Bitcoin in Africa? Not yet.

I was going to write about how bitcoin could help to improve economies in Africa through its efficient and low-cost secure method of transferring money. But after doing a fair amount of research, and realising that many of the companies mentioned in the press over the past year as being the “hope” of the future have since closed down, I’ve changed my mind. Instead, I’m going to write about how hard it is for a bitcoin-based company to do business in Africa. It’s not impossible – there are some success stories. But the advantages of bitcoin at this stage are not as obvious as they might seem. The theory is excellent. But the reality is complicated.

bitcoin in africa

Photograph by Robin Hammond for National Geographic

First, let’s talk about the promise. According to the World Bank, 66% of adults in Africa do not have a bank account. They deal in cash and in barter, with considerable lack of efficiency and security, and scant possibility of escaping that hand-to-mouth cycle. With bitcoin, they could effectively have a decentralized bank account and manage their finances more carefully, with control over what comes in and what goes out. Families could start to save and even lend. Payments would become easier and cheaper, leading to significant savings in both time and money. Current mobile money payment systems are efficient, but have a high fee structure. Bitcoin’s decentralization and security could economically empower those that are traditionally at the margin of the economy.

The ease and low cost of sending bitcoin anywhere around the world makes it the potential saviour of remittance services. Approximately $53bn was sent to the region in 2015 by workers abroad, with fees averaging 12.4%. Remittances cost more in Africa than in other areas – the world average is 7.8%. There are five remittance “corridors” (flows between two countries) in the world with fees over 20%, all of them in Africa. Using bitcoin, the fees would come down drastically, with the savings going directly to the beneficiaries.

The potential is huge. But the reality is very different.

Bitcoin has limited end uses in Africa. Very few merchants accept it as payment, and it can’t yet be used to pay for utilities or public services. That will change, but slowly. Bankymoon, a South Africa-based blockchain financial services company, has developed smart electricity meters that can be topped up from anywhere with bitcoin.

To be able to buy bitcoins on an exchange, you need access to a computer or a smartphone. Relatively few Africans have that. It is true that the majority of the adult population has a mobile device, but only 15% have a smartphone. According to the International Telecommunication Union, only 37% of adult Kenyans had access to Internet in 2014. In Ethiopia, the figure is 2%. So, buying bitcoin is possible but not simple, and the number of exchanges that can trade local African currencies for bitcoin is limited. Most require an initial conversion to dollars or euros, which significantly increases the transaction costs.

So, buying bitcoins is not simple, and even if you receive bitcoins as a remittance from a family member or friend working abroad, changing it into local currency on an exchange is difficult. Those without a bank account would need to find an agent willing to exchange bitcoins for cash. They do exist, but their scarcity and the technology access required allow them to charge very high fees for the service.

And bitcoin as a remittance rail has competition. Innovative international payment methods are eroding the incumbents’ market share by offering much lower fees. In Kenya, for example, WorldRemit, Equity Direct, and even new e-cash services offered by incumbents Moneygram and Western Union can transfer money for less than 5%. Of course, the low fee structure depends on electronic transactions. Once cash is involved, the fees shoot up.

And regulation, or the lack of, is an important structural problem. Although Nigeria’s Central Bank hascalled for bitcoin regulation, no country has it in place or is even, as far as we know, working on it. Kenya’s Central Bank issued a warning in December against Bitcoin use, citing its unregulated status. Unregulated does not mean illegal, but it does create obstacles for bitcoin exchanges, wallets and payment systems.

Regional differences and market size are also a complicating factor. Kenya alone, for instance, is not a big enough market to attract the funding needed to reach profitable scale. According to IMF estimates,its GDP is roughly equivalent to Bulgaria’s, and significantly less than Luxembourg’s. Each country has its own currency and phone system, so compatibility issues are barrier to rapid continent-wide expansion.

On top of the “typical” problems that startups have to face, new businesses in Africa also have to contend with relatively poor connectivity, recruiting difficulties and electricity outages. Africa has always been a very entrepreneurial continent, but at the micro level. The cultural and logistical difficulties of setting up cross-border businesses; recruiting, training and retaining a qualified team; the general lack of political and economic stability; high interest rates; limited access to funding… These and many other factors make the launch of scalable, profitable enterprises even more challenging.

In May of last year, Disrupt Africa ran a story on “5 African Bitcoin Startups to Watch”. Of the five, one shut down, one pivoted away from bitcoin, and one has had a major payment ramp blocked. Further digging uncovers several others that have closed down, and the bitcoin sector is littered with tombstones of good ideas that came to market a bit before their time.

And yet, bitcoin’s time in Africa will come, and its effect on the continent’s economy will be significant. Some remarkable businesses are struggling hard to make this happen. The use cases are much clearer there than in Europe or the US, where credit cards are ubiquitous and mobile payments are easy. The impact it can have on people’s lives is much greater. With persistence and brave first-movers, with rationally enthusiastic public comment and constant dialogue, regulators will see the economic advantages of further encouraging financial innovation. Tech hubs are springing up all over the continent, creative entrepreneurs are attracting international interest, and a lot more than transaction fees is at stake.

(This post also appears in fintechblue.com, where I write about bitcoin and fintech.)

Sunday Seven: payments, pops and lols

I’ve been out for part of the week, speaking at a Digital Media Congress in the north of Spain on new media business models, so this round-up is a bit choppier than usual.

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Are payments necessary? – by Christoffer O. Hernæs, via TechCrunch

One of the purposes of the aforementioned conference was to explore ways that media can become and stay profitable, which is more and more difficult in this age of dwindling print revenues, resented paywalls and online ad blockers. Could invisible payments be part of the answer?

“In the future, there will not be one universal way to pay as we are used to with traditional cash and plastic cards. Payment options will be context-based, and in many cases payments will become “invisible” and integrated into services.”

Uber, Amazon’s Dash buttons, restaurant apps – platforms in which you don’t even have to pull out a credit card are carving out an ever-larger niche, in which payment becomes synonymous with experience and the concept of value changes. How can we incorporate this into media?

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How ‘LOL’ Became a Punctuation Mark – by Megan Garber, for The Atlantic

An excellent article on the mutability of language and need for humanizing punctuation. Seriously, read it. It’ll make you laugh, nod sagely, possibly weep and definitely think twice about the abbreviations we think convey emotion we’re not really feeling.

lol nothing matters

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Startup funding is drying up and fintech is no exception – by Ian Kar, for Quartz

More popping of bubble stuff.

via Quartz

via Quartz

And it seems like fintech is the next sector the media is gunning for.

“Meanwhile, traditional financial institutions say they can best startups by digitizing their own businesses. “I think the banks are pretty good at using digital technology to make it easier for customers…It will be a challenge for anyone to be better, faster, cheaper than us,” JPMorgan Chase CEO Jamie Dimon said in a recent interview with Bloomberg.”

