KPMGVoice: Getting Rid Of Pocket Money

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Canada has been a world leader in getting rid of pocket money. The Royal Canadian Mint eliminated $1 and $2 bills and has stopped making pennies. Now the nation is going digital with a system that — if it spreads around the world — could rewrite what we think of as cash. Canada’s mint in 2012 created a legal, digital version of Canadian money called MintChip. In early 2016 the government sold the technology to nanoPay, a Toronto-based company that has begun to roll it out for use. Using a phone app, residents can transfer money from their bank accounts into a “digital asset store” in the cloud, protected by the same kind of encryption hardware that banks use. “I think the average load is just over $60. I always do $50 at a time,” said Laurence Cooke, CEO and founder of nanoPay. That’s truly digital pocket money. People can exchange Canadian money by swiping their phone screens. And in a limited rollout in Toronto’s Liberty Village neighborhood, users can pay for goods and services in restaurants, bars, a bakery, a hardware store and a florist. In a restaurant, multiple diners can split a bill using their phones — and make sure the waiter receives his tip in his own MintChip account immediately, as if it’s cash. Diners can even pay the bill without waiting for the waitperson to bring it to the table. A big part of nanoPay’s pitch is to retailers, trumpeting the advantage over accepting credit cards. Other phone-based payment systems, such as Apple Pay, are tied to credit or debit cards. Merchants typically take days to receive funds from credit purchases. There are transaction fees, and for the merchant there’s a chance that a card is stolen or a transaction may be disputed and reversed. “The MintChip platform moves value from one entity to another in real time, without settlement and without an intermediary,” Cooke said. “We can do a transaction cheaper and faster and more securely than any other platform on the planet.” Merchants get the immediacy of cash combined with the ability to track customer “loyalty” that a digital transaction provides. That’s different from the anonymity that a cryptocurrency like Bitcoin was created to offer. But as a pioneering regulator-friendly digital cash platform, MintChip and the projects it inspires are likely to have their own impact on rewriting money.

KPMGVoice: Getting Rid Of Pocket Money | Chapter 6 of The Great Rewrite

KPMGVoice: Getting Rid Of Pocket Money | Chapter 6 of The Great Rewrite

The digital currency Bitcoin, invented as an alternative way to hold and trade value outside the established banking system, may never move beyond the fringe. But the record-keeping mechanism that Bitcoin’s creators devised — its method of processing money transactions without a central scorekeeper — seems likely to live on. Ironically, it’s being embraced by the very institutions that Bitcoin was built to avoid, the established banking system. “We believe it will have as big an impact on financial services and banking as the internet has had on entertainment,” said Charley Cooper, managing director of R3, which has formed a consortium of banks and other financial institutions that is co-opting the Bitcoin “distributed ledger” concept in hopes of rewriting the way they conduct business. Money historically is issued by nations’ central banks and held in accounts by banking companies. When two parties transfer money between each other, their banks adjust the balances in their accounts. Bitcoin’s way of tracking who has how much is based instead on consensus — each transaction is recorded in a block of information that becomes part of a public data chain. They call it the “blockchain.” It essence, it’s a shared ledger, distributed on participating computers around the world. The advantage is much faster recording of transactions that move money, eliminating risk and expense. “Banks spend well over $100 billion a year on legacy systems and technology that could be replaced by distributed ledger technology,” Cooper said. Bitcoin’s open blockchain, in which everyone can see every deal, doesn’t work for commercial institutions that for competitive and regulatory reasons don’t want it all made public. R3 has built a platform called Corda that adapts the distributed ledger. “Parties can see info relevant to them, where they are a counterparty, and regulators can see certain info, but it’s not broadly shared around the community,” Cooper said. The consortium testing the software and working out methodology has grown to 75 global banks and other financial firms. “We believe this is the next step in the evolution of money,” he said. If experiments like this work, they won’t be the last adaptations of the “blockchain. Beyond money, the concept of using group consensus rather than central scorekeepers has a chance of becoming a sort of World Wide Web for transactions, handling everything from identity management to content posted on social networks.

KPMGVoice: Financial Services | Chapter 6 of The Great Rewrite

The rewrite of money was inevitable. After decades of computer systems built to replicate age-old financial processes, a 21st-century rewrite of the financial system is kicking in. Venerable institutions and high-tech startups are creating entirely new ways for people to hold and move value, new ideas crafted to tap the unique potential of digital networks and mobile devices. The digital “cryptocurrency” Bitcoin, invented to exist only online and “mined” as if precious metal by brute-force computing power, may never go mainstream.

KPMGVoice: Moven – Fitbit For Your Wallet | Chapter 6 of The Great Rewrite

Moven bills itself as a “Fitbit for your wallet,” a fun way for consumers to manage their financial fitness. Really it’s something more aggressive, an attempt to replace your traditional bank account — and maybe someday conventional banks altogether — with a phone app. The company is part of a new wave of firms called neobanks, or challenger banks, that are trying to rewrite the relationship between consumers and their money. You transfer funds into a Moven account and get a debit card that works at existing ATMs. You can set up direct deposit from your job and recurring payments to pay your bills. You can make payments to friends or merchants from the phone. And you never walk into a bank. “This is really the big shift. It’s the first time in hundreds of years that the branch has not been essential to signing up for a bank account,” said Brett King, CEO of New York-based Moven, who founded the company in 2011. “Within 10 years we’re going to think of our phone as our primary banking mechanism.” These mobile-app banks lack one thing besides physical branches: government-issued charters that allow them to be protected by FDIC deposit insurance. In the United States today, a bank needs at least one branch to be chartered, something Moven says it has no plans to do. For now, Moven deposits customers’ money with Kansas City-based CBW Bank. The phone app becomes the entire interface for users. The Fitbit comparison comes in because Moven’s software turns personal finance into a sort of game, the way the Fitbit  wristlet challenges wearers to take a certain number of steps every day. “We’re trying to get you to compete with your average monthly spend every month, to reduce that spend over time,” King said. Messages pop up if spending is trending high, or if a frugal month allows $100 to be socked away in a “stash account.” It can even give alerts via a smart wristwatch. By owning the relationship between consumers and their money, companies like Moven can expand into more financial products, from lending to insurance. Just don’t call them financial products. “We don’t do products,” King said. “We do experiences.”

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