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In the depths of a secret vault in London there is something that very few people in the world get to see: a billion pounds sterling in cash.
At that place, at the end of each day, the money arrives from stores throughout the country. The next morning, it leaves to be deposited at ATMs.
There are those who believe that in only 10 years that place will not exist .
In 2015, in the United Kingdom, card payments exceeded cash for the first time.
Other countries go further.
South Korea no longer has coins. Denmark and Sweden are pioneers in reducing payment with tangible currency; in fact, Stockholm is considering turning the country into a cashless society by 2030; Already in 2016, only 1% of the value of all payments was with coins or bills.
If that is the coming reality, who will benefit? And who will ultimately control the money in the future?
You and me … and they
If you sell me something and I pay you with bills, we will make a direct transaction in which nobody but you and I benefit.
But if that transaction were digital, someone would have to manage it.
There is a space between you and me, and money is generated in that space .
That is why there is great interest in that you stop buying with metal and paper.
The new cashless world is slowly becoming a reality.
There was a fundamental change in the way we think about money, and it did not happen by accident .
In 1998, Peter Thiel, a technology entrepreneur, gave a talk at Stanford University in California.
One of the people listening to him was just there to make a proposal.
When the talk ended, Max Levchin, a computer programmer for 23 years, took the podium, spoke for less than 10 minutes reached one agreement changed or the nature of money and how we spend it .
The old times
At that time, sending money from person to person was a clumsy process.
You could make a wire transfer, but it was expensive and slow. You could send a check, even slower. Or send cash by mail: too risky.
The plan of Thiel and Levchin was to allow people to transfer money instantly through electronic devices.
“If we created something that replaced cash, not only people in Silicon Valley, but in industrialized and poor countries could take advantage of the system,” Eric Jackson, who was VP of marketing for the new company, told the BBC: PayPal .
“One reason we succeeded was that, without the intention of offending the banks, we were competing with monolithic , bureaucratic and huge tanks , which take forever to change,” said Jack Selby, PayPal’s corporate development VP in those years. .
“We grew up at a scandalous pace … it was scary in some ways .”
A year after its launch, PayPal had a million users.
They started charging a 3% transaction fee. And two years later, they reached a lucrative deal with the online auction site eBay, which accelerated its global growth.
” It caught on like a wildfire, I remember the first time it reached a million in a week, it was very exciting, and before you assimilated it, it was a million every day, and then, a million every hour.” counted Jackson.
And it just kept growing at that exponential rate. eBay tried many times to buy from PayPal and, in 2002, it succeeded.
Thousands of kilometers from Silicon Valley
PayPal had made the digital nanosecond transaction a reality . The idea that you could register online and move money changed the rules of the game.
But there was a much larger rule change in the money transfer business engineered by a mobile phone provider.
And it happened 16,000 kilometers away from Silicon Valley, in Nairobi, Kenya, a city about to become a cash-free society.
In 2003, the Department for International Development (DFID), foreign aid arm of the British government, noted that p ew Kenyans had bank accounts . Banks were too bureaucratic and did not have branches in rural areas.
DDI made a deal with Safaricom, a subsidiary of Vodafone, to find a solution.
The result was M-Pesa. With just a mobile number and a code you can send M-Pesa credit to anyone. The phone is one of the most basic and the transactions are encrypted, very simple but safe.
Kenya was ahead of the world. But that bright and positive vision of empowering those excluded from the services of the financial sector in Africa is only half of the story.
The other half
Today, one third of the economy of that country goes through M-Pesa , Kenya only has 19 million subscribers.
Its reach and influence is due in large part to the monopoly of a telephone company.
“What happened in Kenya is a very good example of how a monopoly can emerge below the radar of the regulatory system,” says Izabella Kaminska, an analyst with the Financial Times newspaper.
“Essentially, the real unit of the economy is the Vodafone unit ,” says Kaminska.
“One firm that is not a bank suddenly became the largest emitter of money in Kenya , ” he stresses.
In addition, it was the result of a British government department giving a million pounds sterling to Vodafone, a private firm, to develop a product with which it would earn a fortune.
“These are reasonable arguments at first sight,” says Nick Hughes, who developed the technology, “but in reality, the problems that M-Pesa resolves in Africa are deep problems and the need is very acute.”
Coffee + cake
The landscape was changing rapidly and a deal made by a bank would allow us to more clearly imagine life without cash altogether.
In 2007, the Royal Bank of Scotland (RBS), which was the richest bank in the world, hired the Gemalto company that had the technology to make possible a new type of payment, without contact .