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The Thing About Cycles – by Michael Eisenberg, via TechCrunch

An anti-anti-bubble piece. Bubbles are opportunities, especially when they pop.

“Just like Unicornism was a herd, and the up market in late-stage funding was a herd, as pessimism grabs hold, it too will become a herd.”

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(I featured this in my bitcoin roundup this week, but it’s also applicable to tech in general.)

My Wet and Wild Bitcoin Weekend On Richard Branson’s Island Refuge – by Hannes Grassegger, for Motherboard

via Motherboard

via Motherboard

Envious?? No, of course not.

Apart from descriptions of the amazing sunsets and drunk lemurs, the article does raise some interesting ideas:

“Poverty, according to the theory that brought [Hernando] de Soto international fame, is not exploitation, but exclusion. In other words, people are unable to participate in capitalism because they have nothing to bargain with. Slum residents, for example, build huts but cannot own them, as there is no place and no law that will register them. If they had some kind of official paper, a certified claim to the property, a title, the hut would be worth something. They could sell it, or take on debt to start a business. To raise people out of poverty, therefore, their valuables must somehow be linked to them as individuals. They must have property rights.”

Enter, you guessed it, the blockchain.

“The blockchain would, in essence, allow capitalism to more fully move into the realm of the internet. This has always failed in the past, because in digital environments, everything is so easy to copy. Therefore nothing is scarce, which is why digital content, like music, images, and text, is almost always free, or extremely protected. The blockchain’s comprehensive ability to allocate each piece of code within its system could completely eliminate the possibility of copying a song, for example, because who has which digital copy when would be traceable. A digital magazine based on the blockchain system would have unique copies, just like a printed magazine. It could be bought and sold like a physical object.”

An insight into the power that is either all-in or poking around the bitcoin space, this article leaves you with the feeling that the sector is disorganized, creative and the harbinger of a new world order. Perfect fodder for an elite meeting on a tropical island.

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Reimagining Money – by Douglas Rushkoff, for The Atlantic

I am a fan of the concept of bitcoin (and write about it here), but love that this article shows some other currency possibilities and how their value goes beyond that of simple exchange.

“In important ways, Bitcoin transposes some of the shortcomings of traditional currency onto the digital realm. It ignores a whole host of questions about the potential to reimagine what money can be designed to emphasize: What sorts of money will encourage admirable human behavior? What sorts of money systems will encourage trust, reenergize local commerce, favor peer-to-peer value exchange, and transcend the growth requirement?”

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Reparations, One Meal at a Time

Have you seen this? If not, take a look, it’s an excellent send-up of the startup pitch: Equipay  – Comedy Hack Day SF 2016 Grand Prize Winner

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Stuff I really enjoyed this week:

Aimlessly wandering around the breathtaking beauty of northern Spain. Stunning. Nice people. Good food. Great hotel (Real Posada de Liena, in Murillo de Gállegos). Really lovely.

murillo de gallego

Sunday Seven: feelings, gifs and bitcoin

Some articles and ideas found over the past week that I either enjoyed or that moved me:

The Tinderization of feeling – by Alicia Eler and Eve Peyser, for The New Inquiry

“Living with a sense of overwhelming choice means exerting an insane amount of emotional energy in making the most banal decisions. What should you watch on Hulu tonight? Make a Facebook status asking for recommendations. Tweet the question to your followers. After perusing for an hour, settle comfortably into Seinfeld, which you’ve seen a million times before. Wonder whether you made the wrong choice. Do it again anyway. There is some comfort in sameness.”

In an article packed with bracingly familiar observations that surprise you and at the same time make you think “Oh. Right.”, warning flares go off about superficiality vs. insight, freedom vs. investment.

“Dating apps facilitate rapid connection and constant communication, but trusting someone still takes as long as it ever did. So Tinder demands a certain amount of emotional dissociation — to distance oneself from emotions by treating connecting to others as a game. The only criteria is to choose and choose fast, choose as many as you want, choose so many you’re not even making a choice. This simplicity can provide sweet relief.”

Tinder is more than a dating app, claim the authors. It is turning us into binary creatures that trivialize choice and make all decisions on a left-swipe/right-swipe basis. Complex decisions become easy, shorn of emotional involvement. And easy decisions become complex, in the search for something better.

“Tinderizing can surpass romantic relationships, and if you get sucked in, you can find yourself living in a yes/no, chill/ignore, 0110101011 existence. You’ll find yourself stuck on Amazon or Yelp for hours, looking for the perfect dustbuster or the best Japanese restaurant in your area, unwilling to choose because there could be a better option ahead in the information stream.”

A brilliant wake-up call to the sobering consequences of delightful convenience and the fast-paced appification of our social and commercial lives, the article offers a suggestions for a potential remedy: share the experience, invest emotionally in the binary decision, and keep it all in perspective.

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The digital materiality of gifs – by Sha

A fascinating romp through the history and future of .gifs – love them or hate them, they are increasingly a part of our media language, so you might as well learn something about where they are and where they’re going. There’s some weird stuff going on in the “meme economy”.

gifs

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A Bitcoin Believer’s Crisis of Faith – by Nathaniel Popper, for The New York Times

Has Bitcoin failed? Mike Hearn thinks so. In a long, somewhat bitter and worrying piece, he announces his resignation from Bitcoin activity.

Here you have Nathaniel Popper’s gripping summary of Mike’s decision and the tension that led to it.

“The current dispute… is a reminder that the Bitcoin software — like all computer code — is an evolving product of the human mind, and its deployment is vulnerable to human frailties and divergent ideals.”

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How SnapChat is targeting the over-35 crowd – by Paresh Dave, for the LA Times

snapchat billboard

“Almost everyone I talk to, it’s their niece that shows them Snapchat.”

Yup, it was my niece that showed me SnapChat. And yup, I find it fascinating. I’m still trying to figure out how it works, but the immediacy of it grabs you. And the fact that you only get to see the message, image or video once makes it so much more like a conversation. It also, strangely, easier – no need to carefully craft anything at all, because it’s there for a fleeting moment and then it’s gone. Much more “genuine”. And I totally understand how it would lower inhibitions and raise expectations.

Sure, there’s the seamy side. But it’s so much easier to “connect” than on Facebook or even Whatsapp. And there’s charm: National Geographic videos, Sweet, The Food Network…

Even the Wall Street Journal (not so charming, but you know what I mean.)

“Business reasons also are fueling other types of interest in Snapchat. New York magazine reported that Wall Street bankers like Snapchat’s self-destructing chat feature. University admissions officers have used it as a recruiting tool. Marketers, of course, are trying it.”

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How to use search like a pro – via The Guardian

One of the most useful tip sheets I’ve read in ages, I didn’t know some of this stuff.

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Some weird cool stuff from CES 2016

… which will no doubt soon be must-haves.

