Written by {Jane Adams]Dr Margrit Kennedy’s presentation on local currencies (see post below) was without a doubt the presentation that got people talking the most at the Digital Money Forum last week but as always all the speakers made noteworthy points. Here, in no particular order are some of the points raised that particularly struck me.
The first day focused on the technology of money with an emphasis on mobile and NFC. The event kicked off with Professor David Edgerton who aimed to provide some historical context for how we view technology. People overestimate the short term impact of technical change but underestimate the long term impact, he said. Hype about technical change is not the same as technical change. So we might think we know what is significant now but in reality we won’t be able to tell for some time yet. I wondered however whether this ignored the question of whether change always happens at the same rate – since 1990 for example the rate of change in the mobile telephone industry has been somewhat different to the rate of change in the biometrics industry. I think we can safely say right now that mobile telephony is significant – I’m less convinced about biometrics.
Someone during the first panel discussion pointed out that mobile banking and payments works well for operators because it reduces churn. In the Philippines for example, churn stands at around 506% for those mobile customers who link banking to their phone, compared to >30% for those that don’t. Reduced churn contributes as much to the operator’s bottom line as transaction fees.
Steffen Steinmeier from NXP predicted that by 2010, > 30% of phones would be NFC enabled. Nick Mirza of Nokia quoted a figure from Strategy Analytics that forecast that the figure would be 39%. However no-one was willing to predict firmly whether consumers would find NFC more attractive than Bluetooth.
One delegate also made the point that loading transport applications onto mobile phones might sound nice in principle but in practice transport operations such as TfL would be unlikely to allow transit operations to be loaded onto phones outside the point of manufacture, for security reasons.
On Day 2, Dr Kennedy introduced the regional currency the Chiemgauer and explained some of the theory behind it. One specific point was that it aimed to eliminate the destructive concept of interest, which she called the wrecking machine of our economies. She said that there were a number of misconceptions about interest in the current money system – that money could grow for ever with interest and compound interest, that we only pay interest when we borrow money, whereas in fact interest costs is built into the pricing of everything, and that everyone is treated equally in the system whereas interest creates polarisation in society.
Instead of earning or paying interest with the Chiemgauer, this currency degrades if it isn’t spent i.e. users pay a fee for hoarding rather than using it (that struck me as fine for someone who is earning but somewhat unfair on the non-economically active who have to live off savings). However as a result, a typical Chiemgauer circulates 21 times a year, compared to 7 times for a euro.
Dr Kennedy was followed by Gene Yoon of Second Life. Both speakers agreed that Second Life would provide an interesting environment to test out assumptions about interest bearing currencies versus non interest bearing currencies. At present in any case Second Life seems to have a quite active economy which has in particular taken off over the past year. There was US$25m worth of user to user economic activity during February 07.
The conference then moved onto the question of cash replacement, a topic which regularly features on this blog. There seemed to be general agreement that cash would remain in the economy, as a fallback and to sustain the black economy. Leo van Hove said that he expected a cash revival in Belgium, home to the reasonably successful Proton purse scheme. This system may well fold when the Belgian domestic debit scheme migrates to Maestro in January 2008.
