In the future you might shop with quantum money. This will not truly exist until it is spent. Quantum theory physics suggests that, at the subatomic level, matter only exists as an overlay of all possible forms, all of which are equally possible. If quantum computers, as conceived by the research physicist Stephen Wiesner, created banknotes, they would only be a series of possibilities until measured, say by an in-store swipe card system. At which point they would become one irreversible payment. This, Mr Wiesner argued, would make them difficult to forge.
If this sounds more like science fiction than contemporary finance, pretty much everything predicted for the future of payments at the ten or twenty-year range feels like something out of Blade Runner.
Contact payment systems in watches or jewellery that can send small currents down the skin so that a simple handshake transfers £10 between accounts are just 15 years away while progress in telepathy chips – small devices wired into the frontal lobes of paraplegics’ brains that can trigger computers over wifi links to choose movies or close curtains – suggests you could simply think a payment and it shall come to pass.
Kevin Warwick, professor of cybernetics at the University of Reading, has chips wired into his brain and arm. He believes that in 25 years you could be walking past a Coke machine, think “Get me a drink” and the can would spring into your hand.
New payment technologies have to be at least as good as a £10 note or we’re wasting people’s time
More immediately, MasterCard Labs in Dublin have been “soft trialling” a system that allows you to shop from your sofa by waving a hand. The QkR platform links your account with your smartphone and an Xbox Kinect, reconfigured to understand specific gestures. Key gestures call up a menu, which allows you to scroll down and order a pizza.
Of course, there are some problems with bringing things like quantum money on to the high street – some to do with the higher equations of theoretical physics and some to do with what seems to be the main problem with clever ideas in the world of payments: it’s the answer to a question consumers aren’t asking.
“Take a £10 note,” says John Rutter, director of product management for mobile solutions at First Data, the US payment processing company, “it can pop out of holes in the wall. You can hand it to someone in payment of a debt, to buy something at a shop or even as a gift. It’s universally accepted and a bundle of them look pretty good in your wallet – much better than a credit card, which looks the same whether it’s maxed out or ready to spend. New payment technologies have to be at least as good as a £10 note or we’re wasting people’s time.”
At the same time, few experts are denying a potential sea change is on the way. Gartner’s 2012 Hype Cycle for the Future of Money points to waves of policy, technology and social trends sweeping away the sandy walls of our current trading practices.
Sir Mervyn King, governor of the Bank of England, sees no reason why the central bank needs to clear final settlements, opening the possibility of private-sector creation and issuance of money. There are policy reviews everywhere from the Reserve Bank of Australia to the UK’s Payments Council which reports in October. National and even regional currencies are vulnerable to attack. Trust in governments and banks is at a low. Peer-to-peer networks and trading are growing. Set all that against companies struggling to raise capital and technology advancing at an exponential rate, and things start to look interesting.
“You’re already seeing some countries banning cards to prevent citizens from getting into debt,” argues Ian Pearson, a futurologist who worked on biometric payments at BT and is now running consultancy Futurizons. “I would expect to see the rise of corporate currencies, electronic currencies and collaborative schemes along the crowdsourcing lines producing the next wave of building society-style mutual institutions.”
Already crowdfunding is hugely successful in raising capital from a large group of small lenders offering low-risk amounts. Originally launched as a fan-funding scheme to help big-name acts without a record deal to secure touring and recording advances, crowdsourcing schemes and sites are now financing films, small businesses and start-ups. FundersClub, a crowdfunded venture capital site launched this summer, raised more than $1.5 million in less than a month.
Alistair Newton, research vice president on Gartner’s banking team, suggests that in future money raised or spent needn’t actually be conventional currency. Social capital, time banks, mobile lending and even money clouds are forecast to grow over the next two to five years. And Gartner foresees they could become viable forms of trading, possibly even developing into a new shadow currency system. Once an open- source currency develops, especially one that could be spent on, say, both Facebook and World of Warcraft, it has the potential to become a true peer-to-peer currency, which can be spent or lent without the need for banks or payment providers.
“The future of payments is offering a bouquet of currencies at the point of sale,” Mr Newton argues. “You’ll pay partly in sterling, partly in euros, partly in loyalty points and partly in other possible currencies.” He points to online currencies, like Zynga credits or digital currencies like Bitcoin, produced online by programmer Satoshi Nakamoto with no central issuing authority or government backing, but accepted by businesses like pizza chain Papa John’s and computer hardware firm LaCie, which already offer the tantalising idea of a people’s currency with no banks involved. The founders say a Bitcoin debit card is on the way this year.
On the high street, meanwhile, banks and card companies are more interested in the long-term development of contactless payments and biometric security. Jim Wadsworth, who runs contactless payments for Accourt, believes biometrics offer the key to the ultimate in contactless payment – no need for a mobile wallet if your face or your hand conducts your transactions.
“Isbank in Turkey has recently installed some 3,400 biometric finger vein scanners in ATMs and branches across the country, letting customers withdraw cash without a card,” he points out. “They are planning to extend this system to shops, creating the largest biometric point-of-sale network in the world. Finger vein and palm vein recognition have been widely used in Japan for cash withdrawal for a while and, as a result of the chaos following the 2011earthquake and tsunami, which left many people without bank cards, Ogaki Kyoritsu Bank is introducing biometric palm recognition at ATMs, again removing the need for cards.”
James Davlouros, vice president of mobile business development, Europe, at MasterCard, thinks this will take some time. “Merchants change their in-store systems every three to five years, so you’re looking at a good ten years for any new technology to become widespread,” he says. “Then the consumer has to embrace it, which can take longer.”