Back to the Future in Payments Technology
One of the things Back to the Future Part II almost got right about 2015 was how Biff paid for his cab ride—with a thumbprint.
A lot of us can basically do this already, by signing into a smartphone with a ride app (Uber, Lyft, or even an app for traditional taxis like Curb) using our thumbprint. The difference is, we do it at the start of the ride and the payment is taken care of automatically by our pre-authorization.
We can do this for other things too—a coffee at Starbucks or goods at the grocery store using Apple or Samsung Pay. All can be authorized by our thumbprint (even my little credit union allows my to authorize seeing my account balances with Apple’s Touch ID).
All this is actually more futuristic than BTTF’s cab ride. The cab doesn’t need to have an expensive customer interface installed where they can authorize payment at the end of the ride. It’s all handled somewhere else. The cloud handles the process and feedback services letting the driver know we’re trustworthy—and letting us know the driver isn’t a maniac – handles the trust issue, allowing us to leave the car without handing over anything to the driver, not even a thumbprint, and assuring the driver that he (or increasingly she) will get a tip as well.
So we don’t even need the thumbprint. Sorry, Mr. Zemeckis.
In economic terms what advanced payment systems have done is dramatically lowered the transaction costs of taking an on-demand car ride, below even that envisaged by the thumbprint future.
Where did this innovation come from? In many ways, it’s a great illustration of Say’s Law—that production creates markets. Smartphone app technology created the market for apps that connect you with other users and providers. Smartphone touch ID technology created the market for apps you can trust with your most sensitive financial data.
Yet one other aspect is less appreciated. Often there’s an inhibitor to innovation in the form of regulation. Regulation of payment networks has demonstrably inhibited the process of Say’s Law in some places. For instance, Apple Pay has failed to get off the ground at all in Australia owing to regulation of interchange fees between banks there (there’s very little fee revenue per transaction to let the relevant parties get a cut).
So perhaps, if regulators had been more active in the BTTF universe, Biff would have been handing over cash for his journey, just like always.