I’ve written a number of times about mCommerce and digital wallets. Now we have loads of companies offering services for electronic payment. These include the Apple Passbook, and many apps using NFC or other means to exchange money. The key thing that joins the hundreds of apps available is that they are legitimately tied to credit cards and banks. As such they provide audit trails and of course tie the world economy together as much as that is possible.
In the future I have postulated that actual paper money will decline and potentially phase out. I could see that happening in New Zealand faster than many other countries. We only have a small number of banks and clearing houses and as such were able to be the first country to mass adopt EFTPOS in the retail environment. Many people no longer carry cash.
However there is of course the grey market and one of the challenges there, is that people who do not want their money transactions audited. There is a global economy like this. People who are paid under the table for their work, people who deal in illegal activities such as drug sales, stolen goods and others. There are also people who just want to opt out of the system or at least flip it the bird. Cash of course can work around the system easily, there is money laundering and people will accept cash for most things as I experienced a few years ago when I watched a guy buying a used Ferrari with folding money he pulled out of his denim jacket pocket.
Much of this money circulates around the system but not through it and this is a challenge if hard cash currency ceased to exist. Or is it.
Yesterday I was on my way to a Microsoft Cloud presentation (which I will blog about on one of my blogs) either SoLoMo Consulting, or Imersia). I was a little early, so I sat in my car and read the latest awesome TNW Magazine on my iPad. Its a great magazine which I recommend you read if this blog is of interest to you, because it is the Money issue. There I learned about Bitcoin.
Bitcoin is “Bitcoin is an experimental new digital currency that enables instant payments to anyone, anywhere in the world. Bitcoin uses peer-to-peer technology to operate with no central authority: managing transactions and issuing money are carried out collectively by the network. Bitcoin is also the name of the open source software which enables the use of this currency.”
Effectively here is no bank, no fees, no audit trail. There are all sorts of businesses, even retailers, who will accept payment in Bitcoins just as businesses accept payment in other forms of money, such as Bartercard Dollars. The difference again of course is that Bartercard still connects to the banks, has an audit trail and the Governments continue to collect their taxes.
Ultimately my question is, will Governments allow this sort of “experimental currency” to continue? Can they stop it? It appears to already have a massive following. You can buy a coffee with it, you can play poker with it. There are sites where you can buy and sell Bitcoins such as Mt. Gox and there ar others too, although I noted that one of those has dissapeared and I noted a story there that Barclays had stopped allowing people to trade with them.
So what happens if the authorities stop Bitcoin? (assuming Google or someone else don’t buy them, but Bitcoin does seem to have an anti-establishment feel to it, but it could be all about the money). Well there is also Dwolla, LibertyReserve, and a host of other systems. I suspect that as cheap smartphones gain mass adoption in the blue collar world, there will be more interest and demand for ways to continue to do ‘cash deals’ without cash.
Futurists are talking about the Local-Global Duality with shifting borders and changing geopolitical landscapes. The one thing keeping us together as countries, or pulling us apart is money. Financial institutions and Governments are struggling to maintain a status quo that will keep countries running. As countries grow deeper in debt after the GFC people rush to take their money out of the banks for fear of losing it altogether, which in turn intensifies the crisis.
I’m not saying I agree with currencies like Bitcoin. I still want my roads and infrastructure, order and safety in my community. I believe that one way or another money from illegal activity still works its way back in, like the guy I watched buying a car for over $30,000 in folding. I do suspect however that we will see a proliferation in ‘currencies’ like this in the future. I also suspect that the criminal elements in our societies could be the ones with the most to gain from them, but also that there will be many scams which will be developed to trick people in giving up real money for virtual currency which they will never be able to repatriate. Silly really, when they can legally create computer games and sell virtual stuff and pay tax on legally earned activity with much less risk.