An alarm clock that wakes you up, not with beeps and trills, but with the smell of brewed coffee or freshly baked croissants.

sensorwake

An app and coffee machine that reproduces any photo on the surface of your latte.

photo on latte

Video games for dogs.

cleverpet

And a whole lot more. There’s a lot of ingenuity going on out there. Whether there’s a business case to back it up, that’s a different story.

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A sad week

My favourite… eulogies is not the right word… for two greats who passed away this week:

Thank you Mr. Bowie – full of heart-warming anecdotes that make you feel grateful to have been witness to a little piece of the impact he had

My favourite Alan Rickman role – totally agree, Colonel Brandon in Sense and Sensibility is my favourite of his performances, too.

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Smoke and bottles – via Bored Panda

smoked bottles 3

smoked bottles 2

Wow. Artist Jim Dingilian fills empty glass bottles with black smoke, and then using brushes and small tools attached to dowels, erases the smoke to leave haunting and misty images.

“When found by the sides of roads or in the weeds near the edges of parking lots, empty liquor bottles are artifacts of consumption, delight, or dread. As art objects, they become hourglasses of sorts, their drained interiors now inhabited by dim memories.” Beautiful.

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Two things I enjoyed this week:

  • The web app Coffitivity – it provides the stimulating (geddit?) background buzz of a coffeeshop. Ideal for when you’re feeling really tired and about to doze off but you have to finish an article. You can even choose between morning coffee shop, lunchtime murmur, and university adrenalin. Soothing and addictive. A bit like coffee, really.

coffitivity

  • The podcast Note to Self – about the “human” side of the internet. Manoush Zomorodi provides interesting anecdotes and insight into how being always connected affects our lives, our choices, our habits. This week I listened to her painful elimination of the game Two Dots from her phone. And the exhilaration of keeping it off. Been there, done that.

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Have a great, sunny (even if only metaphorically) weekend!

Sunday Seven: artificial intelligence, 3d printing, railroads and glitter

Some cool stuff from this week, plus a new feature in which I share with you one thing I’ve been enjoying this week (keeping it down to one will be very, very difficult, but in the interest of brevity I will do my best).

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The doomsday invention – from The New Yorker

A riveting portrait of transhumanist philosopher Nick Bostrom and his views on the future of our species. Transhumanists believe that technology can augment our capabilities and transform the human condition. Bostrom subscribes to that belief, but he’s not like most transhumanists. His studies go further. From his Future of Humanity Institute at Oxford University, Bostrom studies the potential impact of technology – especially artificial intelligence – on the probability of mankind’s survival.

His work on “The Doomsday Argument” shows that the risk that humankind will go extinct soon has been systematically underestimated. It’s unlikely now that we will be wiped out by a volcano explosion or a comet crashing – since we’ve gone millions of years without that happening, it’s safe to assume that we can go a few more million. But, since we have very little experience of technology not wiping us out, we can’t assume that that won’t happen. So, we need to work extra hard to protect ourselves from that eventuality. Even if the technology that could wipe us out hasn’t been invented yet, we need to prepare for it.

“The view of the future from Bostrom’s office can be divided into three grand panoramas. In one, humanity experiences an evolutionary leap—either assisted by technology or by merging into it and becoming software—to achieve a sublime condition that Bostrom calls “posthumanity.” Death is overcome, mental experience expands beyond recognition, and our descendants colonize the universe. In another panorama, humanity becomes extinct or experiences a disaster so great that it is unable to recover. Between these extremes, Bostrom envisions scenarios that resemble the status quo—people living as they do now, forever mired in the “human era.””

This is pretty scary stuff. But we can’t turn our backs on progress. And the benefits of approaching the Singularity, when artificial intelligence becomes self-improving and no longer needs humans, are incalculable. Bostrom believes that we need to develop artificial intelligence, but we need to be very careful. The headlong rush of industry into this potentially very profitable field could bring on the end of humanity unless we take into account its ethical design. We can’t prevent it, but we do need to control it.

“Even the most grounded version of the debate occupies philosophical terrain where little is clear. But, Bostrom argues, if artificial intelligence can be achieved it would be an event of unparalleled consequence—perhaps even a rupture in the fabric of history. A bit of long-range forethought might be a moral obligation to our own species.”

This article is a bit heavy on the philosophical terms, and I confess that some of the reasoning is a bit over my head, but it does drive home the importance of the questions: Are we capable of inventing something that will bring about our own destruction? How do we handle that possibility?

With brilliant people working on this, I at least will sleep a bit better. Bostrom’s institute recently received $1.5 million from Elon Musk, to craft social policies that take some of the futuristic scenarios into account. It’s not easy, though. As Bostrom himself says:

“What I want to avoid is to think from our parochial 2015 view—from my own limited life experience, my own limited brain—and super-confidentially postulate what is the best form for civilization a billion years from now, when you could have brains the size of planets and billion-year life spans. It seems unlikely that we will figure out some detailed blueprint for utopia.”

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Images from the 2016 Sony World Photography Awards – via The Atlantic

You have got to see these photographs. It’s a beautiful, crazy world we live in.

by Julian Ghahreman-Rad

by Julian Ghahreman-Rad

by Manfred Voss

by Manfred Voss

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3d printers give us a new way to think – via Wired

This is mind-blowing in more ways than one. The story opens with an account of how a brain surgeon preps for complicated surgeries by 3d-printing a model of the brain, tumour and all, which he then holds in his hand, studies from all angles, and develops a “feel” for the problem.

Which opens up the possibility of using 3d-printing not just as a making machine, but also as a thinking machine. A way to help us think about problems and to see them from different perspectives.

This reminds me of how we saw mobile phones when they first came out. I don’t know of anyone who expected them to morph into lifestyle management devices. The point is, that we often can’t see what a technology will be used for, until it’s out in the field and people are actually using it and coming up with new purposes.

“What’s more, we need our intellectual culture to evolve. Right now, we don’t value or teach spatial reasoning enough; “literacy” generally only means writing and reading.”

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3d interactive display – via PSFK

And speaking of minds being blown, take a look at this:

image via psfk.com

image via psfk.com

I’ve written about haptics before. This takes the concept to a whole new level. Interactive 3d graphics, without glasses. Really. Virtual, formable displays that feel squishable. Yes, mind-blowing.

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How railroad history shaped internet history – from The Atlantic

Ingrid Burrington gives us a beautiful stroll through networking history and shows us that history matters (not that we doubted that) and that offline sets the tone for online (maybe we doubted that, but we shouldn’t).

“My favorite part of looking for network infrastructure in America is really all the ghosts. Networks tend to follow networks, and telecommunications and transportation networks tend to end up piled on top of each other. The histories of these places isn’t always immediately obvious, but it’s there, forming a kind of infrastructural palimpsest, with new technologies to annihilate space and time inheriting the idealized promise and the political messiness of their predecessors.”

