The future of money: Intangible economy and Electronic money Charles Goldfinger Central Banking Publications Seminar Cambridge,

The future of money: The future of money:

Intangible economy and Intangible economy and

Electronic moneyElectronic moneyCharles GoldfingerCharles Goldfinger

www.gefma.com www.fininter.netwww.gefma.com www.fininter.net

Central Banking Publications Seminar Cambridge, September 5, 2002

GEF

© Charles Goldfinger

The future of moneyThe future of money

Presentation plan The new economic landscape Electronic money Three scenarios Opportunities, risks and challenges


The new economic landscapeThe new economic landscape

Feudal economy

FiduciaryFiduciaryMoneyMoney Capitalist economy

ScripturalScripturalMoneyMoney ? economy

??MoneyMoney

Money and economy


?Service

Economy

InformationSociety

KnowledgeEconomy


InteractionEconomy

Plug-&-PlayEconomy

DigitalEconomy

Buzzword proliferation



ServiceEconomy

InformationSociety

KnowledgeEconomy

InteractionEconomy

Plug-&-PlayEconomy

DigitalEconomy

Shift to the intangibleShift to the intangible

Defining trend


What is the new economy ?What is the new economy ? Shift to the intangible

Price

in USD

Weight

in lbs)

Price

per lbs

Pentium III 851 0,001984 42 893,00

Viagra 8 0,00068 11 766,00

Gold 301 0,0625 48 277,00

Mercedes Benz E-class 78 445 4134,00 19,00

Hot rolled steel 370 2000,00 0,20

Source : G. Colvin, Fortune


The new economic landscapeThe new economic landscape Three dimensions of the Intangible economy

Demand: Intangible artefacts Final consumption products or service

Information, Entertainment, Communication, Finance... Supply: Intangible assets

Intermediate production factors used by businesses to create artefacts and generate value added

Brands, Intellectual Property, Human Capital... Economic structure: Dematerialisation logic

New rules of Business organisation Competition ValuationAbundance, Obsolescence, Volatility...


The new economic landscapeThe new economic landscape Intangible markets

Planetary haggling Loss of relevance of traditional price yardsticks

Production costs• Falling marginal costs

Willingness to pay • Free-riding ubiquitous

Pervasive volatility Toward real-time pricing

• Yield management New pricing approaches

Individualisation Getting rich on crumbs Third party



Networks and markets Markets as networks

Network externalities Liquidity

Broad access Interconnection requirements

Networks as markets Access and capacity management Quality of service delivery adjudication Trust and identification infrastucture

Markets NetworksNetmarkets


Electronic moneyElectronic money

Largely unsettled realm Technology Economics Institutional set-up

in the state in the state of fluxof flux

Make or break issue Ontological:

What and Why ? Definition and purpose of e-money What is the new ?



Conceptual confusion Technology-based definition

From « E-cash to megabyte money » Eternal promises of financial smart cards

Used-based definition Loyalty points LETS

Contrasting views Apocalyptic enthusiasts

The end of monetary system as we know it Sceptical incrementalists

Nothing really new



Fiduciary money

Elements of a definition

Unit of account

Means of Exchange

Store of value

Unit of account

Means of Exchange

Store of value

Scriptural money Electronic money

Store of value

Means of Exchange

Unit of account


Electronic money Electronic money Elements of a definition

Electronic money as a Digital Value Contract Software based Network-resident Continous rather discrete value

Infinitely granular

Intelligent money Complex transactional rules Event-based value

Fungibility Monetary Time Intellectual property Peer recognition

Digital barter


Future of moneyFuture of money

Three scenarios Private currencies

Community currencies LETS

Corporate currencies MSFT dollar

Denationalised currency Hayek

Anybody can issue e-currency…but who will clear and settle



Three scenarios Global currency: the geo

Logical consequence of economic integration ? Symbolic value Technologically feasible

Global RGTS Politically challenging

Macro-economic convergence Euro as a model

• The jury is still out



Three scenarios Market nexus

DVCs Value and image of value

Extension of scope Commodities Financial instruments Asset classes Enviromental protection Social protection

• Macromarkets



Three scenarios Displacement or coexistence ?

Displacement Denationalised currencies and the geo Corporate currencies and DVCs

Coexistence DVCs and the geo

Likely scenarios Strong DVC momentum Geo question will return



Opportunities Aligning intangible economy and electronic money

Allowing higher speed limit ?

Vector of new products and services Deployment of new business models

Multi-tier third party systems Multi-revenue stream aggregation

Easier capture of intangible value



Risks Conceptual confusion Unstable institutional framework and governance Loss of control Systemic volatility and fragility Social backlash Growing dependance on technology


The future of moneyThe future of money Risks

Wither central banks ?

“ The key to any such development is the ability of computers to communicate in real time to permit instantaneous verification of the creditworthiness of counterparties. The realisation of this possibility would make money’s unique role, as the means of final settlement redundant. If final settlement could be made without recourse to the central bank’s money, the bank itself would cease to exist. Present monetary policy preoccupation with the need to limit money creation would give way to the more “technically neutral regulation” of the integrity of the computer systems that verify the creditworthiness of the counterparties’ assets.”

Mervyn King, Bank of England



Critical challenges Reconciling innovation and soundness Defining new forms of governance

Co-opetition Networking

Harnessing and leveraging technology Code as a regulator

From International Financial Architectureto

Global Financial Technology Infrastructure

The future of money: Intangible economy and Electronic money Charles Goldfinger Central Banking Publications Seminar Cambridge,

Documents

money money

new slide

new economy

definition electronic

future of money opportunities

economy digital economy

future of money presentation

party slide