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Adam: Welcome to episode 61 of The Crowd. I’m talking to Jason Oxman, CEO of ETA, the Electronic Transactions Association.
Welcome to Near Me’s podcast, The Crowd, bringing you interviews from thought leaders in the collaborative economy who’ll be sharing their knowledge, diverse real world experiences and stuff you need to know to help build a successful marketplace. If this is your first time joining us, thanks and welcome. I’m your host Adam Broadway.
The Electronic Transactions Association or ETA is a global trade association representing more than 500 payments and technology companies. And since joining in 2012, Jason Oxman has lead ETA and its membership through unprecedented technological transformations. And ETA now represents the world’s largest payments and technology companies. ETA also owns and produces Transact, the premier annual event for the payments technology industry and is the voice of the payments industry on Capitol Hill in Washington D.C.
Before joining ETA, Jason was Senior Vice President of Industry Affairs of the Consumer Electronics Association. Prior to which, he served as General Counsel of a technology industry trade association and vice president of a Silicon Valley based technology company. He’s worked at the Federal Communications Commission to develop and implement technology policy and he began his legal career as a law clerk for the Maine Supreme Court and he is also a former broadcast journalist.
Jason received his B.A., cum laude, from Amherst College and his Master of Science in Juris Doctor Degree from Boston University. We are now going to talk about his recent article, the Four Ways Millennials Are Changing Commerce and the future of transactions. We will be discussing peer-to-peer payments, bit coin adaption, mobile payments, rewards driven programs and the future of cashless transactions.
Hi, everybody! It’s my great pleasure to be chatting with Jason Oxman. He’s the CEO of the Electronic Transactions Association, electran.org. And Jason, absolutely wonderful and a pleasure to have you on The Crowd.
Jason: Thanks, Adam! It’s great to be with you today.
Adam: Well, I’m really excited to get into the detail of our conversation and I’m sure you’ve got a lot of thought leadership and wonderful information that a lot of our listeners are going to be very interested in hearing about. Previously, we’ve spoken with some researchers for looking into how peer-to-peer lending works. We have speak with a lot of thought leaders in business and I think the Electronic Transactions Association experience in the industry is going to be awesome for our listeners to understand and particularly around an article that you’ve written, Four Ways Millennials Are Changing Commerce. And you note that millennials, well, they’ve grown up in a very tech-savvy world. They’re quickly adopting whatever is the most convenient for them in terms of this technology enriched environment in which they have bombarded with choice but very quick to react to the changing ways that all sorts of things are happening in social media, e-commerce, payments, etc. Before we get into that though, I’d like to know a little bit of your background and how you got to where you are as the CEO of the Electronic Transactions Association?
Jason: Well, thanks, Adam. And again, it’s a great pleasure to be with you here today. ETA, as you mentioned, is the trade association of the payments industry. What’s so exciting about payments today is after decades of the credit card and debit card and payments industry being really focused on magnetic stripe cards, that was kind of a great technology in the payments industry for the last 40 years.
Today, we are all about payments technology. So the background that I bring to ETA is more than two decades of work in the technology industry. I had the great pleasure of working for the Federal Communications Commission to help implement broadband policy when broadband was first coming on the scene here in the US and look where we are today with broadband enabled technology around the US. I worked for a Silicon Valley based broadband company and I’ve been involved in trade associations focused on broadband and technology enablement. And so today, as the CEO of ETA, the trade association of the payments industry, I’m focused on how technology is bringing great benefits to commerce for both merchants and consumers in the US.
Adam: Awesome. Well, we might have to have a separate podcast talking about broadband separately but let’s now then focus on the transaction side of things and the way that things have evolved so quickly particularly, I guess, over the last five years. And tell me then, what are the four ways that millennials are changing in the way that they work on the web with e-commerce?
Jason: Yes. So this is really interesting. Of course, as you well know, shopping online is a relatively new phenomenon in comparison to shopping at brick-and-mortar retail. In fact, the commercial use restriction on the Internet wasn’t lifted until 1995. That’s really when the dot.com era started and we can see great companies like Amazon starting up and offering us the opportunity to use our, at that time, our desktop PCs and of course, today, our tablets and mobile devices, to shop.
