ignore. But I can’t begin to predict when it will happen; I just hope I live to see it!
