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More choices for customers, Fewer choices for banks

Natasha de Teran, one of the authors of the book ‘The Payoff’ approached me for a review of the book. The title attracted me and so I agreed to do the review. I thought it would be a book that compiles together information and anecdotes on all kinds of digital payments, and I would just have to skim through and finish it in a matter of days. But it has taken me a whole month. And the reason is that the authors have a variety of perspectives, insights and anecdotes and explanations to share. The book opened up my mind to a much bigger playground.

The authors have neatly segmented the chapters into meaningful groups – introduction, history, geography, economics, big money, technology, and finally politics and regulation. They dive into numerous stories. But the exciting part is they give not just the facts, but in many cases, also the explanations as to why things happened that way. Really appreciated.
There is one section that gives the historical perspective, most of it revolving around cheques and cards. I also liked the explanations about risk, liquidity and convention. I found each section of the book informative, in particular the sections on history and big money. The last section – Politics & Regulation – pushes the boundaries of the discussion into national and global politics, giving the history of how US dollar rose in power and how US government made use of this new power in its hand. Given the turmoil around the world that we are witnessing – Afghanistan, Lebanon, Iran, Hong Kong, etc – it is clear from the author’s observations that politics and payments will increasingly go hand in hand.
The authors share opposite trends throughout the book, such as diminishing use of cash in north-west Europe (led by Sweden) vs continued use of cash in south-east Europe (led by Albania). They also share the story of the launch of the first credit card in California by Bank of America, how the scheme nearly collapsed due to mistakes and fraud, and how the bank saved itself.
Though it took me a month to read, this is not a book that you can put down easily, as you read stories such as no cash for 1 week in North Korea. Language is smooth and fluid and gives a feel as if the authors are talking to you rather than writing something for someone to read. That intangible barrier between writer and reader is gone. As a bonus, there are no mathematical equations or explanations.
The authors have a sense of humor and satires as well, and it is presented very subtly. I would like the authors to push this aspect further to make the book more appealing when they write the 2nd edition.
Unlike most books where footnotes are hardly worth reading, many of the footnotes in this book are more meaningful and definitely not to be ignored.
The authors have made the book interesting for both the banker and the consumer. I would say this book is a must read for every student of business to gain fresh perspectives on risk, liquidity and opportunity. There are only a handful of sectors for whom payments are not important.
As one reads the book, the tone of the text gets more and more serious, echoing the fact that payments is becoming a serious subject. Bottomline, a highly recommended book for anyone wanting to understand the big picture of payments are reshaping the world.

Interesting trivia from the book

– While the USA still accounts for 50% of all credit card transactions, two-thirds of all debit card payments are made outside the USA.

– Relative to GDP, Chinese card debt is even higher: 7.5% of GDP for China versus 4.8% for the USA.

– Three-quarters of all cheques are written in the USA – no other country comes anywhere close. Next in line is France, accounting for 10% of all cheques written.

– Ten years after the launch of M-Pesa, practically everyone in Kenya has an account, and the system processes 50% of domestic GDP in value.

– The number of card-accepting merchants and card terminals in China declined by 15% between 2018 and 2019 thanks to mobile payments.

– For banks, payment revenues total 2% of GDP in the USA, 3% in Asia, but only 1% in Europe.

– SWIFT connects banks in every country in the world, except North Korea.

– Authorities have collected some $36 billion in fines over the past 10 years. Of that, the vast majority – almost 80% – has been handed out (and raked in) by the US: $21 billion for sanction violations and another $5.4 billion for money laundering. Almost all European fines, by contrast, have been for money laundering.

u Amazon just a worth more than the sum of the 6 largest banks in the entire world.

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