So no question that millennials are a powerful driver of the move from brick-and-mortar to e-commerce. We all know that millennials are a big demographic force. In the US, there are more than 80 million millennials in the US. It’s the largest demographic group in the country right now. They’re big spenders as well. Everyone thinks millennials don’t have money. That’s not true. Millennials spend about $600 billion a year. So we expect that’s going to continue to grow, year over year.
So one way that millennials are changing e-commerce is just by being a powerful force, by being a huge demographic of 80 million people spending $600 billion a year and that’s going to continue to grow. So that’s one important way. And of course, for retailers, they want to be responsive to their customers. If their customers are demanding the opportunity and the ability to shop online and shop using mobile devices, well, of course, retailers are going to provide it. Now, that’s one important force.
I think the second important thing that’s happening is that millennials don’t like to use cash. It’s a very interesting difference with prior generations. Millennials are really used to and accustomed to the idea of using electronic payments, of transacting online, really, of carrying their money on a debit card or prepaid card of using online tools like Venmo, that I’m sure we’ll talk about more, to transact with each other. They’re really accustomed to the online world of money and that’s a big demographic change as well and is really changing e-commerce. That’s the second big force.
A third big thing, I think, is mobile. We all know that mobile devices are the future of not only broadband communications but also e-commerce in this country. Mobile payments are now available from a variety of great providers. Fifty-five percent of mobile payments users today are millennials, aged 18 to 34. So millennials are really driving the use of mobile payments using those mobile devices. That’s the third really important area.
And the fourth thing I mentioned I think is that millennials are really willing to try new things. And that feeds into the popularity of everything from mobile payments to digital currencies to the idea of peer-to-peer transfers of money, peer-to-peer lending, new marketplaces, as you mentioned that are coming out. And millennials are really more than any other group, willing to embrace new technology because they grew up on technology. And that’s a fourth important way that they’re changing e-commerce.
Adam: Yeah. I mean, we are seeing all these shifts in the technology and the way people are transacting and in particular, Bitcoin has made a splash over the last couple of years. We’ve seen it sort of tank at different times. What do you see with the combination of online and offline because there is a lot of online commerce going, but with the retail environment still existing and people want to go in and touch and smell and feel and test drive, etc., how can some of the online payments, how do you see it, morphing to also the retailer? I know that when I go in to buy a coffee now, I can use my mobile device and it’s just a proximity payment. Are there other trends that are happening? What about RFID micro chipping people?
Jason: Yeah. There may be chips that we implant in our bodies sometimes soon to pay and do other things. But you are absolutely right, Adam, the way in which mobile devices open up not only e-commerce but change brick-and-mortar commerce as well. And the coffee shop example you gave is a great one. The real pioneer, frankly, of mobile payments in the last three or four years has been Starbucks. And for a while, Starbucks was the single most popular mobile payments platform in the country. Why? Because they made it very easy and seamless. As you said, I can just walk into the store and the technology continues to improve. Now I can even walk into the store having ordered my coffee already on my mobile device and paid for it on my mobile device. I don’t even need to take it out of my pocket. I don’t even need to talk to anybody. It’s just going to be waiting for me on the counter when I get there. That’s incredible technology. But you obviously can’t ask your smartphone to physically make you the cup of coffee. That’s one thing you still need to go to the store to do. So it really is the perfect intersection of mobile commerce and brick-and-mortar.
We’re also seeing a lot of technology launched simultaneously for use in an app and also in the store – Apple pay, Samsung pay, Android pay – great examples of technologies that are enabled for mobile payments in the store. Tapping to pay is fast. It’s convenient. It’s certainly the most secure way to pay today. And that works great on a variety of different mobile devices but sometimes you want to shop in your app and you can use those same technologies that allow you to tap-to-pay and connect them to your favorite in-app commerce, whether it’s actually buying a good online or paying for your Uber using one of those mobile payments platforms. So as you said, it really is an interesting mix between what you can do online and what you still want to or need to do in a brick-and-mortar store.
