Humans have been trying to figure out the easiest way to pay for things for a very long time. First, they traded goats and shells, then gold and coins, then they got fancy and upgraded to cardboard Diners Club cards—followed, eventually, by plastic ones. Now cash and plastic are fading in popularity, and possibly faster than you realize. Maybe you already pay for your morning coffee with just your mobile phone. Soon enough, thanks to advances in biometrics, you might pay with just your face. Well before the end of the century, wallets will likely be museum pieces.
Futurists sometimes joke that the prospect of a cashless society is much like that of a flying car: it’s often promised, but it never materializes. And yet some banks in Sweden no longer dispense cash. Most airlines won’t accept cash for in-flight purchases. A number of restaurants, including New York’s Commerce, have begun refusing greenbacks, accepting only credit and debit cards. “It’s less cumbersome, and no one has to worry about losing money,” says Tony Zazula, Commerce’s owner, who notes that the change has made accounting much simpler. “There was quite an uproar, but it seems like the future is here now.”Here, drawn from interviews with futurists, economists, executives, and entrepreneurs, are other predictions about the future of money.
Phone It In
The shift from credit cards to phone-based payment systems is, of course, well under way. Starbucks, for example, says that 13 million people actively use its mobile app, which allows customers to debit prepaid Starbucks accounts. And this summer, a consortium of 70 chains (members include CVS and Walmart), will launch a preliminary version of an app called CurrentC in a test market. The group hopes that the app will eventually let people in 110,000 locations pay (out of their checking accounts) via phone.* Such apps will use customer data to offer shoppers targeted coupons, and could give merchants a newly detailed look at what consumers are buying, says Ben Jackson, an industry analyst with Mercator Advisory Group.
As mobile-payment technologies multiply, checking out stands to get speedier. Both CurrentC and the Starbucks app ask customers to scan a bar code on their phone. Apple Pay and Google Wallet likewise require a consumer to pull out her phone and hold it to a reader. Future mobile-payment systems could use Bluetooth Low Energy technology, which doesn’t require a customer to be as close to a checkout counter. (Already, some Safeway and Macy’s stores use iBeacon, Apple’s indoor positioning system, to push deals to iPhones.) For that matter, Jeremy Epstein, a senior computer scientist at the research institute SRI International, thinks checkouts could pretty easily be dispensed with altogether. If Radio Frequency Identification (RFID) tags were attached to merchandise, a sensor at a store exit could register both a customer’s phone and the RFID tags on whatever she was carrying, and voilà—as easy as shoplifting—those items would be hers. Merchants can be slow to adopt technologies that are costly to install. But many retailers have already begun upgrading their systems to accept mobile payments, and we may be surprised by how quickly phone-based transactions proliferate. For one thing, allowing customers to pay by phone can save retailers costly credit-card transaction fees, Jackson says. For another, mobile payments tend to be more secure than credit-card transactions. In some new mobile-payment systems, when a phone is scanned, no bank-account data are passed through the cloud; if hackers broke in, they’d see only the unique strings of numbers that are generated for each purchase, which are useless for anything else. In the aftermath of recent data breaches, this security edge may be especially compelling to retailers. “I have a feeling that 20 years from now, everything now done by plastic will be done by a smartphone,” says Robert Litan, an economist at the Brookings Institution.
Scan Me Now
Phones are only the beginning. RFID tags are already so small that they could fit in a watch, or even under your skin. (Such implants aren’t science fiction: one techie, Amal Graafstra, has written about how he installed RFID tags in his hands and RFID readers on various doors in lieu of locks, so that he wouldn’t have to bother with keys anymore.)
Eventually, biometrics might allow you to carry (or implant) nothing at all. A Swedish start-up called Quixter has outfitted stores at Lund University with a system that lets students pay by having the vein patterns in their hands scanned (vein patterns are less susceptible to fraud than fingerprints, since fingerprint dummies can deceive scanners). Iris scanners have potential, too—they’re hard to trick, and eyes, unlike hands, don’t change much with age, says Hector Hoyos, the founder of Hoyos Labs, which works on identity-authentication technologies. Hoyos thinks payments could one day be processed automatically—imagine your eyes being scanned as you enter an amusement park, the price of admission being deducted from your bank account as you get in line for your first ride.Of course, changes like these raise big privacy questions: if we pay for everything by phone or biometrics, companies will be able to track our movements and personal data to an unprecedented degree. Scott Rankin, the chief operating officer of Merchant Customer Exchange, the consortium behind CurrentC, says users will be able to alter their privacy settings to ensure that information about what they buy isn’t used or shared. But as Epstein, the computer scientist at SRI, points out, many people won’t mind sharing data if they believe they’re being compensated with good deals. “Most people are fundamentally lazy and will do whatever is easiest,” he told me. “What’s going to be easiest is not being anonymous.”
