As we saw in a previous post: David Wolman hates cash–from the expense of printing and transporting it, to its impact on the poor. But what are the alternatives?
Wolman notes in his new book that there are millions of people who are trapped by cash, without access to financial services. Cash’s most important failing, he says, is its “inconvertibility” to electronic money. For the unbanked–which includes about 20 million Americans–cash means exclusion, and often higher fees.
“Where the research became more interesting to me was this battle against poverty,” Wolman says. “It takes this conversation about a cashless future from the realm of cool gizmos, to talking about Americans who depend on check-cashing and have to pay usurious fees, and hundreds of millions of people [in places] like India.”
Wolman meets Indians whose lives have been transformed by mobile payment systems, and mobile banking. For example, Eko allows people to open a bank account (with the State Bank of India), deposit money, and transfer remittances–all from a cheap handset. By October last year, 200,000 people had opened accounts using the service, and 800,000 had transferred money. Workers no longer have to travel long distances to hand-off money for their families, and people have greater financial stability. “The most dramatic impact from cell phones may turn out to be services that turn the phone into a mini bank branch in your pocket, thus replacing the need for material money,” Wolman says.
Wolman wonders whether alternatives to cash could take off most quickly in the developing world, where there isn’t an established payments industry or a lot of ATMs, and people are willing to accept change. As one expert tells him, the leading edge of mobile money is not Silicon Valley, but the African Rift Valley, West Delhi, and villages in Brazil. “Poorer countries could hurry ahead without ATMs, expensive cash management, bank robberies, and easy tax evasion, and jump right to it with options that are better than cash,” Wolman writes.
Of course, there are all kinds of interesting mobile-based services in the developed world as well, including the newly launched Google Wallet (an app that allows you to pay by “waving” your handset at the counter), PayPal Mobile, and Square, founded by Twitter-creator Jack Dorsey). But Wolman points out that, unlike say in India and Kenya, these companies have to compete with established infrastructure in the developed world. “They are going to need to give discounts, and really showcase the value proposition to convince people in urban areas to use it.”
Wolman also explores many alternative currencies, including Brixton Pounds,
BerkShares in Massachusetts, Ithaca Hours–all designed to promote local commerce–and currencies based around social networking, such as Facebook Credits, Hub Culture, Bitcoin, and Superfluid. He even finds currencies based around reputation (Whuffie Bank), attention (Serios), and energy (in the shape of the Kilowatt Card).
Wolman isn’t particularly convinced by any of them, although he sees no inherent reason why the government should manage the money supply, especially in the age of the Internet, which makes starting up and running a currency much easier. But he is convinced by cash’s inferiority, and feels confident we’ll eventually move on to something else. His money is on cell phones, or “completely networked computers in our pockets, embedded in wristwatches, or maybe even tiny chips embedded behind out ears … that will serve as wallet, bank branch, currency converter, and seamless payment tool, propelling commerce forward, eliminating the monstrous use of cash, and providing a critical leg up to billions of people.”
To Wolman, there are few good reasons to continue with cash, and it’s high time we moved on to something more modern. He hopes the end is soon–though he concedes it’s hard to know. “Cash is dying a death by a thousand cuts,” he says. “We just can’t be sure how many more until it’s dead.”