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Bitcoin and neuroscience – from Motherboard

This is a very strange article, about how we can use neuroscience to determine the Bitcoin price movement. The digital currency’s surges and slumps have been the subject of much speculation in the press recently, with doomsayers and evangelists vying for the spotlight. And the relative scarcity of information leaves the market moves more vulnerable to the striatum region of the brain. I did mention it was a strange article, right?

“The key word here is expectation—positive or negative information can have paradoxical effects in the brain, based on the person. If something ostensibly bad happens in Bitcoin—the bottom falls out of the price, for example—then someone’s brain may actually respond as if that were a positive thing. What goes down must come up, and all that. It doesn’t make much sense, but then again, neither neither do people or their brains.”

Personally, I think that Bitcoin’s price movements have to do with the relative number of buyers and sellers. Call me “old school”, if you will.

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The most inspirational holiday gift guide ever, really – from Quartz

Have you started your holiday gift shopping yet? I’m still searching for ideas, so I do click on the “gift guide” links and I do skim the lists. And then I marvel at how “unique” my family is, that none of the recommended gifts would be even remotely appropriate for them.

This selection from Quartz, however, is different. It’s inspirational, uplifting, and quite lovely. 40 leaders in art, business, fashion, science and social justice were asked “What is the best gift you have ever received?”. The article summarizes their answers, which flow between the eye-opening, the moving, the surprising and the profound.

“The best gifts are like those roman candles, giving light and wonder to our lives.” – Chad Dickerson, CEO of Etsy

In the end, the most powerful gifts we can give are education, understanding and some of our time and attention. Check out Astro Teller’s entry, it’ll give you the warm fuzzies. I also loved René Redzepi’s (“Something that changes the course of your life”), and Whitney Wolfe (“It was a total detach kit”).

My biggest take-away from the report is that we are all so different, and it’s so hard to know what will impact and float to the top and stay there. And that’s beautiful.

“I like a gift that helps me to become someone I’d like to be.” – Akhil Sharma, author

Even if you don’t want to read this for the inspiration, the graphics are creative and lift the whole concept to a new artistic level.

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Glitter beards – via Bored Panda

If you’re an avid Instagram user, you’ve probably already seen this trend. Men are covering their beards in glitter for the holiday season. Very festive. Just don’t try and kiss me.

image via Bored Panda

image via Bored Panda

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One thing I’m enjoying this week:

Jennifer Jones, the new series on Netflix. Unlike anything I’ve ever seen. The opening title set is stunning, the photography mesmerizing, the plot unusual, the characters intriguing. So far every episode has a good dose of “whoa”.

jessica jones

This review on Quartz (spoilers included) is deep, and goes a long way towards explaining the storyline’s pull.

Sunday Seven: bitcoin, college and art

Been travelling! A lovely few days in Copenhagen with my daughter, with oodles of walking, talking, walking, talking and eating the most divine open-faced sandwiches I’ve had in my life. Oh, and Christmas ale. I could go on for a while about Christmas ale, but I’ll spare you.

So, instead of the Friday Five, we have today the Sunday Seven.

And I’m opening with an article that wasn’t from the past week, but that I have just come across and has one of the best quotes about the fintech sector that I’ve seen:

Bitcoin Bucket Shop Kicks Bucket – by Matt Levine, for Bloomberg

“Tech is an industry of moving fast and breaking things. Finance is an industry of moving fast, breaking things, being mired in years of litigation, paying 10-digit fines, and ruefully promising to move slower and break fewer things in the future.”

A really amusing and sharp article about the craziness of innovation and the importance of Doing Things Right.

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Running a Business without a Bank – via The Atlantic

The Atlantic features a World Bank-sponsored photo competition launched to highlight the struggles of businesses in emerging economies that have to manage without secure banking. The stories are moving and the photos are stunning. Take a look.

by Lê Minh Quốc via The Atlantic

by Lê Minh Quốc via The Atlantic

by Loc Mai via The Atlantic

by Loc Mai via The Atlantic

by Tran Van Tuy via The Atlantic

by Tran Van Tuy via The Atlantic

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Liquid Bitcoin – by Jon Evans, for TechCrunch

A great summary of the main issues buffeting the Bitcoin world right now (about which I write at fintechblue.com). Jon Evans describes the block size debate, sidechains and smart contracts in his usual straightforward, easy-to-understand and witty prose.

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Equal vs. Equivalency – by Brett Berry, via Medium

This is beyond geeky, but blew my mathematical mind. 5 x 3 is not the same as 5 + 5 + 5. No. And equivalent does not mean equal. I didn’t know any of this, and I studied maths at a good university (perhaps I didn’t pay as much attention as I should have…). Part of me is screaming “So???”. But then I remember that the heightened requirement for attention to detail is one of the many things I love about programming, and I realise that maybe kids should be taught this exaggerated level of specificity.

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Rethinking college: Innovative reform, not disruption, is needed – by Stuart Butler for The Brookings Institute

I’ve read a lot of “let’s innovate college education” articles over the past few months, so many that even ever-so-patient I have started worrying about the ratio of words to action. Which may be why I found this article from the Brookings Institution hopeful, albeit short. It suggests reforms (not perhaps the radical innovation the headline suggests, but close) that sound do-able without too much legislative hand-wringing and status-quo defending.

1) Some college level courses taught during high school…

2) More use of online material…

3) Degrees based on performance rather than “seat time.” Certifying progress on successfully completing course work and examinations, rather than in-class credit hours, means students can take courses in non-college settings…

4) New ventures assembling customized, low-cost course packages…

Surely it’s time to stop writing about how little relevance college degrees have in tomorrow’s workforce, and how hard it is to recover the cost/pay down the student debt with the ever-lower wages college degrees now bring? Or rather, time to spend less time writing and more time talking to universities, local governments, businesses that do the hiring, etc.? Not to mention the time we should spend talking to students, the ones who will use and benefit from the reforms and technological changes?

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The Story of One Girl – by Sophia Bush, via Medium

A lovely article about a cause that matters, even more than the article hints at. Get more women access to education, and you are a huge step forward on the path to eradicating poverty.

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Technology fears – from The Brookings Institute

This is anecdotal but interesting, and appropriate for this Halloween weekend: our biggest technology-related fears, from The Brookings Institute.

via The Brookings Institute

via The Brookings Institute

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Gaming platform Twitch gets Creative

The live-streaming gaming platform Twitch has launched its Creative channel, where you can now watch paint dry. Actually, you watch artists paint, glass blowers blow, designers design… And, it’s fascinating, in a totally hypnotic sort of way. Don’t try it unless you have some serious time to kill, but if you are feeling low on inspiration, it’ll definitely get your juices and ambition flowing again. Some artists even have more followers on Twitch than certain games. Inexplicably appealing.

landscape artist Bob Ross on Twitch

landscape artist Bob Ross on Twitch

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My favourite hangover cure, if you celebrated Halloween last night: sushi for breakfast. Just sayin’.

