Nevertheless, a survey of the app’s users found that
Most airlines have moved their purchasing of engine
the ability to skip the queue wasn’t its most attractive operating hours to TotalCare® or a similar model, where feature. Instead, it was the elimination of the need to a flat cost per hour provides them with the engine,
pay at the point of sale, with customers ranking
services, monitoring, spare parts and a guarantee of on-payment convenience as either the biggest benefit or
time performance, with Rolls-Royce managing the risk
equal to the benefit of skipping the queue. Some
just as much as the revenue opportunity. This shift from customers see queuing and waiting for their coffee as
selling jet engines to hot air from the back of planes was a social occasion rather than a burden and take the
a significant factor in creating a low-cost airline industry opportunity to chat with other regulars or the staff.
by shifting the large capital expense of jet engines (often The payment, however, is seen as an unnecessary
about US$50 million) and the complexity of managing
burden. This may tie into a deeply held bias in many
the engines and their maintenance from the consumer to cultures that handling money is somewhat dirty.
provider.
Historical examples include the Christian Church’s
probation against charging interest in the Middle
The same trend is occurring in consumer products,
Ages, or the Qur an forbidding Muslims to charge
with a shift to consumers paying for what they use
interest on a loan, through to the modern usage of
rather than needing to own a product. Music streaming
the phrase ‘filthy rich’ to mean very rich, possibly
services such as Pandora37 and Spotify38 allow
having become so by unfair means, which originated
consumers to create personalised radio stations that
in the 1920s in the United States.
can stream the world’s music directly to their devices for a monthly fee. Flexicar39, ZipCar40, and GoGet41
Disconnecting payment from product Many of
provide cars by the hour so their customers don’t need the emerging ‘digitally native’ services are taking
to own a second car (or, in some cases, a first car) that this trend a step further and explicitly
is rarely used. Instead, they get access to cars parked disconnecting the payment from the provision of
at convenient locations around them, with their account the product or service.
settled automatically at the end of the month.
Products are increasingly transforming into value
A new generation of digital services is – as a design
-added services – servitisation. This has the effect of choice – moving the transaction to the edge of the
shifting payments from a transaction at the point of
relationship between merchant and customer. As with
sale to an ongoing subscription. TotalCare®, Rolls-
Skip, mentioned before, consumers prefer not to deal
Royce’s ‘power by the hour’ service for jet engines
with payment at the point of purchase. Uber builds on
mentioned earlier, is seen as the first and best
this insight by moving the payment beyond the flow of
example of this trend. Jet engines used to be sold at
service delivery to provide a better customer
competitive prices with margins made from the spare
experience. The app enables customers to order a car,
parts business. TotalCare®, first conceived in the
track the car as it arrives, hop out at their destination, 1960s but formalised in the mid-1980s, shifted the
then rate the driver. The only visual acknowledgement
relationship with the customer from products and
of the payment is the fare quoted when the car is
spare parts to a long-term contract (often spanning
ordered. The trip is bil ed to the customer’s credit card multiple decades) to keep the engines running.
automatically at the end of the trip.
The Future of Exchanging Value Cryptocurrencies and the trust economy 39
The end of cash
Finally, products are being transformed into value
Predictions about the end of physical cash typically
-added services – servitisation – converting a
assume it will be replaced by something new, a
payment for products or services into an account
functionally equivalent technology that is more
settled at the end of the month.
convenient, cheaper and easier to use. This may be
NFC and the existing payments networks or it may be
The shared value created between a merchant and
something more radical, such as Bitcoin or another
customer is increasing being captured in a shared
stateless cryptocurrency. The shift to electronic
account, either a stored value card or loyalty scheme, payments has been a significant driver in the decline
that is settled periodically. The merchant and consumer of cash. New digital technology is replacing the old
use this shared account to build trust. If the customer physical technology, enabling us to buy online from
needs to commit funds to the account before transacting, far-flung merchants. The assumption is that while
the customer must trust the merchant.
cash may disappear, the manner in which we pay will
If the merchant allows the customer to go into
remain largely the same, with customers and
credit before reconciling, the merchant must
merchants exchanging value at the point of sale.
trust the customer.
It may be wise, however, to think of this as a shift
We assume that digitisation implies swapping physical
from the merchant’s PoS system to the customer’s
tools – cash and cheques stored in a leather wallet or smartphone. Payments are not just moving online,
purse – for digital tools such as credentials stored in they’re going mobile, and increasingly the PoS is
an e-wallet on a smartphone. The new technology
accessed via the smartphone. While most ‘card not
replacing the old. Digital technology, however,
present’ transactions are from an online store, a
enables us to do more than remove pain points and
growing proportion may be customers using mobile
streamline existing practices.
devices to buy products while standing in physical
stores. These may be purchases from the store, such
Hard currency’s utility rests on its ability to streamline as using the Apple Store app on a smartphone to buy
transactions between two parties who have little
goods within an Apple Store or the purchase may be
knowledge of, or trust in, each other. Today this trust can from a competitor, with the customer using a third-be built with the wealth of communication tools and data party app (such as the one provided by Amazon),
that the Internet and smartphones provide, enabling some with the physical store being little more than a
of the more prominent loyalty schemes (particularly those showroom. Moving the point of sale from the
managed by airlines) to take on similar functions to the merchant’s premises to the customer’s smartphone
leather money tokens issued by some shops, mentioned
eliminates the need for cash.
earlier. These shared accounts, in effect, are denominated by complementary currencies that can expose the firms
Digital technology is also enabling the payment to be
that create them to all the benefits and risks of managing a moved in time. Starbucks Rewards brings the
currency.
payment forward, creating a sunk-cost to foster
consumer loyalty. Skip, on the other hand, allows the
While digital transactions are replacing physical
payments to be pushed into the future, removing one
transactions, the bigger threat to cash in the
decision (“How wil I pay?”) from the buying process.
longer term may be use of shared accounts –
Clearance occurs when the customer orders via the
complementary currencies – to reduce the need
Skip app. In both cases, the merchant can aggregate
for traditional payments.
transactions to reduce interchange fees, or even
avoid them entirely by using a direct bank-to-bank
transfer to route settlement through conventional
debit mechanisms or via an alternative low-cost
service such as CurrentC™. Payments are moving in
time away from the point of sale.