Interview with Jean-Laurent Bonnafé, Director and Chief Executive Officer of BNP Paribas - by...
Money in the era of dematerialization
From metal to scriptural money
The dematerialization of money is not a new phenomenon. Over the centuries, “real” money (coins whose value is tied to the weight of the precious metal that makes them up) turned into fiduciary money (whose value is “declared” and not intrinsic).
A new step was taken with the end of the gold standard. In fact, the amount of money countries made was based on the gold reserves held by their central banks. After dropping the gold standard, minting money no longer depended on holding a material good. At the same time, bank account balances, whose value is determined by bank scripts, led to the emergence of scriptural money, devoid of any “material” existence.
Today, when a wire transfer or debit transaction is performed, it does not correspond to any material transfer of money – it simply involves a shift of credit from one bank to another through scripts. Scriptural money of this kind now represents more than 90% of all money in circulation.
Belgian economist Maurice Ansiaux, who coined the term “scriptural money” in 1912, defined it as a “currency that moves from account to account rather than hand to hand”.
New dematerialized currencies
It took more than two millennia to transition from “cold hard cash” to scriptural money.
But in the last decade, new dematerialized payment methods have emerged. Based on new technologies, they have profoundly altered the physical act of paying:
- Electronic wallets, preloaded to replace money for small transactions, have not taken off in a significant way. Created in 1999, Moneo was even shut down in 2015.
- Contactless payments eliminate the need to enter a secret code for small purchases, using a credit or debit card or mobile phone.
According to Deloitte, 8% of French consumers have already used their phone to pay for purchases in 2015 (3% in 2014). While Gartner estimates that in 2018 over 50% of consumers will use their smartphones or wearables to perform mobile payments in Western Europe.
This year, the Vieilles Charrues Festival allowed festival-goers to pay for purchases using NFC connected bracelets preloaded with credit. Without authentication, equipment like this will only serve for small amounts, along with other contactless solutions.
But MasterCard is already testing a connected bracelet developed by the start-up Nymi, which can identify users by their heartbeat.
Strong authentication like this will help expand contactless payment to cover all transaction types – a sign of the future of dematerialized payments!
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