So shifting gears and looking at some of the new methods of transacting around currency. We’ve had our fear at currencies. Those currencies that are not really tied to any commodities, not backed by commodities, and that’s kind of being the global way of exchanging value. With Bitcoin coming along and the adaption of Bitcoin with this sort of decentralized model and the millennials just jumping on that it seems particularly written in a context of peer-to-peer exchange.
Recently, there was an article that came out of the UK around their Central Bank launching IRS coin, which is, they’re saying “Central Banks beat Bitcoin at own game with rival super currency.” Where do we see Central Banks and fiat currency being impacted by this shift in the way that millennials are using peer-to-peer? They’re using new technology and the technology outstripping maybe legislation, tax law. You know, we see an impact. We’ve seen marketplace and peer-to-peer also impacting insurance. Where are some of the trends that are happening that almost juggernauts now no longer fads. They are really out of trend. And then, we see the Central Bank out of London coming out with their own crypto-currency. How are our governments, our central banks and that side of things, legislation and tax, keeping up with this shift?
Jason: It is really interesting, isn’t it Adam; The way in which what you might call legacy players in the financial services industry looking at it and in many cases embracing this new technology. And I think philosophically the reason you’re seeing all these experimentation and all this interest in moving this new technology platforms forward is because everyone in the ecosystem shares an interest in helping consumers move from a cash-based society to an electronic-based society. Everybody wants, whether you’re a legacy financial institution that’s been around for 150 years or a FinTech startup that’s been around for a 150 days. Everybody wants consumers and merchants to have the capability to transact using electronic means.
So you mentioned Bitcoin. That’s been a great disruptive force in the payment space but at the same time, you mentioned that the Central Bank of London, hardly a startup on the FinTech scene, has embraced the use of digital currency here in the US. There are more than 40 banks that are partnered together on a consortium called R3 which is exploring means of using the block chain as a ledger technology to facilitate rapid, safe and innovative means of processing, recording, moving forward financial transactions. Again, these are banks that have been in business, in some cases, for centuries that are embracing the possibility of using these new disruptive technologies. And I think that’s part of the really good story that our industry has to tell. Again, whether it’s the Central bank in the UK or big financial institutions here in the US.
Everyone is looking at new technology and looking for opportunities to advance it. I don’t think you need to look any further than mobile payments in the way in which literally hundreds, if not at this point, thousands of financial institutions have partnered with technology companies like Apple and Samsung and Google to launch mobile payments. I mean, who would have thought that Apple would be a payments provider, right? And yet, they’re partnered with this companies that in some cases have been offering financial services for more than a hundred years to their customers. So our industry, I think, is doing a very good job of embracing new technology, whether it be mobile, whether it be digital currency and exploring ways that it can provide better service to merchants and consumers. And I think that’s a really exciting development and it makes for an exciting time in our industry.
Adam: Definitely. How do you think some of these changes are going to have an effect on peer-to-peer marketplaces? And I think this is a two-fold question here, the effect that it has on peer-to-peer marketplaces and the trends that we should be looking at over the next four years, five years around the way that people are transacting within marketplaces. You know, the Airbnbs, the eBay sort of scenario morphing into verticals, large enterprise clients even starting up their own aftermarket marketplaces so that they can own the customer journey and their product and services life cycle right through from new to second hand to retirement. What about – and this is a complex question – peer-to-peer marketplaces and the effect of these exchanges and the trends that we should be looking at and particularly, where are we going with this is around bartering as a means of exchange. We see loyalty and reward systems and the like, which bypass the block chain, bypass Bitcoin, that bypass fiat currency, that bypass any electronic exchange, except their needs to be a recording of – okay, I gave you a cabbage, you gave me a carrot. How is that going to be controlling the sharing economy marketplace space?
Jason: Yeah, well, certainly, peer-to-peer technology predates even the fiat currencies that we have today in the exchange of goods in many cases for other goods or other services that dates back thousands and thousands of years. But I think what's interesting about the peer-to-peer marketplaces, as you said, the most important thing is to make sure that there’s agreement among the peers in the value of what's being exchanged and making sure that the transaction satisfies both parties. And as we’re talking about earlier with millennials, millennials are very comfortable and very accustomed to using, for example, mobile technologies to engage in peer-to-peer exchanges of goods and services.
