These are interesting but they just make me wonder why they’re not being done already. Perhaps there’s some fundamental reason you’re missing? Also, the contracts idea doesn't seem that solid to me - my last tenancy already had digital contracts like this. Exactly what niche is the target?
Fair questions and thanks for taking the time to reply. For many of them, I think some businesses are already working in a similar space. For example, the data science tooling idea is arguably being worked on by many businesses/oss projects. E.g. mlflow, metaflow, pachyderm, dolt (and more).
However, I don't think anybody has really wide spread adoption yet and I think it's because the tools aren't accessible to the majority of researchers currently. Take, for example, mlflow. It's a great tool in many ways but requires you to think fairly carefully about how to structure your application around the framework. Additionally, to run experiments, you need to set up your own infrastructure.
These requirements may be met in some settings (larger businesses with a modern engineering culture) but I think are not met in the broader market (university research departments, smaller businesses, businesses without the modern engineering focus, etc).
For the ideas in the personal finance space, there are, as we all know, a large number of fintech companies that are attempting to tackle many aspects of this right now. It's a very tough space to get into due to regulation and poor economics at small scales. It's a domain I'm familiar with though and that means a lot to me. I think the financial industry has a long way to go and will almost certainly look radically different in the future. As it stands, I believe the industry is too fragmented from the customer perspective, with different organisations offering parts of what to people are really all the same thing.
To plan and save for my future I need a current account with a bank to manage my day to day spending and as a 'hub', savings accounts (potentially with other institutions) to save cash, I need a brokerage account to diversify my savings, a company pension pot (with one or more providers depending on how you've moved jobs) and possibly an IFA to tie it all together and cut through the jargon and save you time. This should all be one thing - and it should be easy, and cheap.
Re the contracts idea specifically - yes I am aware of a few firms/organisations that independently manage contracts digitally. The idea is about trying to provide that functionality as a service with the intention being to make consumers lives easier as much as businesses (e.g. I would like one central place where I can manage all of my contracts, sign them, ask questions, be reminded of upcoming obligations, etc). Right now, I think most people have a drawer somewhere full of paper that could probably be organised better.
I'll be honest, I don't have a specific niche yet. If I were to validate that idea further, I would approach legal firms, landlords, and legal departments as saas businesses first most likely. I'm sure there are other sectors worth considering. It may also be that the business first way is the wrong way to approach it? Perhaps You could build a tool for consumers first.
Nice list. In particular, I think consolidation of payments infrastructure and the anonymous credit card ideas are great though both are some what opposed to each other!
Merchant acquiring doesn’t need to exist anymore... Just look at the amount of small shops who refuse to accept AMEX or small card payments - they are price sensitive to acquiring fees and some of the savings could be offered to customers an incentives. As you note, network effect is the hard part but I’m sure there’s a way.
On anonymous payments, I think a credit or debit card like thing that offered anonymity online when buying things would be quite attractive. I would use it. In the EU, you could implement it with open banking and there are various services which already provide virtual card numbers. Problem would be dealing with all the payments regulations.
Hey, thanks for taking the time to have a read! It's true that those two are somewhat at odds with each other. One builds on top of existing infrastructure and the other attempts to work, as much as it can, without it.
In a funny way, I feel like both could sort of angle towards a similar thing in the end. For example, while you might use a subscription based service to pay anonymously at first, you could, once/if established, also offer checkout options for businesses too. Once you own both ends of the payment, you can start connecting people directly. Paypal arguably do this already - when you pay someone's Paypal account from yours, it just settles immediately and internally.
> On anonymous payments, I think a credit or debit card like thing that offered anonymity online when buying things would be quite attractive. I would use it.
That is interesting to hear - I have spoken to a number of people who also say they would use such a service if available. What do you think would be the absolute minimum such a service could offer? I think it is the virtual cards and an email address, do you agree? How much do you think you might be willing to pay for it and how would you expect the pricing to work? A subscription? A small charge for each time you use it?
I agree with your general sentiment about merchant acquiring etc though - yes re AMEX, I don't know about the US but in the EU basically no one takes it. Payments is one of those systems where you draw a diagram of how it works, and you just think "if I designed this from scratch today... it definitely would not look like this!". I think it's inevitable it will change, and it is starting to already. The change we've seen so far is, in my opinion, mostly superficial though (much like the anonymous online payments idea would be).
> Problem would be dealing with all the payments regulations.
