Money museum

[Dave Birch] Wallowing in nostalgia over coffee today — and spurred by Ian Grigg’s comment about innovation and Steve Klebe’s mention of Cybercoin — I was reminded that our good friends at Payments News pointed me to the VisaCash and Mondex testimonial web site, every page of which is laden with memories for many of the Digital Money denizens.

In retrospect, it seems clear to me that one of the key problems with these “ahead of their time” cash-replacement products was, oddly, that they were produced by banks. This meant that they were driven down existing channels into the market, with the result that you could only use them in places that already had terminals (ie, already took other cards). So in places where cash was inconvenient (eg, car parking) you couldn’t use them but in places where cash worked fine (eg, supermarkets) you wouldn’t use them. In some countries, where a special effort was made to drive adoption in unattended locations, the e-purses fared slightly better but something that was a bit like a debit card only less convenient was never going to take off. In the case of Mondex, for example, you had to have a bank account (ie, you already had a debit card) in order to get one: you couldn’t just walk into a bank with twenty quid and walk out with twenty quid on a Mondex card. Looking back, there were some technical limitations as well: balance reading, for example, was a pain because you need to use a keyfob or electronic wallet to find out how much you had left on the card. And the ATM implementation was plain crazy: you had to put your ATM card in, then put your Mondex card in (most people never did: they just drew out cash). All all the channels that we were excited about bringing Mondex to — mobile phones, interactive TV, the Internet — were never seriously considered by banks because their experience was with branches and retailers.

Yet prepaid cash-replacement cards are very successful now: one of my colleagues was given a British Airways pre-paid Visa card loaded with cash last night when we arrived at Changi and his luggage didn’t. Not a NETS card (the local e-purse) but a Visa card. Why? Because Visa is accepted in millions of terminals around the world. This leads on to the other critical problem. As has often been discussed, any realistic attempt to displace cash for low-value payments needs a considerably higher POS density than either Mondex or VisaCash or any other of these schemes were ever able to achieve. In other words, the take-up was limited on the acquire side, not the issue side. The cost of issuing cards is reasonable, the cost of the getting them accepted isn’t. In the long run we will see that the key disruptive technology in the e-cash space is the mobile phone, not the smart card as we thought a decade ago, because mobile phones will become individual POS terminals. SInce we will all be able to accept e-payments, I can see that acquire-side barrier will drop and the lower costs and greater convenience of e-payment will drive the market forward. That was then, this is now.

These opinions are my own (I think) and presented solely in my capacity as an interested member of the general public [posted with ecto]