A few days ago, one of my favorite online services, Spotify, launched a new feature for premium users. I wanted to sign up to become a premium user, but my credit card does not work on their site. This got me thinking about decentralizing payment systems.
Today there are several groups of people pushing federated identity. I’m sure you’ve heard of OpenID, Facebook Connect and OAuth. The promise is simple: use your existing credentials to log on to new services.
Here is how it works in practice: I go to a site, XYZ123.com, and I want to leave a comment on a blog post. I click on the OpenID button and it asks me to select my OpenID provider. I select AOL and the site then takes me to AOL and asks me for my AOL username/password. I enter in the right data and then AOL sends me back to XYZ123.com and I’m logged in.
What happened there is that XYZ123.com let AOL handle the identity portion of their site so that they don’t have to deal with building a database of usernames, passwords, and all the other fun complicated bits that come with creating a new account. Can the same be done for money?
Why should Visa, American Express, Mastercard and PayPal have a monopoly on the online transaction business? Why not let competition flow so that the next time I try and sign up for Spotify Premium I just hit a single button and it takes me to my bank’s website where I can initiate a transfer or better yet it can give me a special code to SMS so that I just pay via my prepaid top up credit, similar to how they already do in Africa.
I do not have enough knowledge about these issues, but please leave a comment and help me learn.