Payment systems Traditional cash is declining – It can be replaced by digital cash that would act like a coin or banknote

In China, beggars also ask for money in digital payments. Cash is declining elsewhere as well. It could turn into electronic cash, combining the good features of traditional cash and digital money.

We testify millennium monetary revolution. This is how the economist at Reitaku University in Japan described the situation Masashi Nakajima In the Japan Times in December. The previous similar revolution was the introduction of banknotes in China about a thousand years ago.

The declining importance of cash, even its disappearance, is starting to look more and more evident – at least in China.

Hong Kong South China Morning Post reported in November that technically enlightened beggars in China are already asking for digital payments instead of coins, as in this case; in the video.

They have affixed to their chest a QR code that is commonly used for payment. The giver of the alm reads the code on his phone and transfers the amount.

Many Chinese no longer carry payment and credit cards with them. The phone is enough.

With digital there are many benefits to paying. Bits are cheaper than coins and banknotes. Digitalisation streamlines services.

The most familiar example is e-commerce. Automation of services reduces cash payments.

About a year ago, the Chinese restaurant chain Haidilao opened a new robot restaurant in Beijing. The customer orders a meal on the mobile phone, which the robot transports to the table. And of course the customer pays on the cell phone.

The hassle of handling money is gone. During the Corona era, technology increases safety by reducing contact between customers and staff.

The strongest and at the same time the worst features of digital payment are invisible.

By showing the banknote, the person only tells them the amount of their purchasing power. By paying electronically, he will have provided a lot of other information, such as who he is, what he bought, where and when. The data is stored and can be combined with other data. The store is able to create new services.

The buyer can also keep track of where the money has gone. He can get summaries of the carbon footprint of shopping, the nutritional content of foods, and other information about his life.

At the same time, the growth of information increases the possibilities for misuse. According to an Alibaba leader, consumption patterns tell of human reliability.

A person who plays video games ten hours a day is likely, in the manager’s view, less responsible than a buyer of baby diapers.

A member of an irresponsible group may have difficulty obtaining credit even if their personal credit information is in order.

Discrimination has been practiced in the world of cash, but digital technology reinforces everything, both good and bad.

Necessarily Nor does everyone want a shop or other outsider to know about their private lives too much.

In the United States, the retail chain Target developed its own service for pregnant women about ten years ago. Volunteer participants received customized offers for expectant mothers.

Everything went well, but then the chain came up with an extension app. The service was also introduced to identify expectant women who had not ordered the service.

The incident became public when a father in Minneapolis marveled at advertisements for baby diapers and cribs coming to his daughter. Shop knew about the pregnancy earlier than the family.

Companies have run into even bigger problems as cash declines. The consumer may be left without credit, but a company or organization may be left without a bank account.

The problem began to grow in the last decade.

There are also recent examples in Finland that the bank has refused to open an account. Sometimes the background has been, for example, a suspicious connection with Russia during sanctions, sometimes no justification.

One reason for the bans is the world’s dependence on the dollar. To comply with U.S. boycott regulations, banks are playing on safe. For example, a mere connection to Russia may be enough to ban an account opening, even if the boycott is targeted only at certain individuals and organizations, not at all Russian or Russian-based entrepreneurs.

Another underlying factor is heavy regulation. Risk research outsources work to banks. They make their own lives easier by completely excluding small customers.

Cash and the difference between digital money comes to the fore.

The use of cash does not need a permit: bank notes lawfully acquired may be used for any lawful purpose without the permission of a third party. The current digital money may not be possible, which has its own consequences. Businesses have long been dependent on e-money.

The impossibility of opening an account effectively means a ban on doing business. The bank makes a judgment, which by law can only be made by a court. There is one constitutional right at stake, freedom of establishment.

Even for companies problems have now surfaced, but they have arisen years ago.

The U.S. Coin Center is a nonprofit research and civil rights organization focused on the opportunities and challenges of new monetary technologies.

Director of the Center Jerry Briton by aid organizations have sometimes found it difficult to send money to those most in need, as aid is often needed in areas declared most boycotted.

Global Center on Cooperative Security works against violent extremism mainly in Africa and Asia. Oxfam International is fighting poverty.

As early as the middle of the last decade, they found that the accounts of non-profit companies and payment services, in particular in the United States, Britain and Australia, were being unduly closed.

The authors of the report warn that the closure could force companies and organizations to move into the gray or black economy. Then it will be more difficult to prevent money laundering, terrorism and other illegal activities – which is what regulation has sought.

Brito and many other scholars of money problems suggest a third type of money, digital or electronic cash.

It would combine the good features of traditional cash and digital money. Every purchase of a video game or diaper would not have to be recorded on external systems. The restrictions would be the same as for banknotes. Depositing large amounts of digital cash as regular digital money would require proof of origin.

“Completely even digital cash is not anonymous. Digital money always leaves traces in the information system, ”says the adviser Aleksi Grym From the Bank of Finland’s Payment Systems Department.

Digital cash is also of interest to central banks.

“Central banks are looking into whether alternatives should be offered. Externally, the services look much the same as for commercial operators. However, many users may find central bank money more reliable than private payment services, which often come from outside the European Union, ”says Grym.

European the central bank (ECB) opened a debate on the digital cash euro in october. The report, published as a basis for discussion, places a number of demands on the digieuro: accessibility, reliability, security, efficiency and privacy.

European central bank money is intended alongside traditional cash.

“Cash doesn’t disappear completely,” says Grym.

“Cash has other functions than daily payments. The values ​​of deposits are measured in cash. It is important that you have the right to withdraw money, even if it is rarely withdrawn. ”

People were doing business at Hang Seng Bank ATMs in Hong Kong in September.­

China’s the central bank has already tested digital cash last fall. In Shenzhen and Shuzou, a number of digital yuan equivalent to about € 20 was distributed to 150,000 citizens.

Japanese banks are closely following China’s developments and planning their own digital cash.

Much research and development work is still needed. Professor of Working Life at Aalto University Pekka Nikander has been doing software development for over 30 years. He describes new tasks.

“In today’s society, data collected about people’s economic and other behaviors is a much broader problem than just the problem of the digital monetary system,” Nikander says.

“Simply anonymizing payment transactions doesn’t solve anything in digital commerce. In addition, identifiers that are both pseudonymous or anonymous and secure are needed. ”

New solutions are being sought in the ATARCA research project of Finnish, Swiss and Spanish organizations, among others, which will be launched in the spring.

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