By Bo Hembæk Svensson & Martin Boye Ovesen, Nets
As you go about your day, notice how many moments are intrinsically connected with either the acquiring or spending of money each and every day. Most days you go to work to earn the money that you will inevitably need to spend. Each day that passes means you have consumed another day's worth of mortgage or rent payment. Try taking a bus, riding a train, or driving your car without spending any money. Not to mention having a physical body which has a habit of wanting to be fed and clothed every day.
In this light, it seems worthwhile contemplating what money is and what the future will bring to the business of money.
In its essence, money is a means of transfer of energy which comes in many forms such as time, material and goods. It fulfils the three necessities for allowing two parties to make an exchange of energy; to act a) as a means of payment, b) as a store of value and c) as a unit of account.
As such, money has no intrinsic value but trust. Its useful value is therefore derived from what sort of transaction it allows and what sort of choice it gives its bearer. A currency is a system of money used by a state or nation to ensure an effective means of payment is in place and in constant circulation - and deep down it serves as a fundamental and primary political tool.
Money is a system. It moves energy, time and matter. It is a channel and carrier.
In the vast body of literature on the nature and future of money, there is a strong indication that we are on our way towards a new paradigm when it comes to how value is transferred between two parties, how it is stored and how it is used as a unit of account. This new paradigm or model is increasingly referred to as "Smart Money". It will be something that will have a great impact at many levels of society, on geopolitics and our daily management of value transfers.
Smart Money will also add new layers to the fundamental principles for how long-term, sustainable wealth is created, and will enable reciprocity in ways we have not seen before.
Therefore, something significant is happening; money and payments are becoming smart due to a technological design called blockchain or "distributed ledger technology" (DLT) which is behind Bitcoin, Ether and other digital money already out there in the open market.
The Smart Money is called cryptocurrencies and is something completely novel. They are 100% digital and programmable – allowing this new kind of money to contain rules, to move around, to manage themselves according to defined agreements and all in all to do many things autonomously.
Smart Money is currently just a supplement to traditional payment schemes but holds the potential to replace them completely - so obviously this is a significant agent of change and an opportunity for financial services in general and the payment services industry in particular.
The long-term benefits for society, government and the general economy have been well documented by academia and many other sources over the past nine years since the world was introduced to blockchain and Bitcoin. These benefits have such a magnitude that it is safe to say that 10 years from now, the usage of crypto-currencies will be global, common and fully integrated into our everyday lives and will have become a central tool in the distribution of wealth.
In 2027, few of us will wish to return to the money transaction models and money management models of 2017 - just as we today in 2017 don't want to return to the keyboard-based mobile phones of 2007.
Remember that Apple introduced its first iPhone just 10 years ago along with the new, revolutionary ideas of apps, smartphones and constant internet connection. Prior to this, not a single app had been released or even conceived.
In the short lapse of time since the introduction of the smartphone, a true symbiosis between man and internet has taken place, and we can no longer phantom a life without the augmentation offered to us today by these ubiquitous hardware and software platforms.
In the near future, we will manage everything of importance using apps provided to us by process service providers offering convenience, peace-of-mind, a complete overview, intelligent and automated services, low-cost administration of all individual and family matters, advice, credit and loans, mortgage, insurance, asset and tax management, payments etc. We will all have a digital identity, a multifunction wallet, a virtual data vault and a dashboard, which will become our official legal place on the internet – which a so-called managing assistant will help us populate, manage and monitor.
Smart Money is not money as we know it today but rather Smart Contracts that trigger verified value transfers. This opens up new possibilities for developing advanced systems, services and applications for merchants, banks, end-users and society in general.
The number of relevant use cases for blockchain/DLT is huge – there is no sector, industry or process that cannot gain from this design, as it creates transparency, shortens end-to-end cycle times, automates processes and manages clearing and settlement of value transfers.
The future is already here - it's just not evenly distributed.