How Bitcoin Will Change the World… Bit by Bit

For the first time in our history, we can send money around the world in a secure manner, with virtually no transaction fees. That in itself is huge, but is only one of the many facets of Bitcoin that has the potential to change the world as we know it. From the underlying technology to the potential uses, we are at the beginning of the deepest societal shift since the roll-out of the Internet. The way we do business, the way we pay for things, even the way we exchange ideas and create… This is a shift that will over the next decade or so change the lives of everyone, from financial sectors to emerging economies, from musicians to farmers, from start-ups to big banks.

The Bitcoin technology is based on advanced cryptography – which means that transactions are virtually impregnable – and rapid information distribution – which means that the whole network knows what the rest of the network is doing, almost instantaneously. The network is run by all the participating “mining nodes”, which verify transactions and transmit updates to other nodes. Anyone with the right computer hardware can become a “mining node”, which means that Bitcoin is run by anyone who wants to participate. Which brings us to the first world-changing idea:

Decentralized money

The concept is mind-blowing. The money that we’re used to – euros, dollars, yen, whatever – is issued by a Central Bank and/or controlled by a government. We have absolutely no control over the value of the money that we use. The value of the cash in our pocket or the money in our bank account is decided by hundreds of factors including our local interest rates, the interest rates of other currencies, the economic growth expectations of our economy, and of other economies, and supposedly of the amount of money in supply. I say “supposedly”, because no-one actually knows what that is. Governments (or Central Banks) can print money when they want to, but once they’ve done that, that money then generates more money through bank lending (they take your deposit and lend part if it out, which then becomes another deposit, part of which is lent out, etc.). And as we saw with Greece, governments can decide to restrict your access to your money. They can, as with Argentina and more recently China, say that your money is worth a lot less today than it was yesterday. They can restrict how much you can take out of your country. There is nothing you can do about this. You don’t have nearly as much control over your money as you think you do.

Bitcoin is decentralized money. It is not controlled by any one group. No-one can decide to change the value, no-one can decide how many there are in circulation, no-one can decide whether it’s legal or not. The value of the bitcoins that you hold is purely decided by the market, which is virtually impossible to manipulate. True, not everyone is obliged to accept bitcoins, as with local currencies. But it is getting easier and easier to swap bitcoins for local currencies as and when you need them.

by Alessandro Desantis for Unsplash

by Alessandro Desantis for Unsplash

Remittances

That makes Bitcoin increasingly valuable as a way to transfer remittances, or payments foreign workers send home to their families. Remittances are estimated to be a $600bn market. But of that money that workers in the US, UK, Germany, etc. send home to their families in emerging economies, about $60bn gets taken out in fees. Imagine if more of that money could actually reach them. Think of what that extra amount could do. It could feed, clothe, educate, instead of ending up as financial profit for the money transfer institutions.

True, turning bitcoins into kwacha, dirhams, etc. is not always easy. But exchanges, both international and local, are spreading, regulation is evolving, and more and more local merchants understand that Bitcoin is a convenient way to accept payments. This situation will improve.

Independence

The potential of Bitcoin used for remittances has an even bigger impact when you consider that 64% of the adults in sub-Saharan Africa, 54% in South Asia, 49% of Europe, Central Asia, Latin America and the Caribbean do not have a bank account. Several countries have developed mobile banking networks that use phone minutes as a currency, bringing efficiency and a method of saving to those who previously relied exclusively on cash. Yet these networks are local, which limits their use, especially in times of increased migration. Mobile money users already have a phone, and are used to the concept of digital payments. Bitcoin will allow them to broaden their scope to include cross-border transfers, international purchases, downloads, access to educational content, and much more. More importantly, they will have exclusive control of their bitcoin balances.

With Bitcoin, you are your own bank.

Efficiency

And your own notary. Today, when you buy a house or a car or a share of a company, you have to wade through piles of paperwork, incurring costs and delays along the way. The paperwork is necessary to ensure that you are who you say you are, and that you’re buying from the rightful owner. Bitcoin, or rather, the underlying technology, condenses all that into a single piece of code. Not only transfers of money become almost instantaneous and cost-free. Transfers of ownership can also be done the same way.

Which brings us to a brief explanation of why Bitcoin is so secure. Using very high-level cryptography, transactions are made with a combination of secret and public keys, which together serve as bitcoin address and encrypter. These transactions are then verified by the entire network, and grouped into relatively small blocks. Once a block is accepted by everyone, it gets added on to the previous block. Each block contains a special code that refers to the previous block – this leads to what they call the “blockchain”. No previous block can be changed or altered without changing or altering every block that comes after, which would be impossibly difficult to do.

Because the technology is so secure, if the blockchain says that you are the rightful owner of that building or that work of art, then you are. And just as you transfer ownership of bitcoins when you make a payment, you can also transfer ownership of other assets that you have wedged into your Bitcoin code. This is the main reason that banks and governments are so interested in Bitcoin, for the potential efficiencies in asset transfer. Even NASDAQ will start trading private company shares using blockchain technology later this year, and the New York Stock Exchange has invested in Bitcoin company Coinbase. Just a few weeks ago we saw the first blockchain share offering. This is all new, but it’s evolving quickly.

Innovation

The scale of innovation in the financial sector due to the creation of Bitcoin is staggering, and we’re only just getting started. There will be stumbles along the way, many Bitcoin startups have failed, but even more are re-thinking the way we do businesses, the way we transact and the way we store value. Bitcoin has limitations, but bright minds are finding ways around these, and in the process are coming up with solutions to problems that we thought unsolvable. Virtually every week we read about a big step forward in what Bitcoin can do, and we are starting to see crazy-sounding ideas become not-so-crazy reality. Just as we had no idea of what the Internet would become back in 1995, it’s difficult to imagine today what Bitcoin and the blockchain will become 10 years from now. But it’s fun trying.

Risks

There are always risks associated with new technologies and uses. The increasing use of Bitcoin for money transfers could increase financial instability (although I would say that we have that anyway). Bitcoin as a currency may become marginalised (although now that we have the technology, something else will spring up to take its place). Increased and/or fragmented regulation to control money laundering may well dampen some impressive initiatives (which we hope will work to find a way to comply and innovate at the same time). Hacking and subsequent loss of bitcoins will always be a threat (although security is improving all the time, and the threat of hacking is not unique to Bitcoin or the blockchain). An increasing dependence on bits and bytes leaves us more vulnerable to cyber-terrorism and energy shortages (which is why all technology sectors are working on developing offline backups and redundancies). And risks will materialize that we haven’t even thought of yet.

The important thing to realise is this: the development of Bitcoin and its blockchain technology has given us a tool that can improve profits, efficiency and distribution of wealth. As with any new tool, the obvious applications have huge potential, and they alone will change the world, for the reasons discussed above. The not-so-obvious applications are even more exciting, as they will take the initial effects and extend them beyond the limits of our imagination. Just as our kids don’t remember a world pre-Internet, our grand-kids will gawp at how inefficient the early 2000s were in comparison to their world. By then the blockchain technology will be so mainstream that they’ll have a hard time imagining a world without it.

