Entering the new age of money

There’s a lot going on in the world of payments in Denmark, sparked in part by SEPA, but with other factors as well. Many people think only of Denmark in terms of its principal exports—such as bacon, Lego and sperm—but it means only one thing to me: Danmont, the first of the European smartcard-based e-purses to try and take on cash half a generation ago.

In a statement, PBS says Danmont has not been adopted by the Danes as a preferred way of making small payments… the debit card Dankort has taken over from Danmønt in areas where the e-purse was formerly used as a form of payment. The scheme will continue to operate until 31 December 2005.

[From Finextra: Danish e-purse Danmont to close]

Now everything is changing again, because the domestic debit scheme can no longer discriminate against “foreign” cards and there needs to be a new national payment strategy. This is why its such an interesting time there and why I was so delighted to be invited by the Copenhagen Finance IT Region, a “cluster organisation” with 13 partners including the Danish Bankers Association, to come and talk at their event looking at the future of money. I was invited along with Alberto Jiminez, the Mobile Payments Global Leader at IBM, and Roslyn Layton from KLEAN, a Danish consultancy. Alberto was talking about mobile, Roslyn was talking about the internet, and I was talking about mercantilism, Kublai Khan and Facebook Credits. Here we are in the Tivoli!

Alberto divided the world into developed (North America, Western Europe, South Korea, Japan, Australia and New Zealand) and developing payment markets, a simpler model than the “quadrants” that we use at Consult Hyperion. Anyway, he pointed out that in the developing countries where there are real opportunities only a handful (Kenya, Philippines, South Africa, Pakistan, Uganda) have reached scale, which he defined as being more than a million users. He explored the benefits of opening up mobile payment markets which, in the IBM model, fall into three categories: the revenue opportunities, cost savings and the “indirect” benefits. This last category—which includes social inclusion, government agendas, brand benefits and so on—I find really interesting, probably because it’s the least understood. He also mentioned government agendas, something that has come up in a few recent discussions that I’ve been involved in.

In her talk, Roslyn touched on one of my very favourite topics, which is the online games business and the growth of what she called “funny money”. But she was also taking about the permeable boundary between loyalty schemes and pseudo-currency. In particular, she drew attention to a Lufthansa “Miles & More’ scheme that lets you trade in your frequent flier miles for a cash management account (CMA) that can contain both securities and deposits. She also drew attention to the relative size of some markets: online games are a $15 billion business at the moment, sure, but premium SMS (as Tomi never tires of reminding me!) is a $23 billion business and online gambling is a $35 billion business. Great stuff. She finished up, though, by saying that we won’t go to an entirely virtual economy, because people ultimately want to keep their money in banks.

Well, up to a point. There’s a big difference between keeping money in the bank and keeping bank money, one of the points I tried to bring out it my discussion about the “ages of money” and the shifting implementation of the functions of money. I’ve included the slides below for anyone interested.

I think the main point that I was trying to get over was that while new technology means real change in payments, it also means real change in money itself. All in all, a really enjoyable event, where I learned a lot and had fun too. Many thanks to everyone involved.