contact us

Use the form on the right to contact us.

Washington, DC
United States

(575) 737-8602

Jo Ann Barefoot explores how to create fair and inclusive consumer financial services through innovative ideas for industry and regulators

2012-01-05  New Mexico-031.jpg


Filtering by Category: Innovation

Harvard and Hogwarts: Magic for the payment system

Jo Ann Barefoot


That’s Harry Potter’s spell for making things blow up, which came to my mind last month at the Harvard Innovation Project conference, sponsored by and moderated by Fox Business anchor Liz Claman.

We met on the still-snowy Harvard campus in Memorial Hall, whose dining area strongly evokes its counterpart at Harry’s school, Hogwarts. A huge stained glass window and vaulted, timbered ceiling soared above long rows of tables where participants excitedly discussed the tech wizardry that’s exploding traditional payments.

As with fictional magic, these innovations have enormous power to do both good and ill, depending on who wields the wand and why. We saw delightful technologies that can bring almost unimaginable convenience and empowerment to consumers. Nearly all of them, though, can also be used for “dark arts” innovation that could confuse consumers and undermine privacy, data security, and control.  

These highlights – all intertwined – still have me pondering:


First, a goal of many innovators is to make the payment process disappear for the consumer, submerging it invisibly into the experience being bought. People call this “Uberization,” since an Uber ride ends with our simply exiting the car – the trip payment, tip, and documentation were prearranged and are already done. 

Technology will enable this approach to spread. We will travel, for instance, with logistics being made and adjusted for us automatically as we move – flights, cars, schedules changed based on local traffic, and so on – with the payments handled invisibly. Similarly, in-store mobile payments will increasingly let us skip the checkout line and just walk out the door, barely noticing how much we’ve paid. This will bring great convenience but will also cause concern that consumers will spend more than they mean to. 

At the same time, though, mobile payments will fuel the growth of PFM apps – personal financial management – that can greatly increase awareness and smart management of our money activities.

Which trend will dominate, and for which groups of consumers? Will new technology make people better, worse, or neither at managing their financial lives?

The Internet of Things (IoT)

A second critical question is what principles should guide the burgeoning Internet of Things? Now that tiny computers are embedded in everything around us, the wizards are beginning to connect them with each other and with the larger world. These feed the big data ecosystem with information about us, and also enable us to do new things, or old things more conveniently.

Thus we learn that Amazon will give us a button for the laundry room so that when detergent runs low, one touch will bring us a new supply. We can control our home’s lights and smart thermostat remotely from our phone. Smart devices range from cars, cameras, keys and cell phones to TV’s, watches, baby monitors, and refrigerators. The mobile devices know where we are. Most know when we’ve used them. When did we leave our house, and return? Who was driving our car last night?

Sir Tim Berners Lee, creator of the Worldwide Web, told the Harvard group that if his house key really must communicate with his door lock, he would prefer the dialogue to be just between them, not stored in the cloud and accessible, legally or illegally, by others. With a wry smile he said, “We all ought to be very afraid, all the time.”

What principles should guide the linking and use of our data, and what control, if any, should consumers have?

Harry’s Invisibility Cloak

That brings me to privacy. Harry Potter has a rare magic tool -- an invisibility cloak that enables him to walk unseen among unsuspecting people. The devices around us are like this, watching us and listening without our noticing.

The X-Box that manages my living room flat screen sees and hears me whenever I’m near it – that’s how I can command it by voice or have it coach me in a workout. Merchants are using GPS to offer us nearby bargains, and using facial recognition cameras to analyze our reactions to products. Our devices capture the entertainment we choose, the topics we Google, what we buy, where we travel, and much more. We are rarely, or never, conscious of being invisibly observed and reported on, to unknown people with unknown plans for us.

We click “I agree” to all this, because we need our digital lives. Is this good, or bad? Should consumers have more granular control? Should companies only collect data needed for a narrow purpose, rather than all they can gather? Should consumers be compensated for their information? Would compensation and constraints impede pro-consumer innovation? Do people care? Is privacy dead?

Platform 9 ¾

The Harry Potter wizards enter their world at London’s King’s Cross train station, Platform 9 ¾, where a seemingly solid wall is a magic gateway to an alternate universe.

Those of us in financial services think of “payments” as a financial topic. Really, though, today’s payment innovations are a passageway into a new universe in which people will have whole new kinds of powers operating under whole new sets of rules. Massive data, analytics, and mobile technology are converging to make payments not a discrete process, but rather an integral, unseen component in our shopping, communicating, socializing, learning, playing, sharing, relaxing – nearly every aspect of our practical, economic, social, and emotional lives.

Are our industry and regulatory frameworks prepared to optimize this new world for consumers?

Wizard Wisdom

Hogwarts headmaster Albus Dumbledore says to Harry, “It is not our attributes that make us what we are, Potter. It is our choices."

What choices should financial services companies, innovators, and policy makers be discussing amidst all this tech magic? 

I would love to hear your ideas.