Dave Birch has some harsh words for the European Central Bank (ECB).
“They should be prosecuted,” he says. “For printing the 500 euro [US$673] note. What possible use could there be for it except illegal transactions?”
You might think that the ECB would have more pressing matters at the moment, with the euro threatening to collapse into a shuddering pile of debts and sky-high bond yields. However, the point that Birch, a director at electronic transaction consultancy Consult Hyperion, is making is that it is things like printing physical notes that have helped to get the eurozone into its present calamitous position: one where Greece’s tax receipts in no way reflect actual spending by its citizens, and Italy’s “black economy” is reckoned to be about 20 percent of the overall economy there.
However, there is another way. Money is turning virtual. More and more of our transactions are digital anyway, but soon even those for which we think cash is essential — the low-value transactions that make up about 65 percent by volume (but far less in value) of transactions in the UK annually — will go digital.
From next year, Londoners will be able to use their Visa cards just as they do their Oyster cards, swiping them against monitors on buses and at underground stations to pay for their journeys.
You can even, if you are feeling Dick Tracy-ish, now get a ￡99 (US$155) watch that can be loaded with money, like an Oyster, and used to pay for your lunch/lattes/wine with one quick tap at high-street chains such as Pret A Manger, Subway, McDonald’s or Oddbins. Your transactions are limited to a maximum of ￡15 a time, and it is being marketed as great for runners (“Buy your bottled water! Your newspaper! Without taking your wallet!”) or for parents who want their children to pay for little bits and bobs, rather than blowing all their money on some gewgaw. Or, indeed, on other stuff that is sold on the streets, for although drug dealers are resourceful, they have not quite got themselves hooked into the electronic payments system yet.
Birch, though, thinks the “watch2pay” system will be a flop.
“Kids don’t wear watches,” he says simply. “They use their phones.”
And it is the mobile that is really powering the change in how we spend money.
“One of the big things we have been looking at is whether there’s enough of an appetite among the banks to develop a mobile payments structure,” says Sandra Quinn, head of communications at the British Payments Council, which handles transactions at the major clearing banks. “You’d use your phone to transfer money to, say, your best friend — you text your bank and tell it to send Pete ￡20.”
Sounds futuristic? Something like that has been running in Africa since 2003: called M-PESA (set up with funding from the British Department for International Funding and Development), it lets people transfer credits to mobile phones, which they can then swap for cash at various outlets.
So there is no real problem in doing it. The real problem is in our attitudes to money, and transactions.
People do love old ways of doing things. When the British Payments Council announced two years ago that checks were entering the sunset of their life and would be phased out by October 2018, the howls of outrage could be heard up and down the land. The council said that after 350 years, there would be “no scenario” for writing checks by that date. (Even so, its forecast suggested there would be around 400 million checks written in 2017, compared with 750 million in 2008.)
No scenario? What about the school dinner money checks, people asked? What about paying the builder who did that work on your house? What about all those transactions where the payee is not necessarily a shop, to whom you might want to make some small or gigantic payment? What about them? Questions were asked in parliament. Early Day Motions (the member of parliament’s equivalent of a Facebook petition) were signed. In the face of the media storm, the British Payments Council relented. Checks could stay, it said.
However, secretly, experts expect that they will go away anyway. Quinn suggests that the 18-year-olds of today — used to buying things online, whether using credit cards, Facebook credits, iTunes vouchers, PayPal or other virtual methods — probably will not, in seven years’ time, want to find a piece of paper on which to scribble their name. They will have some M-PESA-like system that will enable them also to pay the builder, or for the school lunches.
Birch is more blunt.
“I’m incensed that [the UK’s Payments Council] went back on killing off cheques,” he says. “There are plenty of countries where people don’t even know what a check is. The idea that by 2018 you won’t be able to do anything with a mobile phone that you can with a bit of paper and a pen now is just laughable.”
