What is the biggest investment opportunity for the next century?
What is the biggest investment opportunity for the next century? Biotech, Medicine? Well, I believe that it is the electronification of cash. Financial transactions effect every one of us everyday. Whether it is paying the cashier at McDonalds, putting money in a vending machine, buying something online, or tipping someone, cash and payment processing is a huge business. What is wrong with the current system? Well, it is inefficient. Cash is labor intensive and dangerous. Anyone can steal it and most crimes are committed over cash. As a former assistant manager of a retail store, the counting of cash and movement of cash was a big time killer. First, the person paying has to have money, so that means trips to the bank. Then, they must pay the cashier and the cashier must make change. The change must be made quickly and errors are possible. The cashier must also have enough cash in the drawer. The manager must make sure that the cashiers have enough cash. And, at the end of the day, cashier drawers must be counted and all the money totaled up. Then, the company must hire a security company to come pick up the money and take it to the bank. This is labor intensive! The other alternative is credit card. The credit card gets rid of most of this work, but at a price. A store (merchant) must pay between approximately 1.5% to 3% of transaction for the privilege of using the credit card. Then, the company must also pay a fee of about 20 to 30cents per transaction as well as pay money for credit card processing. These fees ad up to an enormous amount of money when considering all of the transactions that are done. And, for online companies these rates are high because of the extra risk of not having the buyer physically in front of you and having the signature. Some companies even charge 15% for the same thing! This is absolutely ridiculous. And for online companies, chargeback fees are a major problem as well. So, if a husband pays for a pornsite using his wifes's credit card, and denies ever visiting the site to his wife, and the wife disputes the charge with the credit card company, a chargeback has occurred. Then the merchant has to refund the amount of the transaction as well as pay a penalty fee of $5-100 for each incident! And, Visa and Mastercard are not finding major ways or reducing fraud. Instead they are forcing merchants to figure it out and are telling them that their chargebacks must be 2.5% or less of the total monthly transactions or face penalties of $25,000 or more. Once again, this is crazy and this must be stopped. The Internet can turn cash and transactions into data and technology can be developed that will be safe, and cost virtually nothing. One company that I must commend on this is PayPal. They developed an online auction payment system called Pay Pal. Both users have to have PayPal in order for it to work. Both parties sign up and give PayPal their credit card #'s. Then, if one wants to pay another, he/she logs onto his her account and puts in the e-mail address of the person they want to send money to and the amount. Then, the amount is charged to the credit card. Although, it still goes through the credit card, it saves the merchant the 2% + fee that he/she would normally pay. Pay Pal then keeps the merchants money for two weeks and earns interest on the money and returns it to the merchant after this period. This solution is a good start, but it still cannot do the advanced things that can be done with a merchant account such as shopping cart stuff and other things. And, that is why auctions are the place where it is mainly used. Microsoft recently released its .Net strategy. The idea is that .net is going to be a platform that transactions can be based on. So, among some of the things that it may do is to seamlessly integrate financial transactions so that if you purchase something from one site and something else from another, it will bring them all together into one online statement. This seems like a great idea, but it still doesn't solve the problem. However, I think that as soon as Microsoft gets into it, they might find that payment solutions will fit well into their model and develop one. What does cash have to do with software making?-- More than you think. Five years ago when the Internet just started taking off, I would have said that they are totally different, but today more people are online and solutions are possible. Today, nearly everything that is information can be related to software or the Internet. Cash and credit cards are information. Information is going onto the Internet and cash will be one of them. That is my dream.
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