I like a service called Venmo a lot. There are many others out there. Venmo is something that many millennials, literally millions of millennials are using. They are processing more than a billion dollars a month from the Venmo platform right now. And if you’re a millennial in your 20s and you go out to dinner with five of your friends, you know, gone are the days where you have to split it five ways with cash or checks. You just do it automatically on the Venmo app and it works and millennials love using it. And as you said, the reason it works is because Venmo is a trusted platform and those who use it know that when they’re exchanging, in this case, money among a group of friends or even a transaction with people you don’t necessarily know very well, they know it’s a trusted platform and they feel comfortable using it and that’s one of the reasons that peer- to-peer is becoming so popular and why services like Venmo are becoming so popular.
We saw Facebook a few months ago announce that they are incorporating payments capabilities into Facebook messenger in order to allow Facebook users to facilitate commerce using the Facebook platform. We’ve seen Twitter engage in this as well with Hashtags and the ability to initiate a payment, buy something by sending a tweet. Again, a lot of great innovation happening and it’s all because of this trusted platforms that are easily accessible that consumers are embracing.
Adam: Yeah. And I think that is the key, that whole trust factor and the shift in the mindset of the new customers being millennials is that their idea of privacy has completely shifted. And I know with Venmo, it’s like I don’t mind that everybody sees that I just gave Sally this amount for this particular thing and she paid somebody else for that. It’s all very private, oh, I’m sorry, all very public or private. And I think that is the generational shift that’s happening that’s enabling this complete revolution in the way payments are happening, mobile transactions, the Bitcoin revolution as well and the block chain, and marketplaces, in general. And you touched on that keyword, trust, being the main thing. So how can institutions and I think there is some level of suspicion whenever you see a Central Bank saying, yeah, we’re going to do Bitcoin competitor is all right, what's the agenda behind that? Is it because they need to control it? Where do you see some of the trust being surfaced and maintained for millennials to really believe that larger institutions can maintain the ethos, if you like, of a Venmo?
Jason: That’s right. And I think trust is really paramount because we’re talking about people’s money, right? And consumers have grown to trust financial institutions, banks, to manage their money, manage the movement of their money. And the banks have earned that trust by being the most secure and safe platform for the movement of money. And I think there is an important role going forward in an era of technological innovation for financial institutions. And indeed, all of the technologies that you and I have talked about, from Venmo to mobile payments, at the end of the day, there’s a financial institution involved because you’ve attached a credit card or a debit card to that account or your bank account in order to take the money off of the platform or put the money on to the platform. And that’s incredibly important because banks obviously play a crucial role in being the safe, secure and reliable way to store and move money. And what I think is most exciting is the banks are partnering with these companies. You know, banks are partnering with Apple, they’re partnering with PayPal, to facilitate this movement of money in new and innovative ways. But I think the word trust is exactly right to emphasize because you need to make sure when you’re talking about people’s money that the movement of funds is transparent, that it’s secure, that it’s safe and that it’s reliable and that’s important for all of these technologies.
Adam: Rewards driven: you mentioned that as a point and that is an important factor in transacting for millennials. And in particular, I believe, in South Korea and in Southeast Asia, rewards are a huge factor and in fact, credit cards, it’s not unheard of for somebody to have like 10 different credit cards because it’s all about the rewards. How does the rewards driven side of transactions play a part?
Jason: Yeah. It is an incredibly important part of transactions. You mentioned rewards for financial transactions like credit card programs where people are driven to a particular card because of the miles or, you know, the points or the shopping programs. People participate in certain retailer rewards programs and become loyal to that retailer because of those programs.
We talked about Starbucks earlier. One of the primary drivers of the Starbucks mobile app is it automatically tracks your gold stars, you don’t have to carry around a cardboard card and get a punch every time you’re there. It automatically gives you your free reward when the time is due. That’s incredibly important. What I think is most interesting about rewards is, we all know that millennials are well recognized as being driven by what’s in it from me in a lot of aspects of their lives and rewards programs are no different.