Not so long ago, it looked as if we might be on our way to a single global currency, or two or three. European countries eagerly abandoned their national currencies in favor of the euro; in 2009, Zimbabwe began using other countries’ currencies in lieu of its own. Economically, these experiments haven’t worked out well, as the eurozone’s struggles suggest. And in fact, as digital technologies advance, shoppers are likely to use more currencies rather than fewer, says David Wolman, the author of The End of Money. From a merchant’s perspective, accepting digital pesos or rubles is less of a hassle—and less costly—than accepting foreign bills and coins.
As mobile technologies let stores track shoppers’ behavior more closely, customer-loyalty programs are likely to become more prominent, effectively creating new, private currencies, says Heather Schlegel, a futurist. Better data on buying habits will likely lead to more-targeted, and therefore more-enticing, offers. Stores might well begin to accept one another’s loyalty points: already, gamers can use Subway and Burger King gift cards to buy virtual goods for online games; down the road, you might be able to use, say, your Disney Dollars to pay for things at Walmart. Bitcoin, of course, is the most successful effort to create a decentralized “cryptocurrency”—a system of exchange that relies upon cryptography to validate and secure transactions, which are recorded in a public ledger. Whatever may come of it (so far, bitcoin’s value has been volatile), Bettina Warburg, a strategist for the nonprofit Institute for the Future, in Palo Alto, believes that some sort of successful “crypto-economy,” in which people can exchange goods without involving either banks or national currencies, is bound to develop. That could include more-widespread bartering of services, she says, perhaps with algorithms determining a deed’s value.
But Don’t Bank on Banks—Or the Fed
Today, retail customers’ most frequent interactions with banks involve cash and credit cards. As cash disappears and phones replace plastic, banks may struggle to remain relevant. Already, around the world, new services are enabling people to move money without any bank at all. In Korea, for example, people load value onto T-money cards, which started out as fare cards (the T is for “transportation”) and can now be used in taxis and at vending machines. In Kenya and other parts of the developing world, people can walk into a convenience store, deposit cash into an account managed by a service called M-Pesa, then transfer the money to other users via text message.
Theoretically, the more popular alternative financial instruments and currencies like bitcoin become, the less control national governments will have—over law enforcement, over taxation, over the very functioning of their economies. After all, if most Americans were to start using bitcoins or rewards points as everyday currencies, fewer dollars would circulate in the economy, and the Federal Reserve’s ability to affect the supply of money and regulate interest rates would in turn be limited. This is, at present, an admittedly distant concern: if you add up all the bitcoins and rewards points and other “special-purpose moneys” in circulation, we’re still a long way from the point where they could disrupt the Fed or erode the national economy. Even so, if alternative currencies continue to gain traction, you can bet that the federal government will be on the case, Litan says. “Once a nonbank creator of money got to be any significant size, there would be huge pressure to rope it into the regulatory framework and call it a bank,” he told me. (China banned the use of virtual currencies to pay for real-world goods once the combined trading volume of such currencies reached several billion yuan a year.)And if the FDIC and the Fed don’t crash the party, the IRS and other tax authorities very likely will. After all, currencies such as bitcoin and Linden dollars (from the virtual world Second Life) have become popular among those who wish to conduct deals out of sight, tax-free. A failed early effort to tax frequent-flier miles notwithstanding, most of the experts I spoke with believe the government will find a way to tax alternative currencies. Various travel-industry groups have recently expressed concern that the IRS may again be considering taxing miles, as well as loyalty points from hotels. Bitcoin could easily be next. Which means that in the future, tax dodgers might have to revert to an old type of money, if they can find it: cold, hard cash.
A Brief Chronicle of Currency
1800–1500 B.C.: In China, people use cowrie shells as a means of exchange.
Circa seventh century B.C.: The Lydians mint metal coins from a gold-silver alloy.
1794: The new U.S. Mint issues its first dollars, which are silver coins.
1950: Diners Club launches. It is the first credit card not owned by a merchant.
1967: A Barclays branch in London installs the first ATM.
1997: The Finnish company 2015 Sonera allows the first mobile payments, at soda machines in Helsinki Airport.
2009: The mobile app Venmo promises to make it easier to pay others back.
2035: Merchants stop accepting plastic credit cards.