Author’s Note: I use the term “middleman” in only a gender-neutral way because it is, in fact, a gender-neutral term. Look it up.
Back in the day when nerds like me still carried pagers, Windows 3.0 was taking the personal computing world by storm, nobody had heard of Tim Berners-Lee yet, and teenage boys were still drooling over Kelly LeBrock, I had a couple of friends who made very good lives for themselves and their families as travel agents. What a sweet gig. They were paid well for their services – by someone other than their customers, I might add – and enjoyed countless travel benefits to boot. It was a good time to be a middleman in the travel industry.
Then the Internet happened, specifically the World Wide Web.
No More Middlemen
By the mid-90s, sites like Travelocity and Expedia started to pop up. As commonfolk became more and more comfortable booking their own travel, the glory days of the career travel agent began to fade. I don’t remember exactly what my travel agent friends did, but I can tell you that in modern parlance, they had to pivot. And thus, the Internet established itself as the ultimate middleman replacer.
We’ve of course seen this repeated many times since. There are still a few insurance agents and stockbrokers around for those who need them. It’s just that not nearly as many people do. Think of your mail carrier as a middleman between you and your credit union for monthly statement delivery. When you sign up for e-statements, you cut your mail carrier out of that middleman role.
No middleman is safe, save one – at least up to this point.
Except Maybe for Payments
There’s a reason payments are so attractive and so lucrative. If you can figure out how to inject yourself into a payment process as just one of many middlemen – even a minor middleman – you can make oodles of money on volume.
Consider all the middlemen who have to work together to get the credit card payment for your new tires from you to the tire store:
The Tire Store
Their POS System/Payment Gateway
Their Payment Processor
Their Bank
Some Card Network
Your Credit Union
Did you say you used ApplePay to buy those tires? That adds a whole nuther “security and convenience” layer to the transaction. And it adds a way for Apple to collect a little spiff from your credit union.
In the world of middleman protectionism, payments seem impenetrable, don’t they? Except no middleman is safe from the Internet.
Payments: Faster, Cheaper and …
Everybody is talking about faster, cheaper payments, but there’s a third component at play that never gets mentioned. Maybe it’s because that third leg to the tripod doesn’t roll off the tongue quite as easily. What we’re actually witnessing is faster, cheaper payments with fewer intermediaries.
Take the rise of APIs and open-banking standards, mix in some fast, dirt-cheap payment rails like FedNow, and you have the basic ingredients for what is inelegantly being referred to as “pay by bank.” I personally hope we move on to something catchier like direct payment, but I digress.
Think about it. If you can access a line of credit at your credit union from a POS terminal at the tire store and direct the payment to the tire store in real time, what do you need Visa or MasterCard for? What does the tire store need Visa or MasterCard for? The answer is, not much.
What About All Those Middlemen?
If direct payment comes to be in any major way, which I believe it will, it creates an obvious problem for the middlemen and their middleman revenue. As I see it, they have two options:
Cling to their legacy technology and try to force the world to do the same, at least until they can figure out how to reinvent their middleman roles.
Embrace the new technology and build value-added services around these new technologies – services so fast, so convenient and so downright amazing that members will gladly pay for them.
Think I’m crazy? Let me know about it.