Digital Money

There’s seemingly a lot of information about mobile payments on the internet in English, but most of it is breathless, “Omg the future is here”-style reporting, and not much that thinks about the implications for people and economies.
Let’s talk mobile payments on the personal level first:


Have you ever used mobile payment, like Line payment?
Why and why not?
What’s the advantages and disadvantages to using mobile payment?
Is there a privacy issue in using mobile payment?
Is there a security issue?
Can you accept a world that does not have coins and bills?

Below there are (way too many) articles I found discussing various aspects of both mobile payments and cryptocurrencies.
The main thing I learned is that cryptocurrencies and mobile payments are not at all the same thing, but that mobile payments have the potential to function as international currencies, which have a lot of interesting implications.


Applecash, an unintentionally international payment system?
Money you receive (via Apple Messages) from others is added to your Apple Pay Cash card that will live in your Wallet app.
While you can transfer this cash to your bank account if you want, you will also be able to use it directly to make purchases using Apple Pay in stores, in apps, on the web, or anywhere else that may eventually support the payment system.
That’s important because it means Apple has taken a fairly large step toward creating its own take on cryptocurrency.

This is real money, after all, that exists only in Apple space until you turn it into something else — a purchase, a service or "real" money in your account. You’ll also be able to share it with other people.
While the service will be U.S.-only on launch, it will extend, and it will be interesting to see how Apple supports person-to-person payments across borders. To enable the service, Apple is working with Green Dot Bank.
The partners will need to unravel complex questions, such as: If someone in Ireland chooses to use Apple Pay Cash to send money earned in Ireland to someone who works at an iPhone factory in China, in what location is the “value of that exchange created”?

“Personalised Marketing”: Do People really want this?
“We look at mobile payments and we take it as a given that this is the way the industry is moving. We are going to pay for things with our phones,” said Alain Falys, co-founder & CEO of Yoyo Wallet. “What is more interesting for us, is the question of the relationship between the consumer and the retailer. A lot of the big players today have a narrow focus on payment, but they aren’t bringing added value beyond that. We are leveraging the untapped data from transactions to gain insights and create personalised marketing.”

The idea is to change the relationship between retailer and consumer by offering a more personalized experience. For instance, instead of walking into a coffee shop to buy a cup of coffee, users will receive an offer for a better deal, such as 12 cups of coffee for the price of 10, which they can purchase in advance and redeem whenever they like.
This is essentially the same idea as an old fashioned loyalty card, but in reverse. This is a completely new way to buy things that is being enabled by the same mobile payment innovations that we see from other players.

Settling transactions between private individuals without cash
There are a host of payment apps that allow users to easily move money to other individuals without the hassle of cash. This is perfect for when you’re out with a group of friends and struggling to split the bill. These apps streamline that by enabling one person to pay with a credit card and everyone else to pitch in via an app.

Creating online stores through existing social media: Instagram + Line
Enterprising businesses in Thailand have essentially turned Instagram into a digital storefront, where in their bio they list their account names for a popular messaging app called Line. Sometimes, even individual photos on Instagram will be location-tagged with the business's Line handle. This makes it easy for customers to find those businesses on the messaging app, and the rest of the transaction - from product selection to payment — takes place from there. Retailers have been known to provide personal customer service over Line because of the app's natural support for one-to-one messaging, according to Bivens.
"The platform has emerged as arguably the most trusted channel of interaction outside a physical encounter," he writes. "I've even heard of cases where people send LINE photos of bank transfer confirmations to provide proof of payment: this almost suggests that people trust LINE more than the credit card processing infrastructure!"

For many Americans, the term "mobile payments" has meant literally using our phones - the actual blocks of metal and plastic - to check out, usually by way of radio chips embedded in the device. In Asia, "mobile payments" is coming to mean paying for real-life goods on or from the phone, almost exclusively by way of software.

You pretty much can't use cash in China, what do you do if you are travelling there?
Mobile pay is growing so rapidly in mainland China that as a foreigner I sometimes found it difficult to complete basic transactions without it.
When I tried to pay at a Beijing McDonald's on a late night, the only payment options were China's Union Pay credit card system, Apple Pay or WeChat Pay and Alipay. As an American visitor without a Chinese bank account, I wasn't able to find a way to use those systems and the store clerk wouldn't take my cash.
"Cash is accepted in all McDonald's restaurants across China. After our investigation, we believe this is an isolated case that happened during night shift change, and thus, all cash counters were temporarily closed," a McDonald's China Customer Care Center told me in an email.
Taxis were also nearly impossible to hail in Beijing due to the rise of Didi, a ride-hailing app that bought Uber's China operations in a deal worth $35 billion last summer. Because Didi was linked through WeChat, I couldn't use it without a Chinese bank account.
The dominance of mobile pay also means companies like Ant Financial and Tencent have access to hordes of personal data. That data can then be shared with the Chinese government, which prioritizes control. Some parts of China have been testing a personal credit score system linked to mobile pay data.

