Chris Hamilton – APCA Blog

The irony of Bitcoin and the future of Shared Ledger Technology

Chris Hamilton — Wed, 27 Apr 2016 03:04:12 +0000

In earlier blogs, I talked about Bitcoin’s attempt to do away with trust in payments, and how it has a “snapshot” problem. I now want to explore the implications of this for shared ledger technology (SLT) and suggest a way…

Shared Ledger Technology and the snapshot problem

Chris Hamilton — Wed, 20 Apr 2016 23:25:07 +0000

I’ve talked before about how user trust in service providers is still necessary for Shared Ledger Technology (SLT), but I think the question about trust in central third parties is harder to analyse. By “central third party” I mean anyone…

Why Shared Ledger Technology won’t free us from human fallibility

Chris Hamilton — Tue, 12 Apr 2016 23:46:57 +0000

In my previous post, I discussed Bitcoin’s desire to remove trust from the payments process. I now want to look at the nature of financial trust: What does it mean to say we “trust” a third party? Is trust of…

We need to talk about Bitcoin’s trust issues

Chris Hamilton — Wed, 06 Apr 2016 22:47:41 +0000

I recently tackled Satoshi Nakamoto’s original Bitcoin text, which has mythical status amongst devotees of shared ledger technology. It is a paragon of clarity on what Bitcoin is really all about. According to its spiritual father, the purpose of Bitcoin…

Cloudsurfing and payments

Chris Hamilton — Wed, 11 Nov 2015 05:50:38 +0000

Many in our industry are watching in fascination as the United States inches towards a real-time payments solution. There are three recent developments: the Fed’s Faster payments task force has defined effectiveness criteria for a new payments system, NACHA has received the Fed’s approval for its same day ACH rule, and most interestingly, The Clearing House – the high value clearing network for the larger banks – has announced a letter of intent with Vocalink to develop a new real-time system.

Judging by the Chicago Payments Symposium hosted by the Chicago Fed last month, there is still nothing like consensus on the “right” outcome, and the US is still some years from new mainstream payments services that are “cloud ready”.

Apple Pay in Australia

Chris Hamilton — Mon, 10 Aug 2015 04:21:41 +0000

Here at APCA, one of our jobs is to ensure that the community is well informed about payments systems and their future evolution. We were therefore very interested in recent industry media commentary on the evolution of new payment technologies and, in particular, the progress of Apple Pay in Australia.

Australian payment institutions have been criticised by some in the local media for not getting together to make Apple Pay happen. I am not privy to any commercial discussions (of course), but that is a little surprising. There just might be legitimate pro-competitive reasons for that not happening – they are competitors and given Apple’s market weight, they will doubtless have a significant effect on competitive dynamics. This bears careful thought.

Why does it take up to a day to process my internet payment?

Chris Hamilton — Fri, 05 Jun 2015 02:21:31 +0000

The use of online banking websites and mobile banking apps has increased a lot in Australia. We have one of the fastest uptakes in the world of that sort of technology. One of the side effects of this is that people are now much more aware than they used to be of how quickly a payment they are expecting is going to hit their account. And that’s led to a lot of discussion and chatter about how quickly payments take place.

The times they are a ’changin’…

Chris Hamilton — Fri, 27 Mar 2015 03:49:32 +0000

We seem to be getting a lot of media queries at the moment about electronic payments, how they work, and how quickly they happen. Maybe this is a consequence of the increasing use of mobile banking – people can see things happening on their accounts wherever and whenever. This means that the mechanics of payments are more “in your face”.

In line with changing customer expectations, payments processing is speeding up, but doing this in a reliable and secure way itself takes time, given the size and importance of the system. Australia’s “direct entry” electronic payments system handles around 8 million payments a day, between about 35 payments organisations (banks and others). There are around 300,000 registered users – these are businesses that routinely use the system – and millions of account-holders. The system is the backbone of Australian business, supporting every kind of payment from big outlays, like commercial rents, through salary and wages (these days, nearly all of us get paid by direct entry) down to the little payments we make to each other on internet and mobile banking.

Fast is no longer enough

Chris Hamilton — Thu, 19 Feb 2015 23:02:46 +0000

The goal-posts are shifting in new "real-time" payments systems. It is safe to assume that if anyone, anywhere builds a new payment system, it will be real-time. That particular bar has been well and truly set by the UK's faster payments system, followed up by the Paym P2P mobile solution that started there last year. All round the world, countries that don't have a real-time alternative are working on how to get one. In the US, The Clearing House has announced its intention to develop a new real-time system, and the Canadian Payments Association is beginning its own debate on payment system modernisation. But the Brits are not resting on their laurels either - they have begun speccing out a new "world class payments system" as the next generation.

The return of collaboration

Chris Hamilton — Wed, 14 Jan 2015 01:35:26 +0000

As I think about payments developments in 2014, what strikes me is that the payments world is now in a phase of collaborative systemic innovation, the like of which we have not seen in 20 years.

I have written about the cyclical nature of network evolution before. It’s all about network effects - ie the reality that, in payments as in other network industries, the net value of a service is proportional to the number of other people using the service. Wherever there are large network effects, an evolutionary balance must be struck continuously between service innovation based on the existing network, and systemic innovation to enhance the network itself. The former uses new technology and/or new business thinking to improve services to end users without trying to change the network itself - because this is expensive and hard to do. Service innovation tends to be competitive in nature. A good example is Square, which innovates in the merchant/customer interaction by riding the rails of the existing card schemes.

The latter - systemic innovation - seeks to upgrade the underlying network so that new and better services can ultimately be delivered to end users. The current global enthusiasm for real-time payments is largely in this category - building new networks to (eventually) deliver better services. Because this needs a large number of existing participants to coordinate in upgrading their technology and operations at the same time, it is typically collaborative more than competitive, and government often has an important role to play.