(I also write about Bitcoin and related trends at fintechblue.com.)

Bitcoin, banks and Barclays: a perplexing relationship

One of the most difficult aspects of setting up a Bitcoin-related company is finding a bank that will work with you. Simple things like collecting revenues and investment, and paying suppliers and employees, become insurmountable barriers. Because setting up a tech startup isn’t hard enough, right? And it’s not like the Bitcoin technology is easy or anything…

(If you’re not familiar with Bitcoin*, here’s a pretty good introduction.)

So it was with delight that I read earlier this week that Barclays would start accepting bitcoins into bank accounts. This was potentially huge, because actually accepting bitcoins* is a huge leap forward compared to other banks, who won’t even accept dollars that have just been converted from bitcoins. I could almost hear the ripples of excitement going through the rapidly growing bitcoin startup sector.

photo by Milada Vigerova for Unsplash

photo by Milada Vigerova for Unsplash

But the excitement was premature. CryptoCoinsNews and others announced soon after that Barclays has denied this. If this denial is true, it is a huge blow to many who were expecting startup operations to get easier. And it is confusing to those of us following banks’ interest in Bitcoin, because Barclays is one of the leaders in the banking sector in Bitcoin investigation and experimentation.

How can an institution invest in a technology, yet at the same time turn away business because it feels that the technology is too risky?

The technology that Barclays is investing in is the blockchain behind Bitcoin. More and more banks, governments and exchanges are looking into how the blockchain can revolutionize payments, asset transfers, trade settlements, etc. Bitcoin works because transactions are grouped into transparent blocks that are then processed by a decentralized community of powerful computers. These blocks, once verified, get added on to an ever-increasing chain of previous blocks. The chain makes it impossible to alter previous blocks without altering every block that comes after, which would be prohibitively difficult. And the verification process makes it prohibitively difficult to duplicate coins or to spend coins more than once. I will talk about this more in future posts, but perhaps you can already see why banks are interested in the blockchain potential for faster asset transfer and settlement.

Investment aside, the business that Barclays (and other banks) are turning away is that of a volatile currency. Bitcoin went from $13 to almost $1,000 over the course of 2013, and is now trading at around $230. That’s volatile. Businesses that earn bitcoin are therefore categorized as “high risk”. Combine that with the public perception that bitcoin is mainly used for criminal activity, and with banks fearful of public criticism and regulatory investigation, and the institutional reluctance to hold accounts for Bitcoin companies starts to become a bit more understandable. Banks are not known for their risk-taking intrepidity.

Yet, nor do they want to be innovated out of existence. Banks in general seem to be aware that blockchain technology has potential, and they have no doubt been following the headlines of valiant startups intent on shaking up the staid financial industry. So, cautious investment in the equivalent of “Research & Development” keeps them involved and gives them a reputation for being forward-thinking, without leaving their core business vulnerable to public or regulatory criticism.

So why the precipitate announcement? Maybe the press’ eagerness to announce good news for the sector led to the hasty interpretation of “we are looking into” as “we will” (my daughter does this all the time). Barclays has clarified that it is investigating a Proof of Concept (which means “let’s test it”) together with some of its charity clients, to see how Bitcoin could help them with fund raising and disbursement. It’s easy to interpret from that they will soon start allowing select clients to accept bitcoin for altruistic causes if, indeed, it does turn out to be an efficient transfer mechanism. But, Barclays has not committed either way.

Barclays has the advantage of being a UK-based bank. The UK government has repeatedly expressed an interest in Bitcoin, going as far to set up a £10m research initiative. So, if it’s regulatory approval that Barclays is waiting for, it probably won’t have to wait for much longer.

In the denial, Barclays stressed that “no Bitcoin is travelling through Barclay’s systems”. That emphasis is revealing, and underlines the understandable reluctance on the part of any publicly-traded bank to let the market think that it was holding such a volatile asset, either on behalf of clients or for its own book.

Yet the reluctance is still perplexing. Most banks now have entire teams dedicated to Bitcoin research. In most cases they are looking into applications rather than the digital currency itself, but even so, they must be aware that Bitcoin is no more about criminal activity than cash is. Obviously, working with a Bitcoin-related business does not mean the bank account holds bitcoin – the bitcoin wallets can do that. These companies need currency accounts to accept payments with which to pay suppliers and employees, not to mention taxes. With KYC/AML (Know-Your-Client/Anti-Money-Laundering) regulations in force in most developed countries, the banks should feel relatively protected against illicit activity.

It will be interesting to see in what way Barclays lets its charity clients accept the digital currency. Will it act as a bitcoin wallet? Or merely a bitcoin exchange, transferring the bitcoin into pounds?

In June, Barclays announced that it has teamed up with Safello, a graduate from its fintech accelerator, to test blockchain applications for banking. Ironically, Safello, a Stockholm-based bitcoin exchange, had its account shut down by its UK bank (name withheld) earlier this year.

Perhaps Safello will play a role in Barclays’ careful Bitcoin acceptance, or perhaps the bank will end up incorporating other Bitcoin players into its stable. Either way, it looks like Barclays is in the lead when it comes to offering bitcoin-related services to its clients.

Elsewhere, young Bitcoin startups are still struggling to get the basic level of service any business needs from its bank. Perhaps more startups will start to look at this as an opportunity. The lack of banking services for the Bitcoin community could lead to the development of a new subset of startups: the Bitcoin banks. Decentralized, hack-proof and unregulated. Appealing, or scary?

 

(*You’ll notice how sometimes Bitcoin is written with a capital B and sometimes lower case. The convention is that when you’re talking about the system of Bitcoin, the protocol and the concept, you capitalize it, because it’s a name. But if you’re referring to the currency, as in “I’m sending you two bitcoin”, then it is lower case because it’s a thing. In another post we’ll go into the craziness of this naming system. Because, as you will see, even I get confused sometimes often.)

Bitcoin, Greece, speculation and headlines

Alternative currencies love a good crisis, and bitcoin is no exception. The price has been trending up for a month now, and of course commentators are attributing that to Greeks buying bitcoin. Of course, right? No idea whether they’ll be paid in euros or drachmas or roubles (if at all), so of course they’re buying bitcoins, the international digital money that is beholden to no government and knows no transaction limits.

Source: Coindesk

Source: Coindesk

The “majority of the Greek population is trying to move their funds to Bitcoin”, claims NewsBTC.com. (Really? Where did they get that from?) According to DigitalTrends, “Online Payments Halted in Greece, Citizens Eyeing Bitcoin to Protect Savings” – the article carries no reference to how bitcoin is too speculative to protect savings, and no data to back up the claim other than reference to a “flood” of information requests. It goes on: “Greeks are rushing to Bitcoin”, shrieks CNN. It’s frustrating when renowned journalists confuse a high percentage growth rate with a high number. 200% is a high growth rate, but not that material when you realise that you’ve moved from 2 to 6. The CNN article cites a 79% increase in Greek bitcoin trades, without specifying the starting point. According to German marketplace Bitcoin, 10x the number of Greeks are opening accounts than usual. Again, no actual statistics provided.

