17_G15_InSight_Money

Global Issue 15

Global Insight Making Money Move proved more popular in East Asia. It is hoped that the installation of smart meters in homes and businesses will add another element to the mix. The meters, which allow two-way communication between electricity or gas meters and a central system, are being provided in homes across Western Europe, Japan, Australia and Canada. Italian fi rm Enel was the fi rst company to complete its installation programme in 2005. Currently, smart meters simply provide power or gas companies with accurate real time usage data, removing the need for meter readings. However, it is hoped customers will soon be supplied with enough information to tune their energy use more cost-effi ciently. The next step in the mobile money revolution is the emergence of virtual currencies. At present, mobile wallets use established currencies but parallel digital currencies are now being introduced that can be traded across any digital platform on a peer-to-peer basis. The fi rst – and best known – was Bitcoin, which, unlike alternatives, is not restricted to a single website, nor used solely in gaming. The currency is created by ‘Bitcoin mining’, where Bitcoin has attracted criticism, not least because its founders are unknown, its market value volatile and it has proved attractive to drug dealers rival servers compete to solve maths tests, the complexity of which regulates the supply. The winner gains the virtual money created and it can enter the market, in much the same way that currency created by a central bank is distributed. Bitcoin has attracted criticism, not least because its founders are unknown, its market value volatile and it has proved attractive to drug dealers. Each Bitcoin was valued at $15 at the start of this year but quickly rose to more than $100 on investor interest. In six hours in April, the exchange rate plummeted from $266 to $76 then rebounded to $160. Other convertible virtual currencies have followed, including Ripple. Developer OpenCoin has created a fi xed number of 100 billion Ripples, most of which it will give away for free. It hopes limiting the supply will increase the currency value over time, thus making the Ripples it retains worth a fortune. The regulatory framework surrounding virtual currencies has not yet been worked out. However, the US government’s Financial Where it works: developing world Mobile penetration in developing countries is changing the quality of life for millions. Access to banking and money transfer services is also growing, but it provides many challenges. M-Pesa (M meaning mobile and pesa – Swahili for money) grew out of a microfi nancing service in Kenya. It is now one of the world’s largest mobile payment systems and is available in Afghanistan, Tanzania, India and South Africa. M-Pesa users with a passport or national ID card can deposit, withdraw and transfer money using SMS, including a small fee for the service. This enables mobile banking for 17 million account holders, but means money is not arriving in a central bank, which can be problematic for governments. Remittance trends Organisations like Remit2India enable users to send money to any account within a startling range of banks. Xoom’s mobile site allows for money deposits using a smartphone to 30 countries, as well as providing cash pick-up services and even home delivery. Online remittance standards apply to these services, but are still in an emerging state. With more mobile users in developing countries on the receiving end of remittance payments, this is a sector to watch. Mobile – developed world Gains in the mobile banking market in developing countries led to an explosion of services in Western countries, including PayPal, Dwolla, TabbedOut, Google Wallet, Venmo, Square and many more. Choosing the right one as a consumer or vendor is tricky as the market is still fragmented and Western consumer confi dence is not yet high enough to support the trend. Crimes Enforcement Network has announced its intention to regulate Bitcoin exchanges. But it remains to be seen whether virtual currencies will be a fl ash in the pan or the next big thing. At the other end of the scale, mobile money transfers look set to stay. After the success of M-Pesa in Kenya, many had assumed that mobile money schemes were a sure-fi re route to success. Yet Nigeria’s initial experience with its Cashless Project shows that each market must be judged on its merits because of cultural differences. Many Nigerians object to state oversight of their fi nances and prefer to deal purely in cash. While the industrialised and developing worlds should both benefi t from the emergence of the mobile economy, very different commercial cultures are making very different contributions to its development. Dr Neil Alexander Ford is an independent consultant and journalist, focusing on international affairs, particularly in Africa and Asia global thi rd quar ter 2013 www.global -br ief ing.org l 17


Global Issue 15
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