Invisible Money
“The transformation of money is real and will affect commerce at every level.”
When people think of money, it’s not usually the kind you can hold. Money no longer comes in its familiar costume of paper and metals. Rather, money comes in the form of digital numbers in virtual bank accounts or financial data saved in third party platforms.
Now, digital currencies and trading services allow people to define the value of money, what it does and where it goes. The traditional gatekeepers of financial transactions are being bypassed. Just when banks felt they were fighting back against disruptive digital plays, along comes one which goes to the heart of everything a bank does — money. People’s trust in banks and government institutions are being eroded. Digital currencies and trading services are taking advantage of this rocky situation to encourage users to try something more experimental. When Wikileaks suffered a financial blockade in 2012, they bypassed it by raising money through Bitcoin. What impact will these powerful virtual currencies have on retail? If Shopify’s latest announcement is any indication, the ripple effects will be huge. The popular e-commerce platform used by 75, 000 merchants recently announced support for Bitcoin, allowing these merchants to accept the virtual currency.
WHAT’S GOING ON?
If money or currency itself is defined by the exchange of goods or services, the digital value is the exchange of “real life value.” The barter economy is already alluring, as witnessed by the increasingly growing and mainstreaming popularity of events like Burning Man. People will happily exchange virtual currencies for air miles, loyalty rewards, and coupons. In recent years, thanks to new methods for exchange online — gaming and gamification, Facebook, in-app purchases — we’ve seen a rise in these virtual currencies, and we’re more open and willing to barter intangibles for convenience and access. In particular, we’ve seen data exchanged for digital content, something we tackled in our trends last year, and of course, peer-to-peer payments. Against this background, what does cash mean at all?
Bitcoin, launched in 2009, is probably the most well-known peer-to-peer payment service available today. However, this unfamiliar ground breeds some new anxieties: the fear that comes with data, illegal activity (hacking or black market trading in particular), and ponzi schemes, tainting some people’s opinion of the service, and, by extension, all digital currencies. The excitement and controversy over Bitcoin led to a U.S. Senate hearing in November 2013, legitimizing it as a financial service and making it’s value soar. This was already happening in Europe: in August 2013, Germany recognized Bitcoin as a “unit of account,” allowing the country to tax users or creators of the digital currency.
The acceptance is spreading rapidly: it is now possible to spend Bitcoins without exchanging them for traditional currency. This is happening at British pubs, including the Pembury Tavern in Hackney, London. In October 2013, Vancouver, Canada launched the world’s first Bitcoin ATM. The machine scans a user’s palm before letting them buy or sell bitcoins for cash. And then there are the Bitcoin superusers: the Wall Street Journal reported on a couple who travelled the world using Bitcoin alone!
But, of course, it isn’t just what (currencies) we pay, but how we pay. People are growing tired of carrying wallets and phones as the central hub for exchange. Thanks to the pioneering efforts of Paypal, Google Wallet, iGaranti, Square, and now Apple Pay, Apple’s ambitious new mobile payment initiative, mobile payments are more mainstream and younger consumers instinctively gravitate towards mobile. They’re significantly less likely to carry cash than their parents. The continuing evolution of these technologies and the resulting social behavior may render cash completely useless.
LOOKING AHEAD
Bitcoin will become more widely used, with companies proudly displaying a ‘We accept Bitcoin’ sign, so as to appear head of the curve, as companies did with Foursquare in 2011. In the long term, services like Bitcoin, could change financial exchange beyond recognition. The Economist speculates that even if Bitcoin crashes, it will leave a huge impact on the financial services sector, in the same way Napster did with the music industry.
This is a dent that cannot be ignored and the experimentation with value exchange is just beginning. In an effort to become a more ubiquitous and intuitive payment method for users, PayPal has created Beacon, “a new add-on hardware device for merchants that leverages bluetooth technology to enable consumers to pay at stores completely hands-free.”
On the heels of PayPay’s payment prowess, is Apple’s competing technology, iBeacon.
But, iBeacon’s advantage isn’t a technological one. What will help iBeacon succeed is Apple’s ability to package an existing technology into a platform that makes it easy and elegant to build upon and partner with. The combination of Apple Pay and iBeacons will create massive opportunity and impact payment and shopping experience as a whole.
For example, in November 2013, right before the infamous Black Friday shopping extravaganza in the United States, iBeacon rolled out in Macy’s department stores in San Francisco and New York City through Shopkick. The technology let’s Macy’s connect with shoppers, offering them information on deals and other shopping tips, as they enter the store. But, iBeacon is still in diapers as far as the tech community is concerned. It enables location based experiences, but on a much more granular level: you have to be standing in a precise check out location to actually check out. Besides geo-locative specificity, non-intrusive push notifications will also be crucial for a smooth experience.
Macy’s has already announced that both Macy’s and Bloomingdale’s stores will leverage iBeacon technology to support Apple Pay allowing customers to pay in store purchases using an iPhone 6, 6 Plus, or Apple Watch.
While not all companies can invent new forms of currency, there’s opportunity in people’s growing intrigue with the idea of not carrying a wallet or any physical money. Coin, a startup launched this year, is a connected device that can hold and behave like the cards you already carry: debit cards, credit cards, gift cards, loyalty cards and membership cards. Instead of carrying several cards you carry one Coin, with multiple accounts and financial information streamlined into one place.
SUGGESTIONS:
Services and brands that are personalized to people, that focus on building trust, and have a strong reputation, will far surpass any financial institution that is not user-centered. A convergence between Apple’s new fingerprint security and Bitcoin to form a new type of transaction could be very potent. While many users may not understand Bitcoin, what they do know is that new forms of exchange are on the horizon. What new currency or value exchange can your company exploit? Should you be using your loyalty point scheme? In what ways apart from cash exchange might it look of value? The key challenge will be understanding the mental model that people are presented with, for users have to understand what something this novel actual is and means for their lives.
With a subject as sensitive and private as money, the services that understand a user’s lifestyle, while helping people better understand how to manage their money, will be key. American Banker stated that banks “have an opportunity to become the stewards of their customers’ digital footprints, securing all their online account and identity data.” Could banks do more for us? The same article mentions that 39% of North Americans would trust their banks to be “infomediaries”. Can banks help us reach our goals — through both financial and perhaps non-money related means (other value exchanges or growth)? Banks could move beyond displaying the ever- increasingly abstract numbers for what we “have” to showing us our value’s potential and the pathway to reaching our financial aspirations.
This article was originally published in Turkish language in DigitalAge, Turkey Oct 2014 — By Rit Mishra, Design Director, Fjord Istanbul.