Short term short circuit

I guess members of Congress don't play chess. You know, developing a strategy, thinking several moves ahead, taking into account that every move you make will generate a counter move. The inevitability of that counter move apparently escaped Congress when they passed the financial reform bill with the Durbin amendment intact.

Durbin mandates the Federal Reserve to regulate debit card interchange. For those of you who have never heard of or do not understand interchange, it's a small, per transaction percentage charged merchants when bankcards are used to purchase products and services. A Fed report puts the average amount of interchange per transaction at $0.44.

The Fed's plan announced last week is to artificially cap interchange on debit cards (not credit cards) at $0.12. If the proposal is approved by the Fed, merchants will save money when customers use debit cards to make purchases, which will allow merchants to pass along savings to customers. Or that's what lawmakers and regulators think will happen -- end of the story.

But every action has a reaction. The reaction will likely be that banks (beneficiaries of interchange) will reduce or eliminate low-cost or free services on checking accounts, since debit card interchange helps to fund those programs. Because banks will start to charge fees on checking accounts to make up for the lack of interchange, people will stop using their debit cards as much.

If consumers shift from debit back to credit cards, merchants will start paying more credit card interchange, which is significantly higher than debit card interchange. And if consumers can't shift back to credit cards because they have bad credit, and they don't want to pull out those expensive-to-use debit cards, maybe they start to reduce (even more) their amount of shopping altogether.

So, an amendment designed to help merchants and consumers ends up costing merchants more than they already pay in interchange, causes consumers to spend less or go into greater debt with credit cards, and hinders economic growth.

If Congress plays any board game, it's checkers, not chess.    

   

Putting tech in its place

The software developer I interviewed a few weeks back seemed a little uncertain about me when I mentioned I don't own a smart phone. But it gets worse. Not only do I not own a smart phone, I don't own a cell phone with a wireless plan. I use a prepaid phone.

For someone who portrays himself as a tech writer, I can see why someone would have reservations. But the reason I don't own a smart phone is simple -- it wouldn't improve my life.

When I go for a walk, I don't need the ability to download MP3s and "friend" yet another stranger. When I drive my truck, I don't need wireless connectivity.  When I'm on a plane, I'd rather sleep. When I'm crossing the street, the last thing I want to be doing is surfing the Internet (California drivers can NEVER be trusted.)

Of course, there are downsides to my personal brand of Ludditism lite. I can't check e-mail on the fly and I can't use my phone to ignore other people in awkward social situations, like standing in line at the pharmacy and waiting for the movie to begin.

I am not saying I will never own a smart phone. It would be novel to play games on one or otherwise divert myself from the real world. But I prefer a slower pace of life. I access technology when I need to pay bills, write a blog, conduct research, communicate with friends and colleagues. So I ask myself, why do I need a smart phone?

Of course, I would think differently if I lived in the slums of Mumbai or in a tiny village in Malawi, where owning a smart phone might make the difference with that ultimate of applications -- survival.

   

The United Consultancy of America

An offhand comment on talk radio sparked a thought about the future of America. The subject of the talk show was the economy. The host mentioned that Apple could not possibly manufacture the iPhone in the United States, since it would cost $5,000 per unit. 

Everything is expensive to produce in the U.S. when compared to the rest of the world. The effects of  unions, globalization, trade agreements and enviable living standards has starved us of our ability to be competitive as a producer of goods, even if the stuff we import from China is inferior to what we used to make here.

But the one thing we still have is knowledge. We know how to make the best windows, the best doors, the best hinges, the best of  just about anything. If you have an idea for a widget, we have the engineers and the craftsmen to design and build it to perfection. Just not cheaply.

Is that our future? Will we be the priestly class, keepers of secret knowledge -- the divine ratios and secret formulas?

It is being said that this may be the future of NASA.With Obama gutting the program (funding it but giving it no purpose), NASA may discover its new direction as a consultant to other space programs around the world.

Imagine our best road builders and metal workers, civil engineers and technological experts, the best our private sector has to offer,  fanning out across the globe to improve living and working conditions across the globe. Obviously, that is happening today. But has it become nationalized? Is it part of our identity as a people?

Ennobling the private sector into a Jedi class of subject matter experts is an idea that returns to America its special standing in the world. We may no longer be the global superpower in military prowess, but we certainly are the priests of DIY.

Oh, mighty Isis!

As a Gen X outcast, I recall the joy of Saturday morning cartoons of the late 1970s -- Batman, Scooby Doo, The Jetsons, Yogi Bear. But also the live action adventure series Shazam!, which chronicled the exploits of Captain Marvel, and its sister series Isis.

Isis was about a young teacher who finds a necklace that transforms her into the mythical goddess Isis when she utters the incantation, "Oh, mighty Isis!" As Isis, the woman could fly and command the elements of sky and earth.

All I really remember about the show is Isis in flight, with her arms extended out in front of her. The rest is a complete blank, probably because the episodes weren't memorable. (The show only lasted one season.)

