DigitalID, wherefore art thou?
Eric Norlin describes a birth of the credit card, which he suggests began with an iconic event, at least from the marketing perspective:
In mid-September of 1958, the first drop occurred. That "drop" took place in the city of Fresno, California. The city awoke to find 60,000 "credit cards" in the mail. This new device had never been asked for. Not one citizen in the city of Fresno had ever called their bank and requested a small piece of plastic that could be used at various merchants. The demand for these cards was something less than zero. One stunning fact dwarfs that beginning -- last year, VISA did $898 Billion in revenue in North America alone.
Digital Identity is larger in scope and more grandiose in vision than [Bank of America founder] A.P. Giannini's original revelation. But the scope and grandiosity that digital identity can offer does not negate the fundamental tenets upon which Giannini built the BankAmericard (which later became VISA).
Giannini's key realization flew in the face of the received wisdom of his day. Bankers of his time simply did not think that the average individual was smart enough to make the decision as to whether to pay something off now, or to pay it off in installments. That was a decision the bank had to make for them.
The credit card was an interesting extension of the notion of "having an account," but the fundamental reason the credit card is ubiquitous today is missing from the article. Western Union has been offering a kind of charge card to preferred customers since 1914. Diner's Club was almost a decade old when those 60,000 cards went out.
Norlin talks about the incredible uptake of credit cards, but by 1968, Bank of America had been licensing its brand, BankAmericard, and finding it was not accepted by many other banks. The market was fragmenting and, in the absence of a new infrastructure, fraud was rampant. A radical change was required in order to bring banks together to eliminate fraud and ensure smooth day-to-day operations based on growing investment in infrastructure.
He suggests that Bank of America's credit card became VISA. It did, but not until VISA found a way to allow banks to share customer data--their DNA, metaphorically speaking, since the bank "controlled" that customer's money--and overwhelmed the initial BofA value proposition. Other cards came and went, and some stayed using similar models, like MasterCard (originally MasterCharge), and proprietary systems, like American Express.
But the acts of "forming a committee" that transformed the industry Norlin credits to Dee Hock is a vast understatement -- it required a wholesale reinvention of the banking industry, which the identity federation and proprietary identity camps have not even begun to recognize. Committees don't solve problems, they debate and reshape them, often to the detriment of the solution. Eric's interpretation leaves out the mess, the mess we need to embrace and clean up before any of the DigitalID stuff happens or there will be no economic incentive in place for companies to facilitate a DigitalID infrastructure; and even less reason for people to do the work of using their identity for economic advantage.
Make no mistake, the idea of allowing people to have a leverageable digital identity is a dangerous one for entrenched interests. This is why the online services have created closed instant messaging, incompatible login schema (so that all relationships can be negotiated by companies, not individuals) and proprietary client software.
Posted by Mitch Ratcliffe at May 27, 2003 09:34 AM | TrackBack