Recent surveys have shown that more than three quarters of millennials participate in loyalty programs, which is surprising because you think about older generations as being driven by getting the airline miles or getting the gas points. You don’t think of millennials necessarily has been driven by it, but in fact they are. And the gap between older consumers who participate and millennials is only about five percentage points - 82 percent of consumers over the age of 34 participate in loyalty programs. Seventy seven (77) percent below the age of 34 participate. So it’s pretty close. And a lot of millennials are getting accustomed to and indeed mobile makes this easy to looking for online offers or coupons or location-based offers, rewards and the like. So it really is a driving behavior and that ties into the payments behavior that we were talking about before.
If you’re getting a reward for using the Starbucks app as your form of payment when you buy coffee, you’re more likely to use it. If you get a reward for using one of the mobile payments platforms or tying your card to one of those platforms, you’re more likely use it. And consumers are looking forward to be easy. They don’t have to carry around extra cards or remember an account number to use it. And that, I think, is driving a lot of these new technologies.
Adam: Yeah. I can see a marketplace for reward points as welcoming. If they’re not already because I can imagine that my reward points at my airline, I may not want to redeem there, I might want to redeem them on a completely different marketplace with a different brand and exchange of points and that’s probably an opportunity for an entrepreneur out there to come out and solve that problem. That would be a very interesting way of being able to leverage the point system right across all the touch points in my life, my commerce life and not just be held hostage to use those points with one vendor or another and that will be interesting how that plays out.
What are your predictions for the next five, ten years? You mentioned cashless institutions. People want the convenience of being able to pay electronically, securely. Governments want to know what transaction is taking place so that tax fraud can be minimized and mitigated. When do you think and what is the trend towards this cashless society maybe it’s starting with specific geographies but then going global? And what might be the impact to the not-for-profits and the institutions who do rely on this spare change in your pocket and how that might be, you know, for the social good?
Jason: So on the first question about the future of a cashless society, I think we have great evidence from outside of the US actually, about how mobile technologies can bring more consumers into the financial mainstream. There are great case studies, a technology called M-Pesa, which is very popular in Africa and indeed is the most popular means of moving money around. It’s actually SMS based. It’s a text message based mobile payments platform. So you actually don’t even have to have a smartphone to use it and it works very well for people who have a phone but don’t have a relationship with a traditional financial institution.
If we look in here in the US, there are tens of millions of Americans who don’t have traditional bank accounts but do have phones. So I think we will continue to see both those who use their phones in conjunction with their bank accounts and I’m certainly one of them. I use my bank account and my phone all the time and it’s tied to my mobile payments platforms that I use. And those who don’t have traditional banking relationships who may use prepaid cards or other great alternatives to a traditional bank account to use those on their mobile devices. I think that’s where we’re headed.
As far as the second part of your question, non-profits who rely on that spare change. There are actually, and you won’t be surprised to hear this, some great apps and online technologies for giving that allow consumers to make those gifts automatically using their stored value on their mobile devices. So much as the payments industry technology is moving toward mobile and in app services, the non-profit sector has opportunities to do so as well. So I think it will prove to be beneficial for that industry.
Adam: Well, it sounds like your experience from the past to being involved in broadband and understanding how that has revolutionized the world and mobile and mobile payments is a perfect plan for your expertise because I’m guessing that there is not going to be a place in the world that you can escape from an electronic connection. We are saturated with the ability to connect to the Internet in even the most far-flung places and we’ve got initiatives from Google and Facebook with Loon and getting broadband everywhere.
So the ability to I guess wire up the world no matter where you are in the deepest, darkest Africa and to the most prolific and population dense places of the world that you would be able to connect. And that the technology and the cost of technology is getting down so low that it’s given away. Do you see then the mobile providers and the banks joining and creating joint ventures around putting a bank account on the phone for those who don’t have them?
Jason: Yeah. I do and I think about again, myself, as a consumer. I think one of the greatest technologies that my bank launched was the ability to take a picture of a check to deposit it. It’s so seamless and so easy and it works so well that it means when I have a check to deposit, I use my phone. I don’t have to go to a bank branch. And yet I can still maintain the safety and security and reliability of that bank account. I think that’s a great example of how financial institutions and banks are adapting to and providing their consumers what they want in the mobile environment.
