Who will hold the power?
If money is power, we should expect that power to shift as we use less state-backed currencies and more digital currencies issued or moderated by corporations.
Zschach added that “Developments in money are driven by convenience and the public sector has always been influential in driving innovation and change.”
Birch believes that while Big Tech wants to manage money, they don’t want to provide it and suggests that banks are best placed to run the changing system since they already have the infrastructure largely in place.
All panelists agree regulators will need to catch up to this changing environment but say that we shouldn’t leave it to the government to decide how the future of money unfolds.
“We all need to look beyond the headlines and the hype of digital currencies and pay attention to the details of how they will work because this is what’s really important,” says Swartz.
“I try to attune people to think about the boring things – I call it the politics of the boring – because this is how we engage them in the important stuff.”
What does the history of the money tell us about its potential future?
Birch and Swartz point out that, for most of history, money was not in the form of physical currency in circulation but in different types of credit enabled by social contracts. Rich and poor people did not use the same money, making it difficult to trade across groups and exacerbating inequalities.
“State-issued currency created a common economic language for all citizens. If we lose that we need to consider what else we lose in the process,” says Swartz.
Swartz warns a return to various competing, and complementary currencies may herald a return to transactions divided along socio-political lines. She compares the evolution of money to that of media and communication.
“Before the rise of mass media, we had a cacophony of information – not all of it good. The mass media age where everyone watched the same thing on the same big networks was the exception, but it did bring unity. Now we are shifting back to a model where people get their news from many sources and a blurring of what’s credible and what’s not – and we’re struggling to adapt.”
Will “more and different types of money” increase or decrease financial inclusion?
In the US, more people have a social media profile (79%) than have a bank account (75%). If Facebook becomes a currency player, could this boost rates of financial inclusion? Perhaps, but, as Swartz warns, at what cost?
“Privacy is an obvious concern but we also need to think about ensuring access. Social media platforms generally don’t have a great track record of moderating content. They have one-size-fits-all terms of service. And their approach to dispute resolution is notoriously poor.
“So when we consider financial inclusion, the terms of inclusion are important. What are the mechanisms of redress if access to platforms is restricted?”
These basic questions around fairness will need to be at the center of new systems of currency, agrees Tom Zschach, who says this is one of several building blocks that will pave the way to the future of money.
“Identity is another key issue – it’s the basis for everything within the financial system. All countries are concerned with tackling money laundering, fraud and just ensuring money doesn’t fall into the wrong people’s hands, whether it is exchanged via a social media platform or SWIFT. Understanding how we can verify identity will be critical in a financial system that’s built on a combination of trust and authority.”
Birch also urges a closer focus on identity. “Financial inclusion is not about money, it’s about identity but the rise of digital currencies is seeing the two converge.”
What’s next for the future of money?
Exactly how the future of money unfolds is difficult to predict but Zschach says understanding how the world is changing can give us clues to how it may develop.
“We’re now living in a hyperconnected world where consumer expectations, including around payments and access to money, are changing fast.
“Financial innovation is likely to respond but we’ll need to look beyond the hype and headlines which reminds me of a quote from Bill Gates. ‘We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten. Don’t let yourself be lulled into inaction.’”