Payments with Crypto’s Might Be Closer Than You Think

When McDonald’s was looking for a new way to boost sales, there wasn’t a shortage of ideas. One strategist told the execs he had an easy, sure fire way to save millions each year.

He wrote down the solution and stuffed it into an envelope. Before handing it over, he ironed out his cut for coming up with the idea.

With money in hand, he happily showed Macca’s execs his plan. Inside were just a couple of sentences. Macca’s could save millions by…cutting a few inches off their plastic straws.

Now, maybe you’ve heard this story before. I remember first hearing it from my economist professor. I’m not entirely sure it’s true. It would make sense though, considering the volume of plastic Macca’s consumes.

In 2017, they were racing through about 500 straws a day. Each year, that adds up to about 300 million tons of plastic. Shave a couple of inches off each straw and that’s probably a few million right there.

Rather than a case study to remember, I believe my professor wanted us to grasp the underlying message of the story: simple ideas are often very profitable.

The newest fintech revolutionising payments

There are a ton of simple ideas out there. Betting that China will continue paying a premium for The a2 Milk Company Ltd [ASX:A2M] products. That’s a simple idea.

Betting that consumers will spend more if you allow them…

Afterpay Touch Group Ltd [ASX:APT] anyone?

Both have been extremely profitable over time. But there’s one Melbourne start-up looking to take the cake. They want to save you three seconds in the morning when you buy coffee.

OK, so that’s not all they want to do. Assembly Payments is like most fintech (financial technology) companies. They want to revolutionise the world…three seconds at a time.

They’ve already got more than 100 clients using their services. Assembly has even bagged one of Australia’s largest banks as an investor. From the Australian Financial Review (AFR):

Westpac Banking Corp has bought an equity stake in Assembly Payments and will work with the Melbourne-based fintech to integrate the bank’s merchant terminals with customers’ point-of-sale (POS) software, removing the need for transaction amounts to be entered into retailers’ systems twice.

For workers in the nation’s restaurants and coffee shops, entering the dollar amount of a transaction into a banking terminal to complete a sale might be a small frustration, but the extra process can add up to real dollars for business owners.

Westpac estimates that for a typical Sydney CBD cafe – which completes between 1000 and 1500 transactions a day – the three to five seconds of time taken to rekey the transaction amount into the merchant terminal adds up to $100 a week for the business owner in extra staff salary, a cost that will be removed once the two systems are integrated.

It’s these small, but simple improvements (three seconds) that move us closer to the world bitcoin bulls pray for: a world of instant decentralised transfer.

Yet I doubt Assembly will get much praise from the crypto world. Anyway…

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Assembly is also in the escrow game: where a deposit is held in a third party account, awaiting confirmation from both parties.

So, imagine selling your car. Rather than trusting the money is on its way, you know the buyer has already put money down. And with Assembly’s application, sellers can expect the payment to clear in the next four seconds.

It was this feature that encouraged Ltd [ASX:CAR] to work with Assembly. The AFR continues:

Carsales’ service, called PayProtect, allows car buyers to put down a deposit on the vehicle they wish to purchase, which is held in escrow, while also allowing the seller to accept the sale, once they know the buyer is committed.

‘…Carsales worked with…Assembly Payments, to launch the service.

‘…Once the deal is agreed, both parties push a button in a mobile application, and the cash is cleared within four seconds, rather than having to wait two to four days for clearance under the prevailing system where a BSB and account number are required. chief executive Cameron McIntyre said instant payments would increase peace of mind in what can be a fraught transaction.

If you think that’s good, then listen to this…

To make transactions even faster, Carsales is jumping on the Reserve Bank of Australia (RBA) crypto system. OK, maybe some wouldn’t call it a crypto system. But the RBA’s New Payments Platform (NPP) does allow ‘near real-time’ transfers on a 24-hour basis.

They cooked up the idea way back in 2012. In a report, the RBA set out ‘…strategic objectives for the Australian payments system. These included the ability for users to make real-time payments; send more complete remittance information with payments; address payments in a relatively simple way; and make and receive payments outside normal business hours.

One step closer to payments with Crypto’s

Again, it wouldn’t surprise me if bitcoin bulls turn their noses up at this one. Assembly and the NPP are by no means decentralised payment systems. There’s some sort of central control going on behind the curtains.

But it’s a step closer to a faster and better payment system. In yesterday’s Money Morning I wrote about what I thought was the real benefit of cryptocurrencies: a system of instant money transfer incurring no fees.

In reality, we might see a hybrid. A platform that has elements of cryptocurrencies with features of Assembly or NPP baked in.

Maybe the dream is still years away. We might have the technology, but the financial middle men collecting billions in fees will try like hell to stop it, or at least control it.

Your friend,

Harje Ronngard,
Editor, Money Morning

PS: How you could potentially pocket a small fortune just by laying down the tiny sum of $100 on this little-known cryptocurrency. Free report (download now).

Money Morning is Australia’s most outspoken financial news service. Your Money Morning editorial team are not afraid to tell it like it is. From calling out politicians to taking on the housing industry, our aim is to cut through the hype and BS to help you make sense of the stories that make a difference to your wealth. Whether you agree with us or not, you’ll find our common-sense, thought provoking arguments well worth a read.

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