And mobile check capture wasn’t even contemplated a few years ago. Before, we were all carrying around these smartphones that had broadband connectivity and a camera, built in, and look at what you can do with it now. And now, mobile check capture seems almost like it’s yesterday’s technology. It doesn’t seem that innovative anymore. We’ve all been doing it for so many years. But it is a truly great innovation. It’s a real time saver. It’s secure and it works very well. So I think as you said that banks will continue to look for opportunities to partner with technology companies, take advantage of all the features that mobile devices can offer and enhance the value of accounts at traditional financial institutions by using that mobile technology.
Adam: Well, I’ll be glad when we don’t checks. I was actually surprised when I moved to the US and had to write a check. I haven’t seen one in probably 15 years. So let’s look forward to getting of those checks. In the near future, we won’t need to use our cameras for scanning them. I think America must be the last to be using checks. It’s interesting to see that shift between coming from Australia and some other place in the world where checks are just like, oh, don’t give me a check, that’s the worst thing you could possibly do to wow, checks are still prevalent. But you’re right that camera scanning does make a huge difference in getting that money from that piece of paper into my account. So good stuff there.
Well, it’s been amazing to have this conversation, Jason. I’ve thoroughly enjoyed it. I could talk for hours actually with you and we could go down some of the rabbit holes. But I did want to close off by just getting some final tidbits from you, little bit of advice maybe that you could share with entrepreneurs and even the enterprise customers that we work with who are building marketplaces and where they might focus some of their effort around A: mobile and mobile transactions support for their marketplaces and B: rewards driven incentives.
Jason: So I think the best opportunities now, today in FinTech, in payments and technology, is helping merchants connect better with their customers. That’s what the payments industry is really focused on and that is helping merchants understand from all of the different technologies solutions are available. How can I better connect with my customer? Because, after all, technology loyalty programs, rewards programs, they are all about engaging the customer, getting them to buy more and getting them to come back and be loyal to that store. So that’s where I think the biggest opportunities are today because there are so many great solutions out there helping merchants understand how those technologies work and how those technologies can be put to use to drive for their loyalty.
Adam: Brilliant. So thinking now about your career over an illustrious span of years doing some amazing things, from broadband initiatives and now with the Electronic Transactions Association and working with banks and large institutions… In all of your span of career, thinking about a piece of advice that you were given that resonates with you even now, that in those moments where you needing inspiration, you can tap into those words of wisdom, what would that be?
Jason: I think the best advice that I got and this is applicable in business and it’s certainly applicable in Washington DC where ETA is headquartered and where we work on policy issues quite frequently. There is no such thing as an enemy and you may be up against a competitor or an opponent in a policy debate or somebody who’s challenging you in a marketplace today, but they could be a partner tomorrow. And you may be up against somebody who’s trying to introduce legislation that would be bad for you and tomorrow, you may be working together on something that’s good for both of you.
So I think the best advice I ever got is there’s really no such thing as a permanent enemy. And it’s really applicable in business, in the FinTech world today as financial institutions and technology companies partner together to deploy new services to the market. It’s applicable on the policy battles of today. There’s a lot of rancor in Washington but there are also a lot of things that different industries can work on together for the benefit of their customers. And it’s important to remember that although you may be on different sides of something today with an individual or business, it’s always better to look for opportunities to work together in the future and not to take any steps that would foreclose that from happening.
Adam: Great advice. I love it. It’s “coop-etition.”
Jason: That’s right.
Adam: Cooperative competition, and that drives innovation and it also keeps us all honest and truthful to our truth. That’s awesome advice, Jason, absolute pleasure to chat with you. We’re going to have a transcript of this interview so that those of you who are listening can also read and you’ll be able to connect with Jason at @joxman on Twitter. You’ll also have a link through to some of the articles that he has written about that we’ve talked about in this podcast. Thanks again, Jason. Thoroughly enjoyed hearing your advice and obvious depth of knowledge across the industry. I look forward to doing this again sometime.
Jason: Thanks, Adam. It was a great conversation. I enjoyed it.
Adam: Thanks for joining us for The Crowd. The podcast that keeps you connected. Join us in the next episode for more knowledge sharing and insights on the marketplace economy.