Do you have government-issued payment technology? A tracking device that is tied to your bank account or credit card, that allows you to pay for stuff without the hassle of transaction friction? Chances are, if you are a commuter, you do. I’ve got one in my car, an image of it is above.
I love my FasTrak. It lets me whiz through the numerous bridge toll booths dotting the Bay Area. But recently, FasTrak did something very important – it cut a deal with the San Francisco Airport, a deal that allows folks with FasTrak to pay for airport parking using their selfsame FasTrak device.
Pretty obvious, no? Well, no, in fact. I’m sure cuttting this deal was fraught with all the red tape and political hazards typical of local government.
But it got me thinking. I have a FasTrak device in my car. I have connected that device to a trusted payment service (a credit card, in my case). Why shouldn’t the local government leverage that fact, and get into the payment biz? It’s a great business (just ask MasterCard or Amex), it pays well, and it’s a service I’d trust FasTrak to get right, because they’ve built significant brand equity with me over the past few years.
We have a major budget crisis here in California, and everyone is pointing fingers, arguing about which programs should get cut, and hoping that we can gamble our way out of the problem (no, really). What about the government *actually providing a valuable service,* one we’d all be willing to pay a bit for?
I know, I know, it’d cut into the credit card companies’ business, but, jesus, tough shit, guys. California is in the pole position here, and should leverage it. Miniaturize the FasTrak, add a modal button (ie, when I press on it, it activates) and some security software, and then roll it out at grocery stores, gas stations, shit, everywhere you can buy a lottery ticket for that matter. The brilliant angle is this: while tons of retailers have tried this, no one wants a walled garden approach (ie, I can use this key fob for gas, that key fob for Safeway, etc.). The government can set an open standard, create a development platform…you all know the rest.
And take a 1-2.5% cut from retailers. I, for one, would love it.
10 thoughts on “The Government Should Get Into the Payment Game”
As in many government-related innovations, Singapore is way ahead in this respect. Every car in Singapore is required to have a fastrak-like system, and a majority of commercial parking lots utilize this same toll-tag as a payment system. Parking is not cheap in Singapore, but it sure is convenient!
Hey, maybe Cory Doctorow could turn this thread into a work of art — that is: if he is willing to bring his talent over here!
I wholeheartedly disagree.
The Government should not be in control dictating standards, responsible for innovation, and interest rates. If you look at the Federal Reserve, they have done a horrible job managing interest rates and value of the dollar instead of letting market forces work. In the FasTrak system, they may impose a lower rate at the beginning, but eventually after they figure out they need to manage fraud, customer service, and maintenance the rates will spiral out of control the program will become yet another taxpayer subsidy. This system would also end up being forced upon retailers whereas right now they have a choice if they accept MasterCard/Visa/Amex or not. Additionally, with the current state of things I doubt many American would feel comfortable giving their purchasing habits directly to the government to data mine. ::Puts on Tin foil hat:: Go Capitalism!
“I’m sure cuttting this deal was fraught with all the red tape and political hazards typical of local government”
And you want to turn your personal payment services over to this typical local government? Seriously?
It’s fair to ask why a larger existing payment services company isn’t already doing this, like PayPal or something like it. PayPal already offers all the services you mention, but not yet such a device.
But to take the reflex socialist view of turning critical personal services over to the government just makes no sense. Government is the worst services providor on the planet – it can capture by penalty of imprisonment great amounts of personal data, and would be forced to share that data with anyone or everyone who wants to plunk down ten bucks to own it.
Please, please, put it in your mind to think private businesses first. You’re correct in your basic premise, but government payment services? No.
…and just one more thing. We have a similar system in Oklahoma, and it’s run by – a private company on contract to the state. Only aggregated data is shared with the state except under supenoa, and the service is simply excellent. State lotteries, printing services, billing and record keeping, sometimes even prisons – these kinds of things should be kept out of the hands of self-agrandizing politicians and closet socialists who want to change the world.
Governments are lousy at this sort of thing; the profit motive is essential for success.
Also payments are nontrivial. You have fraud to detect, disputes to arbitrate. Margins are razor thin and you need scale for efficiency. The chances that a state could compete with MC or Visa (or PayPal) are approximately zero.
John, Lots of people are dying to get into providing this service because it does pay so well. And that is the problem. Where a check cost a penny or two to process, the network for Fastrac and card payments cost 100’s – not a typo – hundreds of times more. So a $1,000 check will cost the same to process as a $1,00 check. But a $1,000 card network payment will cost $15 to $30 to process.
In fact, many states make it illegal to accept card payments because they feel the processing cost is a blantant miss-use of the tax payers money.
It ain’t red tape, bro – just good old fashion money that gets in the way.
There is however a pretty significant difference between a Credit Card and your FastTrak thingy (same as e-tags or e-toll tags here in Sydney). MasterCard is liable for providing you with credit. When a transaction is completed, they ensure the Merchant will be paid. Whereas the FastTrack is effectively emitting a unique ID via a frequency, telling the toll booth “hey, it’s me” and then the managing body will debit some dollars from your account/pay themselves via your credit card.
So with this said, when you pay your groceries with a credit card, it authorises the transaction with MasterCard before you go, effectively offering the merchant with a garantee they’ll be paid by MC. When you cross a toll booth, it doesn’t authorises anything, it just recognises your ID which is later linked to your account and the fee is charged.
I can only close this by quoting ‘Holy Cow’ (erm!) above… “[The] Government is the worst services providor on the planet – it can capture by penalty of imprisonment great amounts of personal data, and would be forced to share that data with anyone or everyone who wants to plunk down ten bucks to own it.”
John, you have a two misconceptions here. The first is the idea that FasTrak and like systems are payment systems. They are not. They simply act as the Merchant node of existing systems like Visa. Your local FasTrak authority is collecting money, as a merchant would, from your Visa account. You authorized them to do so. There is no particular magic in that, or red-tape even. All layers of government participate in Visa, Mastercard and other commercial systems as merchants, from the IRS to the local parking authority. Surely you’ve paid a ticket, if not your taxes, with a card?
The second misstep is the proposal that government get into the payments game. Have you ever heard of the Federal Reserve Bank? The Fed is the master operator and licensing authority for the largest payments transaction network in the world, the U.S. bankcheck settlement system. Not to mention its authority over the issuance of U.S. currency, the most fluid payments system we have. All other operators, including Amex, Visa and Mastercard, answer to the Fed. The government cannot get into payments because it IS payments.
The gist of your post is well-taken (however poorly argued)– that fluidity, convenience and trust are what we want in our payments environment. Not barriers. Amen to that.
Without saying silly things like, “yay private business” and “government provided services are always sub par!”, I’d like to point out that what you’re suggesting is a good idea, but I imagine that are a) very little incentives for anyone in local government to take such a risk, b) almost no one involved in local government would have the technical expertise and finally, c) there’s probably a law somewhere that forbids them to do so, much like that “we can’t provide municipal wi-fi to all of our residents, paid from their taxes, because that would be uncompetitive re: private entities” fiasco a few years back.
That said, I really don’t understand how anything run by government has become “socialist” in the common vernacular.