The Future of Money
The March issue of Wired Magazine carries an article titled: The Future of Money: It’s Flexible, Frictionless and (Almost) Free.
Illustration from Wired - Aegir Hallmundur; Benjamin Franklin: Corbis
"The banks and credit card companies have spent 50 years building a proprietary, locked-down system that handles roughly $2 trillion in credit card transactions and another $1.3 trillion in debit card transactions every year. Until recently, vendors had little choice but to participate in this system, even though — like a medieval toll road — it is long and bumpy and full of intermediaries eager to take their cut. Take the common swipe. When a retailer initiates a transaction, the store’s point-of-sale system provider — the company that leases out the industrial-gray card reader to the merchant for a monthly fee — registers the sale price and passes the information on to the store’s bank. The bank records its fee and passes on the purchase information to the credit card company. The credit card company then takes its share, authorizes all the previous fees, and sends the information to the buyer’s bank, which routes the remaining balance back to the store. All in all, it takes between 24 and 72 hours for the vendor to get any money, and along the way up to 3.5 percent of the sale has been siphoned away."
Paypal, which at the time of its founding was intended to introduce an alternative to money, has become a web interface with the world's banking system and the credit card companies, simplifying transactions, but still using the same currencies that are in our wallets and in our bank accounts today.
Third party applications that interface with Paypal like Twitpay, simplify that interface even more, allowing you to send money to someone's Paypal account by a simple tweet.
Jack Dorsey's Square is another one of the payment alternatives discussed in Wired. It is a physical plug-in to smart phones that allows users to accept credit card payments without having to have a merchant account.
Obopay, which runs on Nokia phones, is a mobile payment system that allows transfers from one mobile phone user to another. It interfaces with Mastercard, a few banks and some major mobile phone providers. Zong is another phone based mobile money transfer application, aiming to take a bite out of the credit card business, while GetGiving specializes in micro payments or small donations to charities.
Those systems, as described in the Wired article, all interface with banks and "real" money. They merely seek to find a way around the immobility and clunkiness of the service provided by banks and credit card companies.
For anyone advocating changes to the current monetary system, local currencies or an internet-based alternative to bank-issued money, the article may be a bit of a disappointment, because it is all about how to move money more efficiently and more cheaply than banks and credit card companies, rather than reforming the money system itself.
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