Yes the regulatory hurdle is a big hurdle to overcome for all the financial services ideas. I believe it is possible but you would need to get in touch with the regulator from day one and be clear about what you wanted to do. E.g. Monzo in the UK used this strategy. They just approached the FCA right at the start, and said what they wanted to do, and the regulator told them what they had to do.
I think this is tough but probably more tractable than people imagine with a bit of determination!
> As you note, network effect is the hard part but I’m sure there’s a way
I think it's extremely hard! But then I think, it wasn't so long ago that not a single store or restaurant could take credit cards of any card (they didn't exist). How exactly did mastercard get going? Did they start with one location? I would like to research this, do you know anything about it?
My intuition is that by focusing on small businesses and their customers at first, you can actually offer something they don't have access to. I see many local shops stil advertising with flyers or street signs and using stamps on a card for loyalty programs etc. Word of mouth and perhaps a facebook group is the only way they reach their customers. A platform that connected them and their customers would potentially have real value to them. For example, as a consumer using the system, I might be able to quickly see which places have got lunch deals on within half a mile, then automatically claim my discount by paying with the app.
What do you think about that? What would incentivise you, for example, to put a small amount of money into that system and pay for things with it? Access to unique offers? Loyalty schemes? Supporting local businesses? A unique payment experience? Itemised receipts (not on a bit paper!)?
With the virtual credit cards, you also need a billing address in most cases. I guess that can be the same for all customers. Perhaps they also get an email address with it and that handles all the receipts/invoices. Alternatively they can all be sent to some service/app where they can be sorted/managed.
I would like to use something like this if I'm not keen to share my card details with a company e.g. because I know they've had a data breach in the past or something. How much would I be willing to pay for it? Probably not much to be honest, maybe a few quid?
Must admit, I like the acquiring idea more.
On the merchant acquiring stuff I can see the attraction for merchants but what's the incentive for customers? I guess there has to be some other benefit... e.g. offering credit on decent terms to customers but here you are competing with credit cards? Or maybe offer discounts for paying using this service. Maybe you can offer a discount AND credit. I guess you'd need to find out how price sensitive the merchants and customers are. Experience suggests that small merchants are price sensitive to acquiring fees as they have minimum spend limits etc. Large retailers e.g. Tesco don't care so much.... though I was buying a car at the weekend and the dealer stopped accepting AMEX due to the acquiring fees... I guess they were cutting costs in the face of Corona Virus recession.
As you note, perhaps the app could collate all your receipts and warranties - could be useful. Itemised receipts would be particularly useful for some.
I imagine a company which offers this service (in the EU/UK) would be an open banking payment services provider. That is, customers add their bank account details and permit the service to "push" payments directly to retailers when they buy something via an API. Of course, customers would manually approve each payment via the app or whathaveyou.
Challenges: 1) how do you handle off-line payments? 2) how do you handle disputes?
No worries - there is hardly an obligation for you to respond :).
Re that anonymous payments idea - you are thinking along the same lines as me re the email and billing address. Getting all the junk/advertising email sent to one place would be a good feature.
Really though, asking people to pay for anonymous transactions is simply an 'in'. I don't think there is a big market there, but I think there is _a_ market.
The goal would be to use that as a springboard to start offering banking services to consumers (e.g. credit, payment consolidation), and merchant banking to online retailers (similar services plus others, e.g. perhaps you could buy a saas business' future cash flows off of them).
If you were able to own both sides of that you would not only make it much easier for people to interact with new online businesses safely, but also provide an integrated identity/payments service to said businesses. You would aim to reduce the cost of the original product to 0 as you became able to generate revenue in other ways.
---
The acquiring idea...
You have some interesting thoughts here. Yes I think you're right that finding an incentive for consumers to use the service is not immediately obvious. Long run, I do think that you would be able to offer credit (both to merchants and consumers) and other financial services but I don't think that is a viable 'way in' for the business.
To start with, I think it needs something simpler and more obvious that you can support with a relatively small number of customers. Ideally without stepping over more regulatory boundaries... you mention discounts and I think that they are the obvious target (though I may well be wrong). I also think that discounting (or other offers) for small businesses is not very well served currently.
Here's an example (fairly arbitrary) of how you could try and kick the thing off - it's obviously a sort of growth hack but its semi-believable.
Pick a student city and convince a load of local bars/restaurants to sign up on the merchant end by promising them no fees and a way to advertise offers to the next batch of students without having to put up flyers and so on. You would then get students to sign up with the promise that they will be able to use it to get cheap food and drinks. You would monetise by charging a referral fee on people redeeming the offers via the app.
