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TheStreet Open House

#DigitalSkeptic: Payments Industry Proves Disrupting Is for Losers

NEW YORK ( TheStreet) -- George Peabody knows that when it comes to moving money virtually around the globe, the blunt sledgehammer of disruption is nowhere to be found.

"Today's markets are used to digital-time disruption," Peabody told me. He's senior director for Glenbrook Partners, a Menlo Park, Calif., consulting and research firm that specializes in the so-called payments business that enables financial transactions without actual cash.

"But the payments industry lives in a very different world," he said.

Peabody has been patiently explaining to me over the past several months the intricacies of the almost absurdly vast payments universe. Austin, Texas-based Creditcards.com, for example, sums up last year's combined purchase volumes for domestic credit and debit card giants American Express (AXP), Discover (DFS), MasterCard (MA) and Visa (V) to be just north of $2 trillion dollars.

What's remarkable is even just this fraction of total global payments -- which excludes payment volumes from emerging markets such as China and India -- dwarfs the combined revenues of all pure-play internet companies including Google (GOOG), Amazon (AMZN) and Facebook (FB) by roughly a factor of 10.

Spend any time talking with Peabody about how this far-more-valuable-than-the-Internet industry is adapting to the Internet Age and you'll realize that the payments business fundamentally questions the foundational Digital Age myth that disrupting first and asking questions later is the only doorway to tomorrow.

"Payments is not like the music or publishing industries," he explained. "It has an established regulatory framework, a very strong network infrastructure and -- at least at the higher echelons -- the transition to digital technologies that moves at a measured, almost planned, pace."

For disgusted investors, sick and tired of struggling with collapsing digital music, publishing, financial services, corporate IT and higher education sectors, payments is a refreshing island of logic and common sense.

"If any of the new emerging technological options grows to take even 10% of the payments market over the next decade, that's going to be a lot," he said. "Payments take time."

The planned payment revolution
What's fascinating about spending time with Peabody is that despite the mind-boggling complexity of the payments industry -- only insomniacs would tackle the tedium of how merchant processors differ say, from card networks -- innovation in today's payments biz can actually draw a logical line all the way back to the days of the Kennedy administration.

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