The Recent History of the Future of Cash
Dave Birch has a really interesting post about The future of the future of cash:
The report also identifies three key attributes of cash that make it — still — the dominant payment system. Universality, trust and anonymity. I’m curious about the location of anonymity in the customer mindset and I’m going to post some more about this shortly, so I’m only looking at the first two here.
I want to extend Dave’s assessment of what makes “trust” interesting:
Trust, on the other hand, may not be such a big barrier. It’s not clear to me how to disentangle trust in the medium of exchange from trust in the store of value, since people clearly use cash for both, but it is clear that a great many other tradable items can easily usurp cash once technology has acted to shift them from being a store of value into a viable medium of exchange (remember the tally sticks!) for their age. A couple of months ago we were discussing Nick Szabo’s classification of commodity derivatives as a kind of near-money, but there are plenty of exant near-monies already in use around the world, including mobile phone minutes in a great many developing countries. If I lived in Zimbabwe, it would take me years to learn to trust cash more than Vodafone minutes.
I think there’s an important element of trust missing, which is finality. With almost all computer-based systems, payments are conditional on some complex bureaucracy deciding to credit them. For example, see Gary Leff on some deal for frequent flyer miles:
Second, print everything and I mean everything. I printed the offer itself. I printed the page where I enter all the information about the rental (including my Skymiles number, etc). I printed the confirmation page. I’m saving all of those, and will save my rental receipt as well.
Why does he do this? Because he doesn’t trust the system. He’s prepping himself to go fight its decisions. In contrast, if they handed him a bearer certificate for 9,999 miles, or $200 cash (the rough value of the miles at $.02 per) he’d be done. He’d trust those things.
People used to sell things for cash on the barrelhead. When that cash was cold, hard cash, rather than fiat, print-it-yourself money, the deal was done when the money changed hands. You can’t lose any more than you have in your pocket (or under your mattress). Electronic systems don’t have that property, and that makes them harder to trust. You don’t just have to disentangle value-store from medium of exchange. You have to estimate the value of finality.