If that worked, you would replicate the model in other cities while also trying to expand the number of merchants signed up in existing cities (to appeal to more than just students).
Long run, I think the goal of this business would be to offer both merchant and retail banking services on top of the payments system. In addition to that, you could also open up your platform for other financial service providers - with a referral fee or service charge model.
Your idea of implementing this via open banking is quite interesting - I must admit, I didn't actually think of that.
Would you be interested to talk about this in a more... tangible way? You can reach me on ideasaintworthmuch at mail dot com (mail is not a typo for gmail).
6 comments
[ 3.3 ms ] story [ 20.6 ms ] threadHowever, I don't think anybody has really wide spread adoption yet and I think it's because the tools aren't accessible to the majority of researchers currently. Take, for example, mlflow. It's a great tool in many ways but requires you to think fairly carefully about how to structure your application around the framework. Additionally, to run experiments, you need to set up your own infrastructure.
These requirements may be met in some settings (larger businesses with a modern engineering culture) but I think are not met in the broader market (university research departments, smaller businesses, businesses without the modern engineering focus, etc).
For the ideas in the personal finance space, there are, as we all know, a large number of fintech companies that are attempting to tackle many aspects of this right now. It's a very tough space to get into due to regulation and poor economics at small scales. It's a domain I'm familiar with though and that means a lot to me. I think the financial industry has a long way to go and will almost certainly look radically different in the future. As it stands, I believe the industry is too fragmented from the customer perspective, with different organisations offering parts of what to people are really all the same thing.
To plan and save for my future I need a current account with a bank to manage my day to day spending and as a 'hub', savings accounts (potentially with other institutions) to save cash, I need a brokerage account to diversify my savings, a company pension pot (with one or more providers depending on how you've moved jobs) and possibly an IFA to tie it all together and cut through the jargon and save you time. This should all be one thing - and it should be easy, and cheap.
Re the contracts idea specifically - yes I am aware of a few firms/organisations that independently manage contracts digitally. The idea is about trying to provide that functionality as a service with the intention being to make consumers lives easier as much as businesses (e.g. I would like one central place where I can manage all of my contracts, sign them, ask questions, be reminded of upcoming obligations, etc). Right now, I think most people have a drawer somewhere full of paper that could probably be organised better.
I'll be honest, I don't have a specific niche yet. If I were to validate that idea further, I would approach legal firms, landlords, and legal departments as saas businesses first most likely. I'm sure there are other sectors worth considering. It may also be that the business first way is the wrong way to approach it? Perhaps You could build a tool for consumers first.
In a funny way, I feel like both could sort of angle towards a similar thing in the end. For example, while you might use a subscription based service to pay anonymously at first, you could, once/if established, also offer checkout options for businesses too. Once you own both ends of the payment, you can start connecting people directly. Paypal arguably do this already - when you pay someone's Paypal account from yours, it just settles immediately and internally.
> On anonymous payments, I think a credit or debit card like thing that offered anonymity online when buying things would be quite attractive. I would use it.
That is interesting to hear - I have spoken to a number of people who also say they would use such a service if available. What do you think would be the absolute minimum such a service could offer? I think it is the virtual cards and an email address, do you agree? How much do you think you might be willing to pay for it and how would you expect the pricing to work? A subscription? A small charge for each time you use it?
I agree with your general sentiment about merchant acquiring etc though - yes re AMEX, I don't know about the US but in the EU basically no one takes it. Payments is one of those systems where you draw a diagram of how it works, and you just think "if I designed this from scratch today... it definitely would not look like this!". I think it's inevitable it will change, and it is starting to already. The change we've seen so far is, in my opinion, mostly superficial though (much like the anonymous online payments idea would be).
> Problem would be dealing with all the payments regulations.
Yes the regulatory hurdle is a big hurdle to overcome for all the financial services ideas. I believe it is possible but you would need to get in touch with the regulator from day one and be clear about what you wanted to do. E.g. Monzo in the UK used this strategy. They just approached the FCA right at the start, and said what they wanted to do, and the regulator told them what they had to do.
I think this is tough but probably more tractable than people imagine with a bit of determination!
> As you note, network effect is the hard part but I’m sure there’s a way
I think it's extremely hard! But then I think, it wasn't so long ago that not a single store or restaurant could take credit cards of any card (they didn't exist). How exactly did mastercard get going? Did they start with one location? I would like to research this, do you know anything about it?
