Like most specialist areas, fintech has its own vocabulary, highly meaningful to insiders but opaque to outsiders. The important issue of “whose rails are you running on” is one of those phrases.
Insider vocabulary
Some people learn to play a bit of baseball when they're young:
They learn basic vocabulary like bat, ball, base, hit, grounder, fly ball, catch, throw and out. That's already lots of words! But the pros and other people who are seriously into what the rest of us lightly call the "game" share a greatly extended set of concepts, words and phrases among themselves.
To take a couple simple examples, there is the “squeeze play” and the “infield fly rule.” Those are just a couple I happen to know. I'm sure there are whole piles of words and phrases that are way beyond me. It’s the use of that specialized vocabulary that distinguishes people who “know baseball” from those who merely watch or attend games.
Fintech is no different. There is some shared vocabulary among all the sectors of fintech. In addition, each specific fintech domain has its own set of vocabulary and concepts, arranged in layers according to how deep you are into the business or technology of the specific fintech sector.
Rails in fintech
When someone talks about "rails" in the payments sector of fintech, they're talking about the mechanics of how money gets from a sender to a receiver. It's about transportation.
It turns out that the image of "rails" is appropriate. Rails are what trains run on. They're big, elaborate, fairly expensive things that were developed a long time ago, and have been somewhat modernized. They constitute a system that is completely separate from and incompatible with the larger and more recent system of roads used for trucks and cars.
Even though railroads started decades before the modern road system, they are a valuable part of today's transportation system. They handle certain kinds of transportation far more efficiently than road-based trucks could.
Same thing with financial-system "rails." They are robust, reliable and cost-effective for the kinds of "cargo" they transport (financial transactions), and not about to be replaced any time soon.
Layers of competing technology
Fintech's technology of "rails" is not only separate from the "normal" way data moves around today, it's remarkably complicated. You may think it's pretty simple, just like I did. It's just adding and subtracting, and every once in a while you multiply to calculate interest; how bad can it be? Reality educated me; I was wrong, big time! And what's worse, there is more than one system of rails!
Let's take one rail system as an example: the ATM network, a.k.a. cash machines.
These are older than you might think. Here's what an early cash machine looked like in 1967:
It was just a railroad car; no network yet, and therefore no "rails." But a true networked version soon followed. It's not easy to find out the historic details, but it appears to have happened early in the 1970's:
The ATM network is just one set of rails. The credit card network has a rather different set, which is completely incompatible. Which is why, among other reasons, the choice of rails is important!
Conclusion
The "rails" used by financial transactions in fintech are deep, robust, incredibly complicated and separate down to the roots from most modern technology. The chance that a bunch of bright kids in a garage is going to come up with a bright idea and replace it next year is zero. And there's more than one rail system to use!
That's why one of the most important questions for payments in fintech is "whose rails are you using?" Even if you have no clue how those rails are built, and few people do, the answer is nonetheless important.
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