Getting practical, Cryptocoins News declares that “Greece is not buying bitcoin”. This sounds more plausible. While not based on actual hard data, it does highlight how difficult it would be for Greeks to buy bitcoin, unless they had already opened bank accounts in other countries. Which those that could, probably already have. Maybe they are buying bitcoins, but it will look as if the purchases come from elsewhere.

Buying bitcoins directly from Greece right now would be very, very difficult. Online transactions are at the moment blocked, and those taking their allowed €60 from the ATMs (when they can find an ATM with cash) will probably want to use it for things like, you know, food.

Max Edin of the exchange Localbitcoins told Coindesk that he “can’t see any notable increase in new registered users from Greece apart from normal growth.” Another exchange active in Greece, Kraken, reports the same.

Several Reddit feeds leave no doubt as to the limited opportunities for Greeks wanting to buy bitcoins now:

Sure, many bitcoin enthusiasts and exchanges are trying to profit from the Greeks’ plight.

It may be opportunistic, but it’s good marketing. Why not offer Greeks no administration charges on their new bitcoin wallets or trading accounts? It’s a good idea, and I don’t think that any of us non-Greeks will begrudge them this preferential treatment. Why not rush to set up a Greek exchange?

As for whether the Greeks should be buying bitcoins now… I’d say no. It’s still speculative, and while it looks promising, there is no guarantee that it will still be around a few years from now. True, the same could be said of the euro or the drachma or whatever currency the government chooses. But meanwhile, that currency will be usable and exchangeable.

Looking at the practical, non-speculative side, Bitcoin is not yet useful for daily life in Greece, as very few retail outlets accept it. As a holder of value, historical price fluctuations show that that’s a risky bet.

But, the increased level of interest is exciting:

Google searches for Bitcoin in Greece (source: Google Trends)

Google searches for Bitcoin in Greece (source: Google Trends)

And with the help of so many headlines, we could well see an uptick in Greek bitcoin wallets once the capital controls are lifted. But it will continue to be more speculative than practical. There’s nothing wrong with that, in fact the more people getting comfortable with Bitcoin, the more solid its base becomes. As long as the influx into the new currency is cautious and reasonable – a transactional collapse, a declining price and the disappearance of the value of Greek savings would not bring positive publicity to a still fledgling opportunity. Bitcoin needs to be seen as a practical solution, not a risky punt. Crazy headlines may enhance awareness, but they may also create unrealistic expectations which hurt everyone in the long run.

The spectre of Grexit and the sensationalist headlines are helping spread the Bitcoin word, not just in Greece, but worldwide. Will this make the price go up? Probably. Will the price then come down? Again, probably. The main impact on Bitcoin from the Greek crisis always was and continues to be speculative. Heightened awareness of Bitcoin’s relative stability (with all this going on, it’s surprising that the price has not fluctuated more drastically) will re-inforce confidence. Its philosophical refuge in political turmoil will attract interest. And many will spot business opportunities that increase liquidity and ease of use on the ground. Widespread use in Greece is not going to spring up overnight. But it will spread, and it will be useful, and it will further extend the penetration of Bitcoin into our collective financial psyche.

Bitcoin lightbulbs

I knew that the lightbulb space was getting interesting (I wrote about it here). There are lightbulbs that can talk to you and play music. Let’s not even go into the orchestrated colour combinations, which sound quite mind-blowing. And I’ve been researching and writing about Bitcoin (not published yet, still trying to get to grips with hash functions). So this made me almost spill my coffee:

There is now such a thing as a lightbulb that mines bitcoins. Yes, you screw it in, and it mines bitcoins.

image via CoinDesk

image via CoinDesk

That sounds a bit disingenuous. You don’t just “mine” bitcoins. You can try to mine bitcoins, you can solve the blockchain hash functions for new transactions with your incredibly fast, very powerful computing chips. And if you’re lucky, you get the solution first, and you get some bitcoins. There is definitely more to it than just turning your computer on, or just screwing in a light bulb.

BitFury, the developer, is considering incorporating a wallet into the technology, so we can make payments from our lightbulb. I feel a bit silly even typing that phrase.

Cheaper mining technology will not necessarily help the sector. Right now, there is a limit on the number of bitcoins that can be mined. The total supply limit is 21 million, and the amount that can be mined will halve every year until we reach it, around the year 2140. So, cheaper mining will not increase the amount in circulation.

Cheaper mining could well, however, put the established mining groups out of business. Even if the bulbs never “win” a bitcoin, the fear that they will could push the market value of bitcoin down, to a level where it is not profitable for the big groups, with their expensive equipment, to mine. And, if the chips do get so powerful and cheap that they can mine from a lightbulb, the expensive equipment becomes redundant, and the mining competition becomes even more fierce. The nodes could regroup and update their technology, but with a lower value, would it be worth it for them? And with mining capability spread more thinly, would that increase stability, or decrease it?

Of course, these appliances are not just mining, they’re also giving us light, so whether they make money or lose money on creating currency is not that important. Except that it is. Energy costs are also coming down, and are likely to continue to do so or at least remain low, as alternative energy sources come on stream. So the light emitted has less economic value. If the economic benefit from mining bitcoin also comes down, the usefulness of the lightbulbs will be limited, and on a bigger scale, the viability of the currency as a transmittor of value will be questioned.

Still, the development is interesting for its technology. It may not end up being inherently useful, but it will deepen our appreciation of possible uses and consequences of digital currency creation. Just because it’s way too offbeat for me to get my head around, doesn’t mean that it won’t lead to important breakthroughs that could, who knows, change the way we communicate.

So back to the old joke: How many bitcoins does it take to screw in a lightbulb? I’m sure there’s a very good punchline at the end of this one.

Who needs cash, anyway?

Have you ever thought to count how many coins and bills pass through your washing machine every year? You know, the €5 note scrunched into a pocket, the coins embedded deep into the corners… I have come up with a rough estimate that over the past 12 months, at least €115 that I know of has been washed and even tumble dried in my house (plus two iPods, but we won’t go into that… ok, let’s go into that, how hard can it be to empty out your pockets before you chuck your jeans in the wash?).

Which has led me to wonder why we still use cash. These days, with contactless, mobile and electronic payments becoming more prevalent and easy to use, is cash on its way out? Most of us still carry hefty purses or wallets with us as we head out the door. And most of us pay for small items, and some big items with bills and coins. But that does seem to be a generational instinct. Citibank recently did a survey asking about payment methods for small purchases. Over half of the over-50s but only 30% of the under-30s said cash.

