By Dale S. Laszig
DSL Direct LLC
People tend to think of commoditization as something that happens to corn, soybeans or cotton, but financial instruments can be commoditized too, according to InvestingAnswers.com. The website defines a commodity as any item that meets three conditions: it must be standardized, it must be usable upon delivery and its price must vary enough to justify creating a market for it.
Electronic transactions were once a novel idea; now they're bought and sold on the open market. In the 1990s, merchants traded paper receipts for countertop terminals; eventually banks stopped accepting paper deposits. Soon all merchants had countertop POS devices, and merchant level salespeople (MLSs) had to find new ways to differentiate. Some competed on rate; others promoted bundled services and discounted hardware. That's how our race to zero began.
Which payment players were first out of the gate in the race to zero? Some claim it was MLSs, selling lower and lower rates. Others blame equipment manufacturers for competing on price until devices became so cheap we had to give the terminals away. The fact is all payments industry stakeholders played a part in the race to zero by commoditizing merchant services in various ways.
Kevin Kelly, author and former Executive Editor of Wired magazine, believes the race to zero is based on natural law. In his 1998 business bestseller, New Rules for the New Economy, he wrote, "Over time, any product is on a one-way trip over the cliff of inverted pricing and down the curve toward the free." He accurately predicted all manufactured devices will follow the doom loop of commoditization and decreasing price in the digital economy.
His 2016 book, The Inevitable, explores emerging trends and how they will shape our destiny. "This book is about the deep trends over the next 20 years that will shape your life," he wrote in a blog post. "I suggest we embrace these changes, including ubiquitous tracking, accessible artificial intelligence, constant sharing, getting paid to watch ads, VR in your home, etc."
Kelly's prescription for dealing with the "new economy" is to make sure the pace of innovation exceeds the pace of commoditization. "We will create artifacts and services rapidly, as if they were short-lived bubbles," he wrote. "Since we can't hold back a bubble's drift toward popping, we can only learn to make more bubbles, faster."
New York Times journalist Danny Hakim has been researching the expanding role of digital assistants, especially the increasingly popular listening devices that store consumer conversations in the cloud. In his December 2017 article, "Alexa, Stop Listening! Hey Google, You Too," he found devices priced to sell before they even achieve proof of concept that consumer privacy protections can be enforced. Listening technology may soon make its way to the business world before all the kinks are worked out, he added. "Amazon said last month that it was bringing Alexa to the workplace, where it can help set up conference calls or track appointments," he wrote. "Google has priced its Home Mini under $30 for the holiday season. And Apple is coming out with its own competitor, HomePod, next year."
Among Hakim's concerns is the notion that listening devices may record conversations all the time, not just when prompted, or could even be used for wiretapping. "Generally, I'm a man of few 'voice inputs,' but I'm not sure I want any of them sent to Amazon's servers," he wrote. "Amazon says that you can delete your records, although it cautions that 'deleting voice recordings may degrade your Alexa experience' because Alexa learns by getting to know your voice inputs."
Listening devices are encroaching on payments, sweetening deals for customers who allow the devices to order physical and digital products. "When you make a voice purchase request, Alexa searches through Prime-eligible items from your order history and Amazon's Choice items which are highly rated, well-priced products," Amazon.com stated. "If an item is available, Alexa tells you the item name and price. Alexa also tells you the estimated delivery information if it will not be standard Prime 2-day shipping. Additional details about that item are available in the Alexa app. Then, Alexa asks you to confirm or cancel the order."
As listening devices publicly compete for market share, business leaders expect to see aggressive discounts, price wars and product offers designed to entice consumers to acquire and enable digital assistants. Scott Galloway, bestselling author, public speaker and Professor of Marketing at the NYU Stern School of Business, said Siri (Apple) and Alexa (Amazon) have "entered the thunderdome, where two voices enter and only one will leave." Galloway explores emerging retail trends in The Four: The Hidden DNA of Amazon, Apple, Facebook, and Google, a business bestseller that reads like a thriller. The book foreshadows a retail ecosystem built on artificial intelligence, machine learning and technology. Its predictions serve as a wake-up call for payments industry veterans who built empires out of clicks, because clicks are going away forever, Galloway believes.
"In the short term, Go and Echo suggest the company [Amazon] is headed toward zero-click ordering across its operations," he wrote. "Leveraging big data and unrivaled knowledge of consumer purchasing patterns, Amazon will soon meet your need for stuff, without the friction of deciding or ordering." This scenario, which Galloway dubbed "Prime Squared," will send monthly shipments of products, based on customer preferences and ordering histories.
MLSs who rebrand as business consultants will be well positioned to survive and thrive in a zero-click economy, said George Sarantopoulos, Chief Executive Officer at Access One ATM Inc. and National ATM Council Inc. Chair. Amazon and other leading brands will continue to leverage big data by anticipating customer needs based on information consumers have willingly shared. As algorithms replace clicks, intelligent systems will replace dumb POS devices, he noted.
"Instead of the psychic 'precogs' in the tank in Minority Report or the telepaths in X-Men movies, the real superpowers will be algorithms that are able to accurately predict all our wants and needs before we even know we have them," he said. "Every day, these 'algos,' with their deep learning, are getting better and better at figuring us out." 
Dale S. Laszig, Senior Staff Writer at The Green Sheet and Managing Director at DSL Direct LLC, is a payments industry journalist and content provider. She can be reached at dale@dsldirectllc.com and on Twitter at @DSLdirect.
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