Financial Reform, Silicon Valley Style
A new, modern payment system could benefit the entire country.

June 11, 2010
Also published on The Huffington Post

Topics = { Entrepreneurship + Financial Regulation + Government + Silicon Valley }

If there's anything that an impartial observer might have taken away from watching the country grapple with one crisis after another for the past two years — from the economy to health care to oil and back again — it's that the federal government isn't very good at getting things done. This, of course, is hardly news.

Typically, the reason that government intervenes in matters such as these is that there's simply no other actor big enough to effect change. Certainly no one bank was willing or able to stem the tide of credit default swaps and subprime mortgages gone bad; no health insurance company was willing to step up to the plate and admit that the system is a giant scam designed to punish the sick, poor and unemployed, let alone offer a more justified and reasonable alternative than employer-based coverage; and no energy company has generously offered of its own volition to take care of the massive cleanup effort that will now be required in the Gulf of Mexico over the next decade (or two). Again, it's no surprise — in each case, doing the right thing means lower profits, and so it takes a government to force change. Given the glacial pace of legislative action, not to mention the fact that such action is usually substantially eroded by the lobbying of the very organizations that need change, it's tempting to just give up.

That is, unless you remember the way Silicon Valley used to be. In the 1980s, hundreds of successful technology companies that solved real problems grew out of venture capital investments. For a variety of reasons, it's been a while since the Valley has produced a comparable crop of productive enterprises, but fortunately, all it takes is one company to make a substantial impact. (Just look at Apple.)

For roughly the past ten years, I've been working on a project that most people would rightly consider utterly boring. My goal was simple: I didn't want to type in the information on my company's receipts anymore. Each month I would spend hour after hour on tedious, annoying, stupid — and yet crucially important — data entry. What I wanted was an accounting system that could already tell what I was buying.

Around the same time, by 2008, I had finished writing and printing my memoir about Harvard and the founding of Facebook, Inc. The cheapest way possible to ship the books was via Media Mail, only offered by the United States Postal Service. Waiting in line with several hundred Media Mail parcels in need of routing barcodes wasn't a particularly thrilling notion, so I developed some software that could print the post office's barcodes ahead of time. It wasn't long before I started thinking about airline boarding passes, the smartphones they could be displayed on, and as always, the receipts I still had waiting to be typed in.

Two years later, my startup has finally launched ThinkLink: the world's first integrated payment and accounting system. And while that may still not sound very exciting, consider this. The first part of ThinkLink that we're opening to the public is FaceCash, a mobile payment system. Whether you have an iPhone, a BlackBerry, an Android device, some other kind of phone, or no phone at all (barcodes work great on paper), you can use FaceCash to keep better track of what you buy at the point of sale.

Here's where financial reform comes in: Since it relies on your phone or paper, FaceCash doesn't use traditional plastic cards at all, and plastic card fees are in large part what drives the growth of many of the same banks that got us into the financial crisis. So while the government attempts to impose salary caps, transparency, and interchange regulation — all of which are necessary — we'll be solving the problem from a different angle, using old fashioned market economics. Our merchant fees are lower than everyone else's, and it's free for consumers, which means we're already achieving more with new technology than any watered-down interchange regulation bill can hope for.

And though we can't singlehandedly clean up the oil spill, we can at least contribute something to the mess. All of the plastic cards in your wallet are derived from oil, after all, and it can't hurt that with FaceCash, you're decreasing demand for oil, even if it's just one card at a time.

As for health care? We're just getting started...


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