The Future of Money

Before I start, let me preface this post by saying that I have close to zero background in finance and economics. My background is in communication. The Future of Money is a pretty ambitious title for a blog post, as one could easily write an 86-page dissertation on the topic. Heck, they have an entire conference devoted to the topic. I guess my real post should be titled something like, The Future of Money in First-World Countries from a Technological & Transactional Standpoint, but that wouldn’t fit quite as well. At any rate, I find the topic extremely interesting and wanted to share my thoughts. I welcome any and all comments, especially from those with a background in finance or economics, so please leave them at the end of this post!

Your Phone is the Future

Plain & simple. I don’t know when (soon, though!), but that’s where things are going. Last week, Bloomberg released an article titled AT&T, Verizon to Target Visa, MasterCard With Smartphones. The article talked about plans to test a system which would allow for consumers to pay with “the contactless wave of a smartphone.” Imagine walking into a 7-Eleven to buy a late-night Slurpee® and chili cheese dog. You head up to the register, take out your smartphone, open your Visa app, swipe the phone in front of a scanner, and you’re off. Done. That simple.

Sound crazy? Why? The service is essentially being offered in Japan, Turkey, and the United Kingdom already. And in June, Citigroup released MasterCard PayPass stickers, which can be attached to the back of a mobile phone, to allow for swipe payments. Contactless payments already exist with credit & debit cards, so why not on a phone? Mobile payment is clearly the next logical step.

Said Gary Townsend, CEO of Hill-Townsend Capital LLC, “What is a cell phone, except for a mechanism for consumers to address their lives in whatever way they choose? There’s certainly no reason if an AT&T account can effectively be carried on a phone that a JPMorgan or a Wells Fargo card can’t be there, too. In fact, the antitrust issues would demand that be allowed.” According to Gary, it might be illegal not to have mobile payment not exist in this capacity.

Note: If you are interested in the further implications of this concept, take a look at the article I reference above. You can find much more on market dominance, transactional/interchange fees, and security.

The Future is Here if You’re Ready for it!

Applications and platforms such as Venmo (in interest of full disclosure, VM is an investor), PayPal, & Square already allow for mobile transactions. Not sure what these are? OK. Quick summaries:

Venmo is “an easy way to pay for things using your cellphone.” Venmo works with any cellphone that can send and receive text messages. (example use: I paid a coworker for lunch the other day by sending a text message, “Pay MarcusKRZ 12 for Indian Food.”)

PayPal allows users to send money through SMS or through a mobile application. Every payment is confirmed by a PIN or password, so there’s no need to worry if you lose your phone.

Square is a personal credit card reader that attaches to your mobile device. Square focuses on providing the best payment experience in the world.

These are just three of many, many platforms that focus on the mobile payment experience. The fact is that they exist already and are being adopted.

The End of Paper Money? Not Yet.

Before I get ahead of myself, let me state that I don’t think that paper money is dead… at least, not yet. The rate at which current mobile payment apps and platforms are being accepted is very low. Of course, once major, trusted financial entities get involved, expect the adoption rate to explode. But then, still, the smartphone user base is relatively small compared to the general population.

Paper money will be around for decades longer, but the end may be in sight.

A Final Thought

From industry consultant, Richard Crone, “A mobile device is online, real-time interactivity that changes the customer relationship. A card is dumb.” We live in a world that is more and more social, and more and more about customer service. Think about the ability of a phone to create long-lasting, interactive customer relationships as opposed to a simply piece of plastic. The phone is the next logical step in terms of transactional payment.

What do you think about the future of money, in this aspect? How soon do you think we’ll see mobile become a serious player in terms of merchant transactions? Do you currently use any of applications or platforms? What are your early thoughts?