Dateline: Dubai, 25th May 2023.
Visa have launched their “Visa+” service, initially through partners PayPal and Venmo, with the admirable aim of helping people to send money between different payment apps. The basic idea is to create a directory of unique addresses so that you can send money to (eg) dgwbirch without having to know whether dgwbirch is using this app or that app, this network or that network. Think how much easier life will be when you can just put a pay name on your business card so that anyone can send you money without having to know your routing code and account number or your Venmo handle or your Visa card number.
This idea of using some kind of unique personal identifier to route payments (a “pay name”) is not new and there are different kinds of pay names out there now. I set up $dgwbirch on Square Cash, for example (although I’ve forgotten the password), and you can pay my invoices through paypal.me/15MbLtd if you want to, and if you want to donate to my favourite charity (the Dave Birch Holiday Home in the South of France Emergency Appeal Fund) then you can give generously to dgwbirch.eth rather than having to copy and paste a long and complicated Etherum address from somewhere.
Some instant payment systems already have identifiers rather than the routing codes and account numbers that we continue to use in the U.K. In Australia, you can send instant payments from your bank to an account number in the conventional fashion or to an e-mail address, a phone number, a business number or (for companies) an individual identifier and Brazilians can zip money through Pix to a phone number, a tax identification number or an e-mail address.
(For privacy reasons, I’ve always been against using mobile phone numbers for payment purposes even though I know how convenient this is. There’s no reason for the guy at the farmer’s market to know what my name, mobile phone number or bank account number is. Telling him £man.city.man should be enough.)
These identifiers are all domain specific though: I can’t send money from my PayPal account to $dgwbirch at Square. But what if you could have one pay name for all of your payment methods?
I’ll explain why this is desirable using an example from a few years ago when I wrote a piece for the Financial Times trying (unsuccessfully) to persuade British banks to do something helpful in this area by creating Virtual Account Numbers (VANs) so that customers could keep the same VAN when switching accounts. I suggested that a straightforward and highly-desirable extension to such a scheme would be to allow consumers to make direct payments to an e-mail address or Facebook name or Instagram handle or whatever else they had registered against the VAN.
Thus it would work something like this. I have a Barclays account. I log in to the VAN system and select that account number. The system bounces me to Barclays for authentication via open banking. Once this is done, I am returned to the VAN system where I can now claim the VAN pointing to that Barclays account. Now I can select a pay name. First of all I try £dave, but it turns out that it’s already been allocated. I try again and get £davebirch.
with kind permission of Helen Holmes (CC-BY-ND 4.0).
The next time I take out a mobile phone contract, instead of trying to remember my Barclays sort code and account number, I can just type in “£davebirch”. I can now tell my employer to pay me at “£davebirch”. If I change bank accounts, I log in to VAN system again and change from my Barclays account to my new Metro account: I don’t need to inform the mobile phone operator, my employer or anyone else. Simple.
Most of the time I neither know or care whether my payee is at Wells Fargo or on Venmo, on Visa or Mastercard. I just want there to be a single pay name directory that provides global functionality. The kind person donating to my emergency appeal will not have access to any of my personal financial information, but can just send the money to £dgwbirch without a care in the world. Their bank, their P2P of choice or Revolut app or will look in the directory and route the money to the right destination.
Now there are people other than banks, Visa or SWIFT or other “traditional” networks who might want to provide those pay names. If FedNow really wants to make account-to-account instant payments part of every day life for the average American, pay names might be a way to do it. I contributed to a response to the Federal Reserve Banks’ Public Consultation Paper on “Payment System Improvement” with a similar suggestion, calling for the Fed to look into a generalised identification system for payments, because some kind of “payment name” might be more convenient for consumers. The idea of a “financial services identifier” (FSI), that could be bound with appropriate credentials — post customer due diligence (CDD) — to form a secure financial services passport which could then be used to effect considerable cost reductions in the financial services industry was then, and still is, rather attractive.
My Twitter handle, to pick just one example, would be an excellent pay name (and, who knows, could become an integral part of Mr. Musk’s plan to make his platform indispensable). Vanity pay names, just like vanity licence plates, might also be a good way for such a platform to generate revenues: How much would some billionaire somewhere pay for the twitter handle @007 if it was a pay name? How cool would it be to go to your bank app, choose “send money” and then put in @dgwbirch and be told within a second or two “yep, they have the money”.
How would that work in practice? Well, your bank would ping the Fed and say hi this is Citi, does @dgwbirch map to a FedNow account? And then the Fed would say yes its account XYZ at Wells and Citi would push the money over FedNow to account XYZ at Wells. Or the Fed might say no, but here’s list of things it does map to: “PayPal, Square and Venmo” and then you could choose one of them to send the money to.
Tweet Me The Money
On the other hand, if Mr. Musk is up for it, Twitter could actually run the directory and switch the money themselves. So instead of asking the Fed which account @dgwbirch maps to, Citi could just ping Twitter to see if @dgwbirch has a blue tick and then, if it does, it sends the money to Twitter’s FedNow account (yes, I know non-banks aren’t allowed FedNow accounts, but let’s assume that the policy changes in the future to be more like the Bank of England’s policy.)
Twitter sees a payment for @dgwbirch arrive and then looks up in its own directory as to where @dgwbirch has told it to send the money. Twitter then sends the money to my Venmo account, my Ethereum wallet, my American Express card or wherever else I may have directed it in my settings. For my $10 per month Twitter “verified plus pay name”, that starts to look appealing. If people could send money to my blue tick, I might actually pay for one.
Thought provoking ideas as always, Dave!
I have always advocated for the mobile number to be the single proxy identifier for P2P / P2M payments. However, I can see why you might ‘legitimately’ not want everyone to have your mobile number.
I assume you are aware of the European Payment Council’s initiative to create a single verified database of mobile numbers for such purposes.
The SEPA Proxy Lookup (SPL) scheme covers the exchange of the data necessary to initiate payments between proxy-based payment solutions on a pan-European level. It aims to facilitate interoperability between participating payment solutions.