This is the dilemma of the new Isis -- a brand new mobile contactless payment network at the point of sale. It is made up of AT&T, T-Mobile, and Verizon. The big three telecoms are trying to leverage their 200 million U.S. wireless phone subscriber base to transform themselves into a payments network like Visa and MasterCard.

Isis is going to use Discover's network of 7 million retailers to develop its own Isis branded network over which smart phone payments will be made.  It's a bold but problematic undertaking because V/MC are such entrenched, well-known brands that operate powerful, worldwide networks. Of course, the card brands also have designs on mobile payments, with pilots in the works that seek to circumvent the power of the telecoms.

So, will Isis soar or bomb? It is very much an open question that hinges primarily on how consumers want to pay with their phones. Remember, Isis was kicked off the air back in the late 70s because not enough kids like myself watched the show. If not enough consumers opt to use Isis, 30 years from now we'll be strolling once again down the hazy corridors of memory lane.

The Magic Dongle

Suddenly, the traditional payments industry seems torpidly slow. I'm talking about Square, the Jack Dorsey company that gives away these little square "dongles" that plug into the headphone jack on smart phones and allow merchants to take swiped payments. You know, payments on a stick.

Apparently the devices are taking off with small merchants. You sign up online, get a dongle mailed to you, you plug it in and start taking card payments. Easier than dealing with salesman, contracts, all that cumbersome hardware.

Now, I've heard Square has a compatibility problem with the iPhone 4. I have also heard that some data security issues still have to be worked out. And Square does not as yet support paper receipts. But, still, Square seems to be gaining popularity. It's small, clever, and easy. So why did it take a payments "outsider," the Twitter guy, to think it up?

I don't think Square is revolutionary. Payments guys have come up with "sleeves" that attach to mobile phones that allow cards to be swiped. There are these clunky handheld devices that take swiped payments. There are even simple pocket swipe devices that allow you only to swipe the card and do absolutely nothing else. And yet no payments company thought up the magic dongle.

Jack Dorsey doesn't look like a payments guy and it seems he doesn't think like one either. Is that why some in the industry don't like him?

Hold on to your envy and do things the way you've always done them and find one day soon that the traditional payment terminal is as antiquated as the rotary phone.

Security Bugaboo

A data security expert told me how ironic it is that people so concerned about keeping their credit card data private have no qualms about broadcasting their private lives on Facebook. It might not be credit card numbers that users are posting on their Facebook pages, but what fraudster interested in identity theft wouldn't target people who post details of their lives for everyone to see?

Beyond the willing disclosure of personal information on social networking sites, it is becoming evident that the back-end security for online privacy is becoming a concern. Google recently said that its Street View vehicles inadvertently collected data passing over unsecured private networks. Then there's the problem of third party applications exposing user information on social networking sites to advertisers and online information tracking companies.

The security expert said that his company, which is in the business of protecting consumers' card data, has that data locked down in a military-grade facility. The servers are located underground, guarded by security personnel, monitored with security cameras, and only accessed after people go through several steps that involve picture taking, palm print scanning, code entering, and passing through a series of locked, nondescript doors.

This level of security is certainly not realistic for social networking sites and for how data in general is stored and transmitted over the Internet. However, the flaws being exposed point to the need for software developers, social networkers and any Internet-based business that touches sensitive customer data to make data security a higher priority.

The 'Shakespeare' App

Tim O'Reilly of O'Reilly Media delivered a provocative and inspirational keynote address at the PayPal DevCon held in San Francisco last week. One point he drove home was that developers should take advantage of the sensor capabilities of smart phones. He mentioned how a phone can sense the unique gait of its owner; thus how we walk can be used as a biometric authenticator. Or how, when two phones running the same Bump application are touched together, a P2P payment is automatically made. So apps can be developed to utilize the "sensitivity" built into smart phones.

My thoughts naturally turned to apps useful for writers. What novelists and poets do is filter the material world through their senses. So why not an app that sharpens or extends that ability?

A Bluetooth-enabled camera can be attached to the rim of my glasses. My phone recognizes when I pause to look at something and snaps a picture of it. Then my phone is also keyed to laughter, since laughter means something interesting was seen, heard, or said. Any time the phone registers laughter, the phone records the audio of that, and the conversation around it. Finally, throughout the day my phone records my breathing and heart rate.

At the end of the day, the app compiles all this information into a multimedia presentation that I view on my phone before I go to sleep. I see all the highlights of my day, all the interesting things I've seen and heard but perhaps have not really registered because I was too preoccupied or distracted to take notice. The audio and video is cued to a graph of how my body responded to the various stimuli over the course of the day. 

In the end, this biofeedback loop helps me experience my day with more clarity than I brought to the initial experiences, and maybe I fall asleep realizing how rich my everyday, humdrum life really is. An app like that couldn't help but enhance my capacity to experience and recall the world. It would ultimately result in better writing.

When many of the apps developed for mobile devices end up distracting users from the real world, my "Shakespeare" app would do the opposite. Anything to make my morning commute a little more interesting.