Pound-Coins-2

Why cash?

Cash is comforting. Cash is convenient. Cash is reliable. But, the use of cash costs the US economy approximately $200 billion every year, according to a study from Tufts University, in ATM fees, security costs, handling time… Another report states that it costs UK businesses more than £17.8 billion per year just to handle cash. So it’s no wonder that the idea of no longer having to is attracting interest.

And as for its advantages, are they really that?

We think that cash is comforting. Yet almost $40 billion was stolen from banks in the US alone in 2011, and the Tufts study estimates that another $40 billion is stolen in cash from retail businesses annually. If we lose our wallet, we never expect to get it back with the cash still in it. Retail outlets spend upwards of $20 billion a year to protect their cash, and that doesn’t take into account the time spent in lines waiting to deposit lesser amounts. Comforting? And let’s not even think about the germs that passing cash can spread.

Is cash convenient? Its physical characteristic that people find convenient is actually one of its biggest drawbacks. You can only reliably exchange cash face-to-face. You’re at the restaurant, or the store, and you physically hand over your cash to the waiter or the check-out person. Counting out change takes time. Lugging around hefty purses or wallets full of coins is a nuisance. And its physicality makes cash simply not viable for the increasing percentage of household and business spending that is no longer done in person.

Is cash reliable? Counterfeiting of notes is a huge business. In 2011, $231 million in counterfeit cash was removed from circulation. We can assume a whole lot more wasn’t. If the medium were reliable, our stores and restaurants wouldn’t need to spend on fake note detection tools.

One big advantage of cash that is more difficult to argue with is its anonymity. A dollar bill does not care who is holding it. Electronic transfers leave a trail. I get that the right to privacy is important, and I can see some instances in which even non-criminals would want an above-the-board transaction to not be traceable, but is this the advantage that we should be focussing on? And, Bitcoin – to give one example – does protect the user’s identity, while at the same time leaving a verifiable trace.

Less cash

Today, the growth of ecommerce and the increasing ease of electronic payments are reducing our dependence on physical bills and coins. While many ecommerce purchases here in Spain are paid for “cash on delivery”, as in the client hands cash to the delivery courier, that preference is declining, and is virtually unknown in other countries. Ecommerce purchases, on the whole, are paid for by electronic transfer.

E-payments are getting easier to use. I can now make App purchases on my phone with my thumbprint. I pay for my groceries by waving my credit card at a screen. E-payments are also getting cheaper. The high commission or transfer fees on the electronic transfer of small amounts made them relatively uneconomic. Now, with digital wallets and virtual currencies, the handling costs are very small. Electronic micropayments are now possible, and convenient.

Mobile_payment

A study recently released showed that cash payments in Denmark have fallen from 80% of total transactions in 1990 to just 25% in 2012. 40% of Danish adults hardly ever use cash, and the Danish government has announced its intention to allow retail establishments to refuse payments in physical currency, with the aim of reducing costs and boosting economic growth. Mastercard estimates that 60% of payments in Singapore, Netherlands, France, Sweden and Canada are done with non-cash methods. Card use in Iceland is the highest in the world, with almost 99% of private transactions being done on plastic.

Curiously enough, as the European economies improve, cash should become even less important. The two main user groups of cash today are the elderly, and low-income families who use cash as a budget management tool (when the jar is empty, it’s empty). Fewer families subsisting on marginal incomes, and more businesses being able to afford the (decreasing) cost of adapting will accelerate the transition. Non-cash transactions will get the double boost of higher transaction values (due to the economic recovery) and a higher percentage of transactions overall (due to increased adoption of electronic and mobile payments).

The impact of mobile

Mobile payments have for years been substituting cash in developing economies. Kenya, for example, sees 34% of its national payments and 66% of transaction volumes go through mobile phones. 22% of Bangladesh’s adult population use mobile payments. In December alone, a total of $7.5 billion was transacted globally through mobile money systems, and Forrester Research estimates that in-person mobile transactions will reach $34 billion annually by the end of the decade. That’s only in five years. That’s huge.

Smartphones and tables can also be used to accept credit card payments with a little device, called an mPOS terminal, which makes it much easier for small retailers and itinerant sellers to reduce their dependence on cash. In Stockholm, some unemployed people selling street magazines now accept electronic payments.

The entrance of new players

In Europe, the main providers of payment solutions have up until now been the traditional banks. Our online transfers are done through our banks, and contactless payments are so far controlled by the banks. Paypal only accounts for 20% of total online payments in Europe. Fintech startups and even the big Internet providers and tech companies are moving into this sector: Apple, Google and Facebook are just some of the names gearing up for a battle over our online and mobile wallets.

The EU directives on e-money and payment services have created a legal framework that regulates the payments sector and encourages innovation, in that the regulation increases consumer trust and thus makes it less risky to introduce a new idea. Payments are “hot”, according to venture capital and angel investors, and judging from the number of startups vying to make transactions easier.

And then there’s the role of crypto-currencies such as Bitcoin and Litecoin (just two examples, there are many), and the effect they will have on international payments. Although they are struggling to gain mass acceptance, it’s early days yet, but I believe that they will end up being an important part of the payments scene.

Decreasing risk

Yes, online banking and mobile transfers do have some element of risk. Smartphones with embedded wallets can be stolen, payment information can be hacked. But cash has considerable risks, too, such as the untraceable theft and counterfeiting that we’ve already talked about. And technological advances are reducing the threat of fraud in e-money. Secure servers and two-step verification are becoming the norm. The awareness of the need for password protection is becoming more prominent. Soon our phones will be able to biometrically verify that it is us who is asking for the transfer, by scanning your iris or mapping your voice.

True, criminals are ingenious, and there probably already is a hefty black market for false contact readers or mobile credit card scanners. But as they adapt, so do we, and security will continue to become easier and more reliable. Yes, there is some risk, but less, and decreasing.

The outlook

As more outlets accept and encourage non-cash payments, more consumers will try them out. As more consumers are comfortable with the new payment mechanisms, more outlets will adapt. And the cycle will lead us all towards a more convenient but probably more fragmented payments scenario.

We’re not going cashless any time soon. But it will happen, most likely before my 12-year-old graduates from university. Personally, I’m not going to miss scrambling after dropped coins or unfolding wrinkled bank notes. I concede that, except for the having to carry it, cash is convenient. You hand some over, you get some back, no hassle. But e-money is becoming increasingly convenient, too. It will end up being very easy to use, from your phone or your watch or your fitness tracker. And it reduces cost and increases efficiency for the businesses that receive it, which allows for higher profit margins and/or lower prices for us.

Governments spending less on note printing and coin minting… Businesses saving on security and handling costs… Individuals having more streamlined wallets and more information on where the monthly budget went… All that sounds like a win-win idea to me. Could the replacement of cash end up being the main “disruption” of our era?