Sovereign currencies will remain and individuals will
Considerations
continue to measure and store their wealth (and be taxed) Money is a technology for managing the exchange of
in the local sovereign currency, as the relationship
value when the parties involved in transactions either between state and citizen remains unchanged.
don’t know, or don’t trust each other well enough to
develop the level of trust required. Consequently, the The customer–merchant relationship, on the other hand, is future of exchanging value looks like it will be shaped changing dramatically. Value is now defined by
primarily by social pressure rather than technology.
consumption and consumer preferences, rather than by
This is both an opportunity and a challenge.
production and the features and functions a merchant
chooses to make available. This means social rather than The challenge is that it is difficult, if not impossible, to technological forces will shape the future of payments.
predict the outcome of a socially driven change. We can Consumers’ deep-seated dislike of handling money is
see this on the stock markets, where quoted prices
pushing the payment – the exchange of value – from the represent the consensus opinion of the stock’s value
centre to the edge of their relationship with the merchant.
rather than the numerical result of a computation on the We expect these payments to be mediated via
firm’s potential, based on fundamental business
complementary currencies and loyalty schemes where
indicators. It can also be seen when active funds
value is defined relative to the local sovereign currency.
managers who pick stocks struggle to perform better than The current practice of payment at the point where the passive, automated, index-tracking strategies.
goods are exchanged or services consumed is likely to fall into decline.
The opportunity is that the future will not be
determined by the dispassionate logic of technology,
Settlement between institutions will move to new
enabling us to interact with the change as it unfolds
instantaneous payments mechanisms. These
– exploring, learning and creating opportunities
mechanisms may be based on exchanging value via a
and new roles for ourselves.
trusted intermediary in the short term, such as APCA’s New Payments Platform and the electronic conveyancing
With this in mind, we’ll discuss what different
platform of Property Exchange Australia. In the mid to stakeholders may consider as they navigate the
long term, settlement is expected to move to peer-to-peer future of exchanging value.
solutions, possibly based on block chain or other
technology platforms derived from cryptocurrencies,
which are more efficient and effective than intermediary-based solutions.
Finally, international transfers will migrate to new
peer-to-peer cryptocurrency-based solutions where
the solution’s native currency (such as XRP for
Ripple), other than facilitating the payments
process, is used only for triangulation between two
currencies not commonly traded.
The Future of Exchanging Value Cryptocurrencies and the trust economy 59
Merchants should consider the shift to virtual payments as Financial institutions should consider themselves the
a move to mobile payments. The long-term trend we see
platforms for the creation of payments solutions rather is for consumers to use their mobile devices to mediate than the providers of a small number of well-defined
their interactions with merchants, including payments. This end-to-end payments solutions. The payments
may not be via an e-wallet on a mobile phone, though. It is landscape is becoming an innovation battleground on
more likely that payments will be embedded in the end-to-which the winners will be determined by consumer
end service provided by the merchant. Apple’s Apple
preference rather than technical merit. While we can
Store app is a good example, as are the solutions
be confident that these payments will be in sovereign
provided by Skip and the Starbucks loyalty scheme.
currency, how and when these payments will be made
Merchants need to understand how customer payments
is not certain as we can see the cracks in the ‘buy at are woven throughout their interactions and that
the til ’ model. As we noted for merchants, the shift
customers will determine when and how payments are
away from the till will likely result in the growth of made. If merchants make the payment inconvenient (by
loyalty schemes that function as complementary
forcing consumers to find their way to a physical till, for currencies. Financial institutions have the expertise in example) they can expect customers to find more
AML/CTF regulation to ensure these loyalty schemes
convenient options (using Amazon’s app from the aisle, are safe, secure and compliant.
perhaps). Merchants should experiment with payments
technologies and solutions to find ways to build closer Financial institutions might also explore new ways of
relationships with customers rather than simply upgrading creating value for their customers. The current focus on to the latest solutions provided by the incumbents.
products and transactions is a result of a historically Merchants should also consider how they can use their
product-centric relationship with customers. However, as loyalty schemes to foster customer loyalty as a shared we’ve noted many times, value is now defined by
store of value rather than treating them simply as a
consumption rather than production. It’s been often said convenient tool
that banking customers want a home, not a home loan.
to pass discounts and vouchers to customers.
Similarly, the customer of a super fund wants a happy
Caution is required, though, as this shift may
retirement, not investment products.
expose merchants to AML/CTF regulation.
Financial institutions face a different challenge.
Payments now represent most of their interactions
with customers, typically somewhere around 80
per cent. We expect this figure to drop significantly
as payments move away from the point of sale,
enabling merchants to aggregate transactions.
These payments will also be hidden within the
merchant’s product or service portfolio.