If consumers, designers and artists led the discussion about how we make payments in the future, they would likely come out with a vastly different system than the one technologists are creating today.
This will be especially important as we move towards a cashless society, said Dave Birch, director at Consult Hyperion, speaking during a TEDx event in Woking, England on Jan. 23. And society is almost there with advanced mobile payment systems such as Apple Pay entering the market and popularizing the idea, he said.
A cashless society could bring a lot of benefits for consumers and merchants. For instance, a consumer has to exchange bank notes (dollars to pounds) to pay at local stores when traveling, but if payments were digital, shopkeepers would never have to handle foreign bills. Every form of currency would just be a different button on their screen. The barriers to innovation fall away, Birch said.
While cash usage at the point of sale is declining steadily, cash in circulation in many countries continues to rise, especially large bank notes such as 50-pound notes in the U.K. and hundred-dollar bills in the U.S., said Birch. Although I haven't seen one around, he said.
Birch said the industry has a clear idea of where these bank notes are being used because of Italy's move to count drugs and prostitution in its GDP numbers last year. The U.K. soon followed suit.
These large-denomination notes aren't being used for their original intended purpose, Birch said, but instead are used to support the illegal economy.
Cash is actually an expensive tool for payments because it's more difficult to store and transport, plus for the working class that uses cash, check-cashing fees and ATM fees add to the cost. In the European Union, the total cost of cash is 1% or more of the GDP, Birch said. That cost is paid by people in the middle to lower socioeconomic groups, he said.
All of you are paying for cash...subsidizing criminals use of cash, Birch said.
What really needs to happen, he said, is for consumers to get into the discussion and tell technologists what they want their money to look like.
While Birch has spoken favorably about blockchain technology, the distributed public ledger system used for Bitcoin transactions, he says an electronic semi-anonymous money isn't something that consumers want.
If you let technologists build money you get a giant, electronic Somalia...where the rich aren't accountable anymore, said Birch, referencing Bitcoin.
Every year, Consult Hyperion hosts The Future of Money Design Awards, in which artists compete to build the most hopeful (or woeful) visions of an alternative digital payment system.
One year, one of the contestants created the Light Coin/Dark Coin concept which allowed for both a public blockchain where transactions were free and an anonymous system that came with a 20% automatic tax surcharge.
This type of system would give society the money back it deserves from the black economy, Birch said.
Cryptocurrency projects have been popular over the past couple years with the rise of Bitcoin. There are thousands of alternative cyrptocurrencies, called altcoins. Some are merely clones of Bitcoin's protocol with a few minor tweaks and others loop in innovative ideas for the mining process, such as protein folding, to authenticate payments.