8

The world of alternative currencies

The O2 wallet, a secure digital wallet service.

Technology is changing pretty much everything these days, including money and even what we think money is.

Bill Maurer is the Dean of Social Sciences and an Anthropology professor at UC Irvine. He studies and navigates the brave new world of alternative payments — things like using your cell phone to pay for your coffee or Amazon rewards points to buy a new TV.

"Mobile is really shaking up the payment space, and opening up new vistas for innovation and entrepreneurship," Maurer says. “People always joke around about how the mobile has replaced the wallet as the thing that people fear losing or leaving behind most. People can go through the whole day without their wallet and not really stress out about it too much, but really get anxious when they don't have their phone nearby or if their service goes down."

But mobile payment systems have quite a bit of work to do before replacing things like cash or credit cards. “Human behavior changes very slowly, in the money domain in particular. The coin is a 5000-year-old invention. It hasn't gone away. It'll be interesting to see is whether or not some of these payment innovators or money innovators are able to get people to make the jump away from using any kind of physical token altogether and to just let things happen say on their phone, or let things happen in the internet ether.”

Maurer says companies also benefit from alternative currencies. "On the business side there's quite a strong case for mobile,” Maurer says. “Because of the kind of data that it allows folks to capture, to learn so much more about consumers, and their behavior, and their desires and to start developing … around that data.”

Imagine knowing what a consumer is thinking or doing at the exact point of purchase or when someone uses loyalty points from a credit card. Maurer says alternative currencies can help gather more data than cash or check payments, "so you've seen a lot of experimentation going on with things like loyalty points, and trying to kind of envision whether or not a loyalty point could serve as a kind of private token or private currency.”

Things like credit card rewards and company loyalty points could move into that space that cash once lived alone, but Maurer thinks government regulation might hamper its rise. “Regulators might curtail [alternative currencies] simply because there are a number of consumer protection issues. There’s a number of risks.” He uses the example of a credit card program. A consumer can accumulate a bunch of points, but what if that company decides the points no longer have value? That could be why cash, still, remains king. 

About the author

Adriene Hill is a senior multimedia reporter for the Marketplace sustainability desk, with a focus on consumer issues and the individual relationship to sustainability and the environment.
Log in to post8 Comments

welcome to my world of bitcoin bit.ly/koinz

Why would the board of eBay decide to sell porn through Paypal? paypalporn.blogspot.com - Maybe they need the money or really starting to feel the pressure from other easier to use alternative payment methods?

It must be that they are feeling pressure. A lot of small, alternative payments try to get a following by working with online porn. But Paypal?

Also, most alternative payment methods are private. Paypal is owned by eBay. Institutional shareholders like Calpers can't hold shares in companies that sell porn. So, in other words, at a certain point you "grow out of porn" - not into it. Looks like a pretty big misstep by the eBay board.

I don't believe the alternative currencies discussed are that. I look at them as alternative methods to access your income. I don't use any currency, only credit cards which I zero balance each billing. Each of these alternative currencies represents a borrow which must be matched to income which should be greater than the borrowed amount.

Professor Maurer, like many academics, has a rather odd view of the real world. "... get people to make the jump away from using any kind of physical token altogether ..."? Where has he been? We are already there.

I don't use mobile payment devices or bitcoin (I know way too much about electronic security & privacy to accept the risk), but it has long been incredibly rare for me to use cash (and I write maybe one check a year, for those that are changing very slowly).

All you really need are those credit and debit card numbers, and PINs (often not even the physical card). And there is nothing "one rail" about this method; when I'm in Europe I do business in euros just as easily as with dollars at home, with the same account numbers (the vagarities of currency markets are a negligible downside). As one of your previous guests pointed out, money today is just numbers in computers somewhere; as long as everyone accepts & trusts the system, it works. Of course the system is fragile, but we accept the risk for the convenience (while hopefully keeping a backup method). We already just let it happen.

And the professor is right that there is no “pressing huge demand” for a new system; but there is also no fundamental improvement in convenience with mobile devices, to balance the increase in risk and decrease in privacy.

And as for having a unit of value not tied to the US dollar; for the individual consumer that would Not be a good thing. Private currencies have been tried many times in history (good for fat cats, bad for the public); they were always ultimately unsuccessful and chaotic (it's again, a matter of trust). No matter what monetary systems we come up with in the future they will always be tied to whatever standard of value is the most stable within the world economy; that is how they gain the trust of the public.

"People can go through the whole day without their wallet and not really stress out about it too much, but really get anxious when they don't have their phone nearby or if their service goes down."

I suppose this is correct if you are one of those people who can't walk down the street without staring at a smartphone or must text while driving because thinking is painful. None of these habits has anything to do with payment efficiency.

If I leave home, am on the road and discover I don't have my wallet my stress level rises at the thought of being pulled over with no license. I have no need to text or gossip while driving and find thinking enjoyable.

Why I have zero interest in the brave new world of snooping in my wallet and my personal life: "On the business side there's quite a strong case for mobile....Because of the kind of data that it allows folks to capture, to learn so much more about consumers, and their behavior, and their desires and to start developing … around that data.” For me it is cash all the way. Marketers may buy tracking space on the money eventually but I will resist the borg as long as I can.

With Generous Support From...