Indeed, some of the biggest names in mobile are already pushing things in that direction. Google has for the past year included systems in its Android smartphone software that let suitably equipped phones use “Near Field Communications” (NFC), where your cellphone stores your debit or credit card data, and you enter a pin and wave it near a suitably equipped register, and your payment is made.
The NFC forum includes 140 companies, with every major smartphone manufacturer apart from Apple, which has not yet indicated what it thinks of NFC. (The watch2pay uses an NFC implementation from MasterCard.) With more than half of the UK population already having a smartphone, and at least a third of the US population, the tide of cellphones enabled to do some sort of mobile transaction is rising.
However, Birch thinks one of the biggest benefits of digital money comes through its ability to help our floundering governments. The odd thing is that all the money that governments have access to is already digital, and in a sense imaginary: The European Financial Stability Facility, or the Bank of England’s latest round of quantitative easing, are just numbers in a computer.
There is not actually a giant pile of ￡50 billion worth of banknotes. However, the money that is causing problems is the real, physical stuff, which changes hands when builders or plumbers (or mafiosi) want to avoid their transactions being tracked, which means that tax-starved governments are missing out.
Do not think they have not noticed it, either. One of Italian Prime Minister Mario Monti’s first acts after coming into office was to announce the lowering of the ceiling for cash transactions to 300 euros. France is doing the same, pushing it down to 1,500 euros. That is why it is getting harder to get large cash amounts out of your bank: The expectation is that you are trying to do something illicit.
In the end, the rise of electronic transactions (now 70 percent by volume of high-street spending in the UK) may just be a matter of convenience: as our mobile phones and cards all go contactless, able to do transactions with a wave, we might find it simpler to go with them.
And the school lunches? We might still keep cash for them. By 2018, with inflation being what it is, British might be paying in ￡50 notes. At last they will have a legal use.
The Donald Trump administration’s approach to China broadly, and to cross-Strait relations in particular, remains a conundrum. The 2025 US National Security Strategy prioritized the defense of Taiwan in a way that surprised some observers of the Trump administration: “Deterring a conflict over Taiwan, ideally by preserving military overmatch, is a priority.” Two months later, Taiwan went entirely unmentioned in the US National Defense Strategy, as did military overmatch vis-a-vis China, giving renewed cause for concern. How to interpret these varying statements remains an open question. In both documents, the Indo-Pacific is listed as a second priority behind homeland defense and
Every analyst watching Iran’s succession crisis is asking who would replace supreme leader Ayatollah Ali Khamenei. Yet, the real question is whether China has learned enough from the Persian Gulf to survive a war over Taiwan. Beijing purchases roughly 90 percent of Iran’s exported crude — some 1.61 million barrels per day last year — and holds a US$400 billion, 25-year cooperation agreement binding it to Tehran’s stability. However, this is not simply the story of a patron protecting an investment. China has spent years engineering a sanctions-evasion architecture that was never really about Iran — it was about Taiwan. The
For Taiwan, the ongoing US and Israeli strikes on Iranian targets are a warning signal: When a major power stretches the boundaries of self-defense, smaller states feel the tremors first. Taiwan’s security rests on two pillars: US deterrence and the credibility of international law. The first deters coercion from China. The second legitimizes Taiwan’s place in the international community. One is material. The other is moral. Both are indispensable. Under the UN Charter, force is lawful only in response to an armed attack or with UN Security Council authorization. Even pre-emptive self-defense — long debated — requires a demonstrably imminent
Since being re-elected, US President Donald Trump has consistently taken concrete action to counter China and to safeguard the interests of the US and other democratic nations. The attacks on Iran, the earlier capture of deposed of Venezuelan president Nicolas Maduro and efforts to remove Chinese influence from the Panama Canal all demonstrate that, as tensions with Beijing intensify, Washington has adopted a hardline stance aimed at weakening its power. Iran and Venezuela are important allies and major oil suppliers of China, and the US has effectively decapitated both. The US has continuously strengthened its military presence in the Philippines. Japanese Prime
RSS