Guest post on payment mechanisms

I don’t normally do guest posts on other blogs – the problem with that is that you lose track of the fact that you’ve written it and you have no control over record-keeping of these posts. That doesn’t mean I haven’t done guest posts in the past – I used to guest-blog for this blog called Sportsnob, but would faithfully cross-post every post here (or in the Livejournal predecessor). I also used to guest-blog on the Indian Economy Blog, but then again I would cross-post here.

I remember that Madman Aadisht had taken a break from blogging during placements at IIMB, and because he wanted to keep the blog going, he offered to attend some pre-placement talks on my behalf (IIMB had a complex system of compulsory attendance for pre-placement talks so that companies got a favourable impression of the batch). So I ended up writing some blog posts on his blog (after a revamp, they all appear as if he’s written). I can identify that I wrote this one and possibly this one (Madman was kind of my guru on all things online, which includes blogging and Orkut – he sent me an invite to join Orkut long before it was cool. So I kinda ended up writing like him so it’s hard to distinguish the posts now) and this one for sure and perhaps this one .

I remember writing a few posts on some of Takshashila’s group blogs such as The Broad Mind and Logos, but with no documentation of what I wrote, I stopped writing for those, especially since I have my own blog there now. So it’s been a while since I wrote one.

But then I wrote one today. I have mentioned a fair number of times on this blog that liquidity is a much underappreciated concept in economics (apart from financial economics) and I would like it to be talked about more. So I’ve been doing my bit evangelising the concept of liquidity.

Sangeet is a management guru who runs a rather well-read blog on Platform Thinking, which is basically about putting the concept of liquidity into practice. We’ve been talking a fair bit recently since both of us started eschewing formal full-time jobs around the same time and generally have conversations on a lot of random things, including things on our blogs, which includes platforms.

So after one such conversation on platforms and payment mechanisms, Sangeet asked if I could write a guest post for him. And I’ve obliged. Here is an extract:

So how can a new payment mechanism (such as m-Pesa or Apple Pay) gain traction? There are essentially two ways – one is the Paypal route, where you enter with so big a bang that you quickly have a large chunk of the market, and network effects make it necessary for the rest of the market to adapt to you. Given the plethora of payment options that are present now, it is unlikely that any player will be able to establish this kind of domination without significant investment.

The other option is to make it interoperable. Apple Pay, for example, could introduce an Android App (which might cannibalise on Apple iPhone sales, but increase traction of Apple Pay itself). This could potentially increase the number of devices that can pay using this mechanism, and it thus gives incentive for merchants to install the mechanism that allows them to accept payments using Apple Pay. There is a parallel to this within Apple itself – when the iconic iPod was first introduced, it was only interoperable with Apple computers. After much internal debate, Apple finally introduced iTunes for Windows, and made the iPod interoperable with Windows, in 2003, and that year iPods saw a 235% growth in sales

Perhaps because Sangeet mostly writes long blog posts, or perhaps because I was fairly jobless writing this in the IESE Cafeteria the other day (remember I’m a B-school WAG now), I ended up writing a rather long post. Still I’d encourage you to read the whole thing there.

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