The final goal was clear. If small cash transactions are made with a card, the number of transactions increases, which benefits the banks.
They performed a test in the RBS staff canteen.
The volume of purchases with cash was drastically reduced. In addition, they noticed that by paying without contact, instead of just buying a cup of coffee, people bought coffee and a cake.
The RBS experiment showed that people spent more making contactless payment .
Unknowingly, the technology was taking advantage of the work of a scientist from the Massachusetts Institute of Technology, who subjects the way we think to intense scrutiny .
Drazen Prelec has spent almost 20 years investigating what happens in the brain when we made the decision to pay in cash or with a card.
“MRI detects activity peaks in the region of the brain known as insular, associated with unpleasant feelings such as pain, rejection, disgust,” he explains to the BBC.
“It tells us that there is pain associated with spending money, it is not physical, it is anxiety and aversion, and it may not be conscious, but it is there, the cards anesthetize people and eliminate the pain of payment, people buy more.”
The birth of an economy
In the same year in which the financial crisis plunged the world economy into recession, an incipient digital economy was opening its virtual doors.
It would be worth more than US $ 140,000 million, and began with the launch of the iPhone in 2007 .
At the beginning, the device only allowed to install applications created by Apple, but in a few months everything changed and a multimillion-dollar economy of applications was born.
The iPhone became an extraordinary device to sell and the App Store caused a gold rush among developers attracted by the easy access it granted to the hundreds of millions of credit cards linked to iTunes accounts.
Apple earns around 30% of each application downloaded from its App Store . But established as a policy not see what you bought or keep the transaction data
Your ultimate goal is to sell smartphones and hardware, and link every aspect of your life to your brand.
When the rival Google launched a similar service a year later, Android Pay, was interested in something else.
The answer is in the fine print of the terms and conditions.
“We can collect information about this transaction,” including the date, time, “the location of the merchant, a description provided by the seller,” any photo you choose to associate with the transaction, “the names and emails of the seller and the buyer.” , the type of payment method, “its description of the reason for the transaction and the offer associated with the transaction, if applicable”.
Do you remember that space between you and me in the transaction, in which companies make money? Now that space is full of data.
T u t e have become the new currency .
“What the technology companies can do with the data is endless, let’s not forget that the data finances the internet, most of all those applications, of everything you see, are paid by the advertisers,” said Izabella Kaminska.
“Technology firms really see data as the new oil. And l will data on payment s are the oil of better quality in the business . They are a complete record of how you spend and live your life.”
This is the era of Big Data, with algorithms that analyze every aspect of your behavior. That is our reality.
Technological companies are the central nervous system .
And a technology giant detected an opportunity that is not limited to taking advantage of the data of the clients of a particular company … how about capturing the data of the economy of a whole country and, eventually, of two thirds of The world population?
The gold standard
In January 2017, a private jet landed in the dark of the night at Kenyatta airport in Kenya.
One of the most influential technology billionaires in the world came to Africa with the intention of learning about mobile money: Mark Zuckerberg.
Your visit was timely. At the time of its trip to Kenya, the Facebook subsidiary, WhatsApp, was about to test person-to-person payments in India with the aim of deploying money transfers to its 200 million users there.
M-Pesa is the gold standard to follow.
One of the great challenges for companies is to conquer the informal economy. In Nairobi, more than 90% of people shop at typical street vendors, not supermarkets. And they do it using M-Pesa.
Fortune is at the bottom of the pyramid .
Someone like Zuckerberg has the ability to scale the M-Pesa model, offer a global service and achieve what is fostered in the technological world: a monopoly.
The goal is to be an octopus. M-Pesa is an example of a very successful octopus, which effectively took over Kenya’s money supply in a covert punch. No one noticed until it was too late.
However, the target may be bigger: not only provide another mobile money service, but converted into “the” mobile money service .
A monopoly of money
“I want a handful of companies to have the opportunity to control something as fundamental as where I can spend my money?” Said Mike Weston, a data science consultant.
” No ”
“As in all other industries, there are dangers of monoculture,” says David Birch, an expert in digital money. “We do not want a situation where we all depend on one type of money and, if something goes wrong, we’re all in trouble.”
Neither governments nor banks nor technology have killed cash yet, but thanks to them, the way we think has changed.
Money in cash, in the form of coins, began to be used for the first time 600 years BC and was an invention as sophisticated as the iPhone .
Small metal objects exchanged as a sign of trust. That trust now we are depositing in technology companies.
Maybe it’s worth stopping and thinking if we really want that economy without money, before it becomes a reality.