Aggregation – both the problem and the solution (back)
Aggregation is the key to making small value payment systems successful since it dilutes transaction costs by sharing it over multiple transactions. The problem is that any system that is non‐anonymous and online requires every transaction to be recorded, processed and audited resulting in costs. What is needed is a symbiotic mix of business models in much the same way as airlines operate hub-and‐spoke systems to deliver passengers to its profitable long‐haul flights. The payment associations should similarly integrate small value with credit/debit to participate in the 80% of transactions to which they are currently excluded.
The problem is well understood and much of the activity in rapid contactless payments has been geared to solving the problem. However, the result of applying a similar technology and charging model to both small and large value payments has been, at best, uninspiring and more typically, abysmal.