Some days ago I was reading about the Swedish approach to switch from coins and bills to a completely digitized currency. Electronic Cash cards (EC) and Credit Cards as well as paying via mobile phone should be applied as the standard operational procedure for payment. What were the reasons for this approach? The spokesperson was arguing that due to illicit money and robberies in Sweden cash should be replaced by a more secure solution. Illegal earnings and tax evasion could also be fought off by not allowing cash anymore. Of course, this approach is controversially discussed in Sweden but let us have a closer look at it…
That is a very interesting approach… . One of the stories I heard is that housewives got annoyed that their husbands went directly to a pub every payday and came home broke. That was the time personal bank accounts and bank transfers have been introduced. If that is true or not, I do not want to judge but it shows a certain development from cash to a virtual representation of money. Another story I came across while reading one of George Soros* books was that a small island’s currency was so devalued by inflation that no one wanted to use it anymore. So the inhabitants started to go back to the roots (literally) and trade goods with each other. The only problem was, that there was no indication how much a certain good was worth. So you could trade an egg for an apple and get 6 eggs for your apple from another guy. Even though that is a funny game people thought of something like a currency. But due to the fact that they lost trust in the currency, they opted beer to be their central unit. So everything was measured in bottles of beer. Being a German, I love this story.
Taking these stories as well as recent technological development into account, a complete digitization of money would be a consequent development. What can be the problems with introducing such a system?
1. People (especially elders) do not want to use it because they do not trust technologies
2. Traceability of each and every transaction. How are you supposed to buy your porn when your wife and Big Brother can see the transaction on your bank statement,
3. Security. Especially mobile phones would never be my choice to process payments. Computers have the advantage, that with a certain knowledge you can make them relatively secure. But how many people ever run a software update on their phone? Installed privacy plugins or even had an antivirus scan running?
Having said that, there should be some preconditions met before a system like that could be introduced.
1. Digital Payments have to available EVERYWHERE including the tip you give a guy working for the government, keeping public comfort rooms clean.
2. The security of EC cards and credit cards have to be maximized. That includes but is not limited to the systems used in supermarkets and said comfort rooms which facilitate the transaction. A chain can only be as strong as its weakest link. Signatures should not be sufficient enough (together with a card) to process the payment. A personal identification number with at least six digits chosen from an alphanumerical pool should become standard.
3. No charges for digital payment, nowhere.
4. Testrun in a region to gather best practice experience
5. Invoice and bank statement of account should be automatically send to your email address and maybe mobile phone (concerns discussed earlier) in order to increase overview and transparency for yourself.
6. Introducing a system similiar to prepaid SIM cards in order to enable an anonymous but at the same time secure method of transaction. These cards can then be bought with EC or credit card from ATMs. For the sake of the environmentalists out there, make them recycable!
7. Advocacy, advocacy, advocacy
Apart from the security concerns, I would love to see that happen. As technologist, I am always in favor of applying technologies – if it is appropriate. In this case it will still take a lot of time and advocacy to change a system we use for centuries.
*sorry George, I would really like to engage into a discussion on global finance and how this system works, has been introduced and it’s genuine links to the discussed topic but I feel the urge to spend my Sunday afternoon having a coffee and paying in cash… as long as it is still possible.