Monday, November 16, 2009

Open POS

On this blog we have spoken much about the design principles that underlie “Open Currencies.” However, there is an aspect of this we haven’t said much about, which I believe has significant implications for on-the-ground currency efforts. So let’s unpack how the principles of Open Currency would apply to the Point-of-Sale (POS).

So what is the primary function of a POS device? A POS device must be able to securely send and receive data to and from a server. Usually this data is in the form of a monetary transaction, and records a customer buying X dollars worth of merchandise from the merchant. It must be noted that the current technological ability of devices to provide this service in a secure manner in such volume is, to say the least, awesome. However, despite my personal awe at what is already possible, I must draw attention to an even more amazing future waiting in the wings.

Right now, these devices require stand alone applications that are capable of talking to one (or a specified group of) server(s). This means that if a start-up currency group wants to get access to the POS, they must develop (or license) and install an application on the device that will talk to your server so transactions in your currency can be recorded.

How we treat the POS is analogous to if Amazon, Facebook, and Netflix all had to develop separate stand alone applications for your computer. Obviously, this approach is incredibly inefficient. Had this been the approach 20 years ago, I am quite sure there wouldn’t have been widespread adoption of the Internet. Widespread adoption of the Internet was enabled by the web, and the web was made possible, in part, by a browser which could talk to ANY server using a common protocol.

What if instead of a stand alone application, we had the equivalent of a browser at the POS? This would mean that ANY currency group that needed access to the POS would be able to do so by simply declaring themselves in the space (like registering a domain). No one’s hands would be on the tap. There would be NO middleman. We heartily support net-neutrality, but incoherently accept the non-neutrality of the POS.

Let’s remember that on this blog we define a currency as being “a formal system that allows a community to perceive and interact with flows.” We have named grades, reputation scores on Ebay, driver’s licenses etc. as included in this expanded definition of currency. Think of the UNBELIEVABLY large variety of currency data that could be gathered at the POS (obviously with the full consent of all participants). Merchants could ask customers if they had received good customer service, allowing them to know more about the performance of employees. An endless variety of loyalty point systems that encouraged various shopping behaviors could be devised and implemented. Customers could track their own carbon footprint. And, of course, monetary currencies that aren’t based on scarcity could finally get the access to the POS they need. The possibilities are literally endless.

For some very strange reason, we haven’t yet approached the POS like this. Having tried to pitch this idea to currency groups of various sorts, here are what I think the mental and emotional barriers to this concept might be.

  1. Scope. Most currency projects have fairly narrowly defined mission statements. While a tightly defined mission can be a good thing to keep focus in a group, in this case it seems to hinder perception of the larger ecosystem. Sometimes it’s good to think outside the mission.
  2. Competitiveness. Some groups don’t think that spending resources on an application that may be helpful to their perceived competitors is a good idea. While few seem actively focused on keeping their competitors down, many would be loathed to waste their own scare resources in this manner.
  3. Territorialism. POS providers make most of their profit by being the middlemen. Embracing an Open POS would mean that a large part of their business model would simply be irrelevant. However, I would argue that this evolution is inevitable. The sooner smart merchant services companies embrace it, the sooner they can position themselves as leaders of the next paradigm.
  4. Fear of the cyber boogie-man. For some reason, upon hearing the word OPEN, some people conjure images of cyber villains lurking in the shadows waiting to pounce on unsuspecting grandmothers. Let’s remember that we do LOTS of transactions over the web, and the web is an OPEN network. In fact, most security breaches happen because of human error. People use their own birthdays as passwords for their bank accounts, yet weirdly think the technology itself is what is making us vulnerable. Of course, security must be considered, but there is nothing inherently less secure about an open network.
  5. Fear of too many choices. Believe or not, I actually heard this argument recently at a meeting with the City of Portland where we were discussing the possibility of a municipally funded Open POS. A consulting group that was at the table claimed that unless we restricted the number of currency groups with access to the POS, merchants and customers alike would be overwhelmed with choice. Clearly, these people don’t understand the last 20 years of cultural evolution. And, more importantly, this mindset is completely antithetical to both democracy and the free market. I suppose there are those that would have claimed 25 years ago that an open hypertext network would be quickly filled with porn, false claims, and criminality. While they would have been right, they would have completely missed the point as well as the benefit of the web. Taking personal responsibility for your web experience is a learned skill (one that some still struggle with), and the same will be true of any Open Currency network.

Each of these hang-ups are, in their own way, remnants of a dying economy. At their root, all of these fears lead back to the fear of scarcity. New business models that leverage the power of networks bypass the threat of scarcity by finding innovative ways to create value through autonomous collaboration. Again, think about what makes open source work so well.

One of the key advantages for any currency group taking this approach in concert with other groups is the ability to cross-market. Right now, each group has to hawk its own proprietary POS technology. If instead these groups were selling an OPEN POS device, they would be helping each other get access rather than forcing businesses to choose a POS technology before they had any experience with the currency. Obviously, this would make marketing the POS technology MUCH easier. Some people got online to buy books from Amazon. Some people got online to rent movies from Netflix. But once they were online, it was pretty easy to find and use other services. By embracing an OPEN POS, other groups could join this effort by simply plugging their currency in. No barriers. Only autonomous co-innovation.

So what can we do now? Let’s start by declaring our intent. I propose that those who represent currency projects that might want to adopt an Open POS approach comment on this blog with your intent. I certainly don't pretend that there is a functioning technology ready to use right now, and the challenges we will face in building this kind of network will be significant. But, it would definitely help build momentum for each of us to see that there were other currency groups ready to jump in. Let’s build a truly functional ecosystem at the POS where we can support each other through autonomous collaboration rather than continue to fight over non-existent territory.