Your phone is now more un-losable than ever
But regardless of safeguards, for consumers like Ms Zhang the fact that her phone is now her wallet means the consequences of losing her phone are far greater than before, and the inconvenience as well.
"I find myself checking every few minutes whether I still have my phone, because I've become so reliant on it I can't imagine what I'd do if it's lost," she said.

"Demonetisation": Did the Indian government try to force people into digital platforms?
Retired Indian diplomat Zikrur Rahman is most comfortable using cash.
But more than three months ago, he was forced to apply for a debit card and get an e-wallet account after Prime Minister Narendra Modi last November abruptly pulled 500- and 1,000-rupee (S$21.40) banknotes from circulation, leading to a nationwide shortage of cash.
The Reserve Bank of India printed new 500- and 2,000-rupee notes, but it was not fast enough and amid the chaos of long queues outside banks, Mr Rahman, like millions of other Indians, was pushed into adopting digital payment methods.
"I find it convenient to use (e-wallet) Paytm to pay for my prepaid mobile phone and other small amounts. But otherwise I have gone back to using cash. I don't use the debit card because they take transaction costs. I find it easier to go to the bank and withdraw money," Mr Rahman told The Sunday Times.
Since coming to power in 2014, Mr Modi has brought greater focus on pushing India's towards a digital economy.

But persuading Indians to give up cash remains tough.
In rural areas, banking infrastructure remains poor and internet facilities meagre. Financial illiteracy is a key problem, said experts.
"Eighty-five per cent of retail payment transactions in India still happen through cash," said Mr Naveen Surya, chairman of the Payments Council of India, adding that many Indians had no knowledge of digital transactions.
"For the first-time digital users, we need to educate them in a way that they don't get confused."
With cash coming back into the system, many have switched back.
Vegetable vendor Manoj Shah, 28, said most customers bought vegetables through Paytm at the height of demonetisation.
"Now only two madams still buy using Paytm. Everyone else has gone back to using cash," he noted while delivering vegetables to households in South Delhi.

Only 20% of transactions in South Korea are in cash
When restaurant manager Sam Park, 31, splits bills with friends, he simply "tosses" them the money using a money-transfer mobile app.
Naver Pay is his preferred mobile payment system for online shopping and a credit card for everything else.
"I don't use a lot of cash these days, maybe only when I go to a traditional market," he told The Sunday Times.
"A friend told me about Toss last year. It's an easy way to send money, and I just used it last week to split a restaurant bill with four friends."
Cash is no longer king in South Korea, as more people switch to using credit cards, digital wallets and mobile apps to make payments and, sometimes, just swiping their mobile phones - think Samsung Pay, which is pre-installed on newer models of Samsung smartphones.
Only about 20 per cent of all payments in South Korea are made with cash - among the lowest in the world - according to the Bank of Korea, which is pushing for Asia's fourth largest economy to go cashless by 2020.

Japan prefers cash
For all its tech savvy, Japan still prefers cash to cashless payments.
And, it is not for the lack of options. Mobile wallets debuted as early as 2004, while Apple Pay and Android Pay services are both available.
More prevalent is the mobile tap-to-pay technology developed by Sony, known as FeliCa, embedded in the Suica and Pasmo rail passes that are similar to ez-link in Singapore.
They are stored-value cards that can also be used in taxis and convenience stores.
But, latest available data from the Japan Consumer Credit Association shows that cashless payments only accounted for 17 per cent of the country's overall retail consumption in 2014.
This is lower than South Korea's 85 per cent, Singapore's 56 per cent and India's 35 per cent.
And, according to Bank of Japan data, the value of digital e-money transactions stood at 4.6 trillion yen (S$57 billion) in 2015, a fraction of the 49.8 trillion yen in credit-card payments.
Separately, a survey by insurer Meiji Yasuda last August indicated that cash was still the preferred payment method for as many as 70 per cent of Japanese across all age groups.
Experts have noted that Japan's jitters over going cashless stem from decades of economic stagnation, leading to a fear of overspending and incurring debts.
And then, there are concerns over virtual security in a country where people feel safer carrying around wads of cash, given the low crime rate.
Sales manager Keisuke Okui, 35, told The Sunday Times that he is an Apple Pay convert, after the technology was introduced in Japan with the launch of the iPhone 7 last year.
He lauds the benefits of going cashless: "I no longer need to carry my wallet, being able to do most of my payments by phone, so it is really convenient for me."
But, he observes his friends favouring banknotes, even for big-ticket items.
He said: "Even if they go to restaurants, the bill could be 100,000 yen and they will still pay by cash.
"Japan is still quite conservative, and there is a mindset that with credit cards people may spend more than what they actually have."