My intuition is that by focusing on small businesses and their customers at first, you can actually offer something they don't have access to. I see many local shops stil advertising with flyers or street signs and using stamps on a card for loyalty programs etc. Word of mouth and perhaps a facebook group is the only way they reach their customers. A platform that connected them and their customers would potentially have real value to them. For example, as a consumer using the system, I might be able to quickly see which places have got lunch deals on within half a mile, then automatically claim my discount by paying with the app.
What do you think about that? What would incentivise you, for example, to put a small amount of money into that system and pay for things with it? Access to unique offers? Loyalty schemes? Supporting local businesses? A unique payment experience? Itemised receipts (not on a bit paper!)?
With the virtual credit cards, you also need a billing address in most cases. I guess that can be the same for all customers. Perhaps they also get an email address with it and that handles all the receipts/invoices. Alternatively they can all be sent to some service/app where they can be sorted/managed.
I would like to use something like this if I'm not keen to share my card details with a company e.g. because I know they've had a data breach in the past or something. How much would I be willing to pay for it? Probably not much to be honest, maybe a few quid?
Must admit, I like the acquiring idea more.
On the merchant acquiring stuff I can see the attraction for merchants but what's the incentive for customers? I guess there has to be some other benefit... e.g. offering credit on decent terms to customers but here you are competing with credit cards? Or maybe offer discounts for paying using this service. Maybe you can offer a discount AND credit. I guess you'd need to find out how price sensitive the merchants and customers are. Experience suggests that small merchants are price sensitive to acquiring fees as they have minimum spend limits etc. Large retailers e.g. Tesco don't care so much.... though I was buying a car at the weekend and the dealer stopped accepting AMEX due to the acquiring fees... I guess they were cutting costs in the face of Corona Virus recession.
As you note, perhaps the app could collate all your receipts and warranties - could be useful. Itemised receipts would be particularly useful for some.
I imagine a company which offers this service (in the EU/UK) would be an open banking payment services provider. That is, customers add their bank account details and permit the service to "push" payments directly to retailers when they buy something via an API. Of course, customers would manually approve each payment via the app or whathaveyou.
Challenges: 1) how do you handle off-line payments? 2) how do you handle disputes?
On the history of merchant acquiring: maybe this helps: https://blog.thesharmas.org/2020/06/05/history-merchant-acqu...
Re that anonymous payments idea - you are thinking along the same lines as me re the email and billing address. Getting all the junk/advertising email sent to one place would be a good feature.
Really though, asking people to pay for anonymous transactions is simply an 'in'. I don't think there is a big market there, but I think there is _a_ market.
The goal would be to use that as a springboard to start offering banking services to consumers (e.g. credit, payment consolidation), and merchant banking to online retailers (similar services plus others, e.g. perhaps you could buy a saas business' future cash flows off of them).
If you were able to own both sides of that you would not only make it much easier for people to interact with new online businesses safely, but also provide an integrated identity/payments service to said businesses. You would aim to reduce the cost of the original product to 0 as you became able to generate revenue in other ways.
---
The acquiring idea...
You have some interesting thoughts here. Yes I think you're right that finding an incentive for consumers to use the service is not immediately obvious. Long run, I do think that you would be able to offer credit (both to merchants and consumers) and other financial services but I don't think that is a viable 'way in' for the business.
To start with, I think it needs something simpler and more obvious that you can support with a relatively small number of customers. Ideally without stepping over more regulatory boundaries... you mention discounts and I think that they are the obvious target (though I may well be wrong). I also think that discounting (or other offers) for small businesses is not very well served currently.
Here's an example (fairly arbitrary) of how you could try and kick the thing off - it's obviously a sort of growth hack but its semi-believable.
Pick a student city and convince a load of local bars/restaurants to sign up on the merchant end by promising them no fees and a way to advertise offers to the next batch of students without having to put up flyers and so on. You would then get students to sign up with the promise that they will be able to use it to get cheap food and drinks. You would monetise by charging a referral fee on people redeeming the offers via the app.
If that worked, you would replicate the model in other cities while also trying to expand the number of merchants signed up in existing cities (to appeal to more than just students).
Long run, I think the goal of this business would be to offer both merchant and retail banking services on top of the payments system. In addition to that, you could also open up your platform for other financial service providers - with a referral fee or service charge model.
Your idea of implementing this via open banking is quite interesting - I must admit, I didn't actually think of that.
Would you be interested to talk about this in a more... tangible way? You can reach me on ideasaintworthmuch at mail dot com (mail is not a typo for gmail).