Weekly Column: Introducing the Payments Innovation Caucus
In 1914, Western Union began issuing metal cards to the company’s top customers. For a subscription fee, “preferred” customers could use their “metal money” to defer payments on various goods and services. This was the first step in a series of monetary advances which revolutionized access to capital and credit. It has significantly changed the way commerce is conducted around the globe today. In the 101 years since metal money was first distributed, the credit card - and now the payments industry - has moved from metal to plastic to virtual transactions. Today, payments can be made with the simple tap of a smartphone.
South Dakota has been a leader and an innovator in the payments industry. As technology has expanded the reach of mobile payments, South Dakota’s role in this world economy has grown substantially. To help educate the Senate and others about the enormous potential of this industry and the dangers that could result if it is compromised, I have partnered with Senator Gary Peters from Michigan to form the bipartisan Senate Payments Innovation Caucus. The caucus is an opportunity for the Senate to understand the critical nature of the payments industry, to see what the industry has done for our state and to make certain South Dakotans have a voice in any changes to the industry moving forward.
The payments industry is growing at lightning speed. Last year, the Boston Consulting Group found that by 2023, the total world volume of electronic payments would hit an astonishing $780 trillion in transactions worldwide. These electronic payments already allow us to click, swipe or tap to purchase countless items. Yet the industry continues to grow. New technologies such as the Starbucks app and ApplePay make it easier than ever before to purchase goods and services.
But mobile transactions have benefits far beyond simplifying our lives. They can be important tools for facilitating economic development throughout the world that can help lift nations out of poverty. Take Kenya for example. Today, 25 percent of the nation’s gross national product flows through mobile payment networks. These networks help Kenyans transfer money quickly, safely and with little cost. When Kenya was engulfed in violence after the 2008 election, mobile payments played a critical role, helping Kenyans trapped by rioting access cash to buy needed food and supplies.
While we should celebrate the many benefits of mobile purchases, the larger and more interconnected the industry becomes, the more our enemies seek to attack it. Already, cyber hackers have attacked banks, merchants and payment intermediaries causing billions of dollars in damages, threatening our national security. To help keep these networks safe and reliable, it is important for Congress to take these threats seriously and understand how to best protect consumer financial data amid ever-changing technologies.
Payments innovation is a diverse industry that continues to grow and change each day. I’m proud of South Dakota’s leading role in it and look forward to working on the Payments Innovation Caucus to inform others of its needs and keep consumer data safe from hackers.