i.e., for buying drugs
Cryptocurrencies are a new asset class that enable decentralized applications … And since we're claiming it's a new asset class I call these cryptoassets, because the word cryptocurrency is a bit of a head-fake. It brings a lot of baggage of what a currency is and that is really not what these are. These are a new asset class.
But what does it do?
Like every other class of assets, cryptoassets support something, Ludwin explained. Securities support corporations; treasuries support government  efforts to raise capital; mortgages support homeowners; cryptoassets support decentralized applications.
"What we really have to ask is, 'Are decentralized applications valuable?,' and then come back to the question of whether cryptocurrencies are," Ludwin said.
And frankly, he said, not all DAPPs really are valuable. This has to do with the fact that, fundamentally, a decentralized application doesn't do anything that can't already be done with a centralized application.
"On every dimension, the centralized counterparts tend to beat the pants off the decentralized ones," Ludwin said. "They're faster, they're cheaper, they're more scalable, they have a better experience, they operate without drama, they don't have rapidly fluctuating values underneath them."
There's just one thing that decentralized apps do better: censorship resistance. Access to DAPPS is open and transactions are unstoppable. So, Ludwin said, the question becomes, who benefits by giving up speed, cost, scale and user experience in order to achieve censorship resistance?
Using this question as a starting point makes it far easier to say whether a cryptocurrency has value. If it supports a DAPP that consumers or industries or governments value and want to use, then the cryptoasset will be something that individuals and organizations will want to own.
In short, Ludwin said, "I know that in the long run, a cryptocurrency's value is going to be driven by people using the underlying decentralized application."

Will China have its own cryptocurrency?
China’s central bank is going digital.
After assembling a research team in 2014, the People’s Bank of China has done trial runs of its prototype cryptocurrency. That’s taking it a step closer to becoming one of the first major central banks to issue digital money that can be used for anything from buying noodles to purchasing a car.
For users transacting over their smartphones or laptops, a PBOC-backed cryptocurrency probably wouldn’t seem much different to existing payment methods such as Alipay or WeChat. But for sellers, they would get digital payments directly from the buyer, lowering transaction costs as the middleman is cut out of the process.
At the same time as it builds up its own capabilities, the PBOC is increasing scrutiny of bitcoin and other private digital tenders. It doesn’t want a bitcoin bubble to blow up. And since currencies have historically been issued by the state, not private players, it doesn’t want to cede the cryptocurrency space to companies it has no control over.

What is Blockchain?
"Cutting costs is an obvious benefit, but the impact of shifting to blockchain-based digital money from the current payment structure goes beyond that," said Larry Cao, director of content at the CFA Institute in Hong Kong. "There’s a potential you can pay anybody in the system, any bank, and any merchant directly. Blockchain will change the whole infrastructure. This is revolutionary."

Blockchain is basically a digital ledger that contains the payment history of each circulation of the unit. If the PBOC’s version is widely adopted, that would challenge existing intermediaries such as banks and payment services like Alibaba affiliate Alipay and Tencent’s WeChat -- two leading online payment networks.
"I won’t say banks and payment companies will disappear, but their role would definitely change," said William Gee, a risk assurance practice partner at PwC China in Beijing. "They need to find their new role in the new payment ecosystem, and we will probably see some innovative business model in this sector."

Real-time data
For the PBOC, using blockchain, the technology that underpins the digital currency bitcoin, will allow it to trace transactions and collect "real-time, complete and authentic" data to compile precise monetary indicators such as money supply growth, OKCoin’s Duan said.
"The transparency of economic activities in every corner in the country will significantly improve," Duan said. "The central bank will have unprecedented knowledge of how the economy runs."
So instead of relying on monthly surveys of businesses, or collations of spending from the statistics authority, the PBOC and therefore the government would have real-time readings on the pulse of consumers. Policies could then be fine tuned on a day-to-day, even hour-to-hour basis, giving an unprecedented level of precision to monetary management.

How the digital money could work
A PBOC research paper last year outlined how digital money could work:
-The PBOC creates cryptocurrency and transfers it to commercial banks when more liquidity is needed
-Consumers would top up digital currency from modified automated teller machines or from bank tellers and store it in a crypto wallet on their mobile phone or other device
-For purchases, consumers wire from their person wallet to the merchant’s account
-The merchant deposits the cryptocurrency into their commercial bank account
-The cryptocurrency would be part of the overall money supply, replacing part of the outstanding paper tender, a separate paper published in the central bank’s magazine said in September.

"Talking about the impact of digital money now is like trying to predict how the Internet would transform lives in the 1980s," OKCoin’s Duan said. "We know it’s going to be huge. It has the potential to change the entire economic infrastructure. We’re just not sure about when and how."

Current mobile payment options in Taiwan