You don't pay to send someone an email – to send information from one place to another. And merchants typically pick up the cost of actually making the transaction when you buy something online. And the founders of Circle – the free, blockchain-enabled payments app – don’t think you should pay to send money, either.
“The internet has already transformed how communication works, how media works, information discovery, shopping – but not money. Circle means I can beam value anywhere in the world. And we’re heading towards a world where the cost of moving and storing value will go to zero,” says Jeremy Allaire, co-founder of the US-based firm, which launched in the UK last month.
If you use this consumer-focused payments app, you’ll find something that reminds you more than anything else of a social media experience – and that’s crucial. Part of its identification process involves taking a selfie, and you can send text, emojis and videos alongside cash. Sit in a restaurant and instantly send cash to the friend opposite you. Or send money to a family member who’s abroad.
Currently, Circle works for dollars and sterling, but its currency range is set to grow soon. The plan, explains Allaire, is to scale fast and generate revenues on the back of a strong user base – like Facebook.
Allaire is no stranger to tech – or entrepreneurship. The political science graduate joined forces with his brother and close friends in 1995 and founded the Allaire Corporation, creating a web programming product that enabled people to build dynamic websites. That was sold to Macromedia, and Allaire became the latter’s chief technology officer, leading key evolutions to the Flash product, including video. “It was then that I started to realise just how important video would become. It was only 2002, but the potential was clear.”
So he left and started another firm, Brightcove. The video cloud company went public four years ago and, since then, Allaire has been working with former colleague and now Circle co-founder, Sean Neville.
“What we’re trying to do is change how money works and what the consumer experience with money is. When you break it down, what you realise is that money is just data. There’s no actual money, just ledgers. And banks are essentially regulated database operators. Payments and transactions are just synchronising those databases.”
And technology means far more efficient ways of moving and housing data. “It turns out that software and the internet are really good at solving problems of synchronising and storing data. We’ve used the internet to make a lot of things free. If you went just a decade ago and said to people, ‘do you want to express your emotions and what you’re doing publicly?’ they’d say ‘no, why would I want to?’ No-one would’ve predicted Snapchat, 140 characters.”
If you say “remittances” to Allaire, he baulks. “When was the last time you talked about sending a cross-border email? It should be no different with money. It doesn’t matter what your motivations are for sending value.”
When Allaire and Neville first saw the blockchain – the immutable distributed ledger technology – it was “like seeing the first web browser in 1993. Barely anyone knew what it was, certainly not what it was for, but we both saw that it could be a very powerful foundation for changing an incredible range of things, including money.” Circle uses it, and other open internet standards and protocols, to enable it to offer a free, and extremely robust and secure service to users. Because blockchain is decentralised, it has multiple nodes (people on computers) which would need to be attacked in order for the ledger to be compromised.
Allaire also explains that, as large payment processors have added the capability for consumers to pay via, say, Apple Pay, they could do the same with blockchain. “As it stands, you’re giving the merchant a key to your bank account when you pay by card. These systems weren’t designed with cybersecurity in mind. The blockchain model is really attractive because, first, it’s more like cash – when the value is transferred, it’s a final payment. There’s no latency because of cumbersome systems. And second, you can transact for a fraction of a penny.”
A new standard
Setting up Circle hasn’t been plain sailing. Operating in the UK means the firm can “passport” their product across the EU, but wading through government approval and licences – state by state in the US – meant that, although the company was founded in 2013, the social payments app was only launched towards the end of last year.
“The problem is that payments systems globally are overseen by government. But now, there’s technology that is designed so that no one person or group has control of it – and we’re using it. How do you explain that to regulators?”
Circle is focusing on fiat currencies at the moment, but its systems could offer the same services in cryptocurrencies. Unlike Allaire, I’m still unconvinced that a new currency can enjoy widespread adoption unless it’s asset-backed. But for him, it’s the perception of value that matters. “The time value of money is also important. If I have a need for money now, I’ll pay for it. It’s a socially created thing.”
The company is now concentrating on rolling out its service across the UK, and then Europe. “China is a couple of years ahead of us, and it’s a great laboratory. Social payments exploded there because of the concept of social gifting. That took hold and we’ve seen completely new behaviours emerge. We will see the same in the West, too. People need to experience new ways of sharing value, and what we’ve built is so much better than what they will have experienced before.”