The future of blockchain will impact mobile payments increasingly. Our guide outlines what’s ahead for this disruption trend.
Facebook, Amazon, Google … It is well known that the tech business often tends towards the winner-takes-all principle. Whether in social media, search engines or in e-commerce – quasi-monopolies are developing here, although formally there is also competition. Amazon CEO Jeff Bezos says quite openly that Amazon wants to sell “everything” at some point. Everything. Amazon would like to grab a share of every trade that is made somewhere by forcing all retailers to sell via Amazon at some point.
The winner-takes-all principle in digital services
What is seldom done in the conventional economy and involves greater effort, happens almost automatically with purely digital offerings: companies such as Facebook and Google have so large market shares in their respective core businesses that the competition can hardly be called competition anymore. And there is also a solid mathematical reason for this, which is actually not new, but is reinforced by the Internet: It is about the so-called Matthew effect named after the Bible author. He wrote the following:
For whoever has it will be given that he may have abundance; but whoever does not have what he has will be taken from him.
This principle is known as the “rich-get-richer principle”. (The next two sections may be a bit tough, we apologize for that.) An American sociologist operationalized this phenomenon on the basis of citation frequencies in science. According to this, well-known authors are cited more often than unknown ones – and thus gradually more and more well-known.
The principle usually results in Pareto distributions in which a few actors each own a large part of the distributed units. This could be, for example, market shares in the economy or the distribution of population shares between cities and the country. In such systems, too, the Matthew effect applies if we look at the tendencies towards rural exodus.
Based on these simple and actually very intuitive rules, the Hungarian mathematician Albert-Laszlo Barabási later researched how networks expand over time. And that brings us to the Internet!
Barabási’s principle of “scale-free networks” explains how large nodes in a network tend to combine more and more connections and, thanks to ever better networking, grow closer and closer to each individual point in the network. This means: Everyone knows Facebook – and almost everyone is on Facebook. And since almost all of your friends and acquaintances are there anyway, you would also be more likely to register there than on Google+.
In a network like the Internet, where virtually all participants can access everything, this effect is taken to extremes. And we have to be careful! Because in the payment sector in particular, similar trends could emerge very quickly.
How blockchain will impact mobile payments
We currently still have a relatively green field for two important future technologies. The blockchain, which could make gatekeepers or middlemen such as banks superfluous when paying, is only just arriving in the minds of the economy. In addition to the well-known Bitcoins, there are many other tried and tested use cases . But in most industries, most decision-makers are not even aware of how much disruptive potential the technology actually entails. Accordingly, there is currently plenty of room for experimentation.
The second technology is the “smart” payment method, the market of which is still very fragmented . There are many providers and technologies, but few that are really well known. Customers also (still) lack confidence when they are supposed to pay with their smartphone, for example. The concerns are about security and privacy. So there is still room for experiments here too.
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Winner-takes-all when paying?
But precisely because of this status quo, everyone who wants to deal with payment methods has to be extremely careful. We see from Amazon, Google and Facebook that digital platforms and services, * if * they develop well, are difficult to stop. For example, if you first build a simple trading platform for X (for electricity, for real estate, maybe even for money?) Via the blockchain at the right time, you no longer have to worry about competition.
And anyone who can set up a universal payment method that is simple and secure (admittedly, that’s not that easy to realize …) could quickly have a similar quasi-monopoly here. Therefore, it is now important for everyone who has something to do with payment to keep their eyes open and now to take action. Or the disruption comes from another company.