It's pocket science

PUBLISHED : Friday, 16 September, 2011, 12:00am
UPDATED : Friday, 16 September, 2011, 12:00am


Time is money; money is the root of all evil and it doesn't grow on trees. There are more maxims about money than there are about dogs, which makes one wonder; who is really man's best friend?

Money is simultaneously the thing we think about most and consider the least. Given the primacy of money in our lives it is curious how accepting we are of the changing nature of money and, increasingly, the digitisation of money. It has evolved from shells to precious metals and coins, then to the paper system.

The next stage of its evolution is upon us and there could be many different future manifestations of money competing or co-existing with each other. The notion of a cashless society is decades old with credit and debit cards almost universal in legitimacy, so much so that it is remarkable when a vendor or shop doesn't take Visa or Mastercard.

Hong Kong has led the world in cashless payment since instituting the much admired and copied Octopus smart card system in 1997. Despite recent privacy concerns, the Octopus card has been a model of consumer acceptance, with a 95 per cent penetration rate among Hongkongers between the ages of 16 and 65 and more than 24 million cards in circulation. As an integrated transport card, the Octopus card is top of its class but where the system has really excelled is its ability to pay for small-value items in more than 10,000 retail outlets across the territory - 11 million transactions that generate HK$110 million a day.

Yet even this system faces challenges, particularly from the burgeoning mobile payments industry. With people more likely to forget their wallets than their phones these days, the marriage of the smartphone with a payment system was a technological no-brainer. Such systems already exist and work to varying degrees of success in Japan and Finland, the land of Nokia, with phones embedded with chips that can be read by specialist readers.

Google has jumped on the bandwagon with Google Wallet, which uses a chip-based mobile device to make payments. But Google has yet to transfer its search and e-mail stardust to mobile payments and the company lacks the hardware manufacturing capabilities to fully realise Google Wallet's potential.

Although the technology for mobile payments has been available for a few years, which in industry terms is aeons, the system has yet to take off, presumably because Apple hasn't as yet released a product to make it acceptable and cool. The concept is likely to get a boost from innovative companies such as Square, the latest start-up of Twitter co-founder and tech wunderkind Jack Dorsey.

Square is a halfway house innovation that doesn't need fully integrated mobile devices to work. A free card-reading device that can be attached to an iPhone, iPad and certain Android devices, Square allows a user to accept credit card payments for one flat 2.75 per cent fee across all cards, anywhere at any time. Square is geared to allow sole traders and small businesses more flexibility in their payment offerings without having to set up arrangements with the big credit card companies and the higher fees they charge. Currently only available in the US, Square, founded in 2010, has garnered industry praise and such buzz that it is already worth more than US$1 billion and is likely to go global in the coming year.

Innovations such as Google Wallet and Square are still practical solutions to the increasing use of digital devices and always-on internet connections. The long-term future of money, as for future consumption, is likely to be in the virtual realm and Second Life is a taster of what's to come.

Second Life, the online virtual reality world, allows for property ownership and goods and services exchange, proving there is no place that capitalism cannot penetrate. Users trade in Linden dollars with one US$1 worth 250 Linden dollars, at current exchange rates. Although initially a user needs to exchange real-world dollars for Linden dollars, the sealed-off trading within Second Life allows users to wheel and deal and make their Linden dollars grow. Chinese web entrepreneur Anshe Chung became the first real-world dollar millionaire from buying and selling property inside Second Life.

Facebook, QQ, World of Warcraft, Nintendo and hundreds of other companies have all made millions of real dollars off restricted virtual money by locking users into their e-environments. Sooner or later consumers will want cross-platform virtual money that also works in the real world, or so the people behind Bitcoin hope. Bitcoin works on the principle of peer-to-peer money exchange much like Paypal, but it is decentralised, removing the middleman and the fees associated with services such as Paypal.

Money has come a long way in a relatively short time, its continual evolution likely to keep in step with technology. The smartphone and an internet-everywhere society has quickened the pace of the steady digitisation of money, so much so that the present evolution of money has occurred with most of us blissfully unaware.

Despite such giant strides, the future of a completely cashless society, virtual money and mobile peer-to-peer payments is close but still some years down the line so we'll all have to put up with the mountain of change rattling around in our pockets for just a bit longer.