Emerging Markets: The Future of Money is Digital.

On the 11th of April, the Royal Canadian Mint announced plans to release MintChip. Still in the research and development phase, MintChip will ultimately let people pay each other directly using smartphones, USB sticks, computers, tablets and clouds. The digital currency will be anonymous and good for small transactions — just like cash, the Mint says. “There’s been a very huge growing digital economy that is really going to be fueled by smartphones and mobile being the next big thing,” Mint’s chief financial officer Marc Brûlé said. Despite the variety of payment options, he said there are “still no cost effective electronic solutions” for low value transactions that can be used regardless of a person’s age or credit standing. The idea extends on previous visions, such as Montran in conjunction with MMA, the Maldives Monetary Authority. In 2010 the World Bank and the Maldives Monetary Authority (MMA) commissioned payment systems provider Montran along with Fundamo to develop and implement a national, fully interoperable, mobile payment system in the Maldives. With a vision of removing the need for physical cash. Open systems and interoperability are key features of the architecture, enabling the delivery of not only competitive services to the consumer, but full inter-bank payment capability. This allows the platform to evolve as consumer demand and service requirement increases – critical in the Maldives. It would appear we are pushing closer to the reality that pioneers envisioned some 10 years ago in search of finding a distribution means with a deep enough penetration to convert physical cash issuance into digital money. Such a vision gave birth to entire ecosystems such as M-Pesa in Kenya, MTN Mobile Money, WING in Cambodia, Easypaisa in Pakistan, G-CASH in the Philippines and many more. But one common thread to date has been the emerging markets focus. With little financial services infrastructure, prominent security issues around cash based economies and a desire for a more inclusive financial system, emerging markets were seen a the 'Next Billion' as innovative ideas connected rural, remote and poorer markets into online payments and money networks. Resulting in the digital enablement of what many read in Portfolios of the Poor , which tells the story of How the World's Poor Live on $2 a Day, through many poor people have surprisingly sophisticated financial lives, saving and borrowing with an eye to the future and creating complex "financial portfolios" of formal and informal tools. With the announcement from the Royal Canadian Mint, we are seeing what many would have considered inevitable, the application of emerging markets thinking on low cost digital issuance of money, to developed economies. This announcement should be seen as a huge step forward in the evolution of money, as it shows a clear drive to strong monetary systems through the use of technology innovation. To use the words of Geoffrey Moore (Crossing the Chasm), emerging markets were the 'beachheads' for innovation in the evolution of money, as we shift from the early adopters(Visionaries) to the early majority(Pragmatists). I have long preached the idea that monetary authorities should shift from spending taxation dollars on the issuance of physical cash across to more digital oriented issuance. Thus creating a mainstream tipping point for the digitisation of currency around the world, and creating the motivational & regulatory factors that would eventually open up the closed loop approaches to many of the 'cash alternative' ecosystems around the world today. Such an approach would also enable a stronger regulatory approach to use of digital currency to more in alignment with the interests of the nation. I see no reason why networks like Octopus, EzLink and Oyster could be run as a national currency network, thus reversing the commercial protection approaches to the current ecosystems that lock out alternatives. The reality is the future of money is digital, we've known this for some time. But society hasn't been able to take the steps required to evolve the currencies of the world towards more digital friendly issuance without the innovative drive through those that commercial prosper from investing in such offerings. I see the announcement from the Canadian Mint as the first in a long line of monetary bodies that will make similar moves over the coming years. My tips are look to the developed but lower population nations like Sweden, New Zealand, Norway, and maybe Germany to make similar announcements very soon.

1 Comment

  1. Hi Scott,
    Great post, I too have been a proponent of digital currency and wanted to add that we here in Canada almost pulled it off back in 1997-98 with the introduction of the Mondex and VISAcash schemes. Trials and pilots were very successful, that said the chip architecture was the downfall as the big 5 banks balked at the cost of a 32 bit multos smartcard versus the 16 bit chips that were deployed in the pilots. The amount of fraud that would have been mitigated over the past 14 years from mag-stripe cards would have paid for the upgrade 100 fold. The conservative nature of Canada’s banks and the well funded lobby of mag stripe infrastructure sector and the nascent Interac cartel were blinded to the absolute failings to correctly assess the swiss cheese security of mag striped based transactions and they were also too cheap to address the situation and basically put the fraud costs as line item expenditures in the OPX going forward instead of halting fraud and moving to a smartchip based system

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