This was my presentation for the Arts, Design and Social Sciences Postgraduate Research conference in 2018 at Northumbria University, where I spoke about money.
These are the slides, and you can read the presentation script below.
Hello all. I am Belén, and my PhD, which is supervised by Professors Vines and Holmquist, is about three things: participatory design, older adults, and digital financial services, which is just a fancy way of saying that my PhD is about money.
I don’t know about you, but I cannot design what I don’t understand. So I’ve spent the last few months trying to understand what is money, and I am going to tell you some of the things I've learnt so far.
If you ask an economist what is money, apparently they will tell you that money is three things. First, money is a unit of account, which means that is a measure of value, but also that money is not just coins and notes. Money is an account, a data record, information stored on a ledger. And in fact, the bulk of money in circulation, at least in the UK, is made not of cash, but of these information records.
Ledgers are interesting because they split monetary transactions into two parts: the value transacted, for example, £10; and the information about the transaction: who pays how much to whom.
This split between value transacted and transaction information does not happen when I pay in cash. When I give you a £10 note, what I am transferring to you is the value embodied in that note, and the transfer is instantaneous. The moment the note is in your hand, bam! the value is yours, and it is no longer mine. That’s it: nothing else required. I don’t need to know who you are, you don’t need to know who I am, and unless you record the transaction somewhere, it will be forgotten about. Nobody will ever know that I paid you £10.
But when I pay you £10 using a debit card, you don’t get the value straight away. What we are actually doing is storing on a ledger the fact that I want to give you £10. And at some point in the near future, the payment infrastructure will read that data and transfer the actual value from me to you. But the information doesn’t disappear when the transaction is complete: who paid how much to whom will stay in the ledger ... forever. This is important, and I will tell you why later.
An economist will tell you that, on top of being a unit of account, money is also a medium of exchange: it is used to pay for things. Some people argue that thinking about payments purely in terms of exchange hides their real nature. Payments are not just exchanges: payments are relationships. Relationships between people, the state and its financial laws and regulations, and the owners of the payment infrastructure, traditionally banks, but more and more telecommunications companies and mobile phone operators.
Finally, an economist will tell you that money is also a third thing: it is a store of value. And that’s why we save it.
Understood as these three things, money is old, very, very old. Some people think it started around 8,000 BC as a unit of account in Sumeria. However, what we mostly understand as money today, that is, currency that is the monopoly of a nation state, is actually quite young. In the UK it was born at the end of the 17th century with the creation of the Bank of England. In the US only in the second half of the 19th century. As early as the 1860s in the US there were still something crazy like 8000 currencies in circulation, issued by railway companies, shops, hotels and of course, by banks.
Then, in the 1960s, money started changing again, into this, and increasingly, into this: a wave of our mobile phones. The owners of the payment infrastructure, the banks and the mobile phone companies, are very enthusiastic about these new forms of money, probably because their business model is based on charging transaction fees. They advertise these new moneys to us, praising their advantages, but also telling us that all forms of physical money, things like cheques and cash, are no good. Cheques are inefficient: they take ages to settle, and require pesky humans to do so. Cash, they tell us, is dirty, and not just in the literal sense. After all, who goes around with suitcases full of cash? Who uses the 500 euro note? Cash, they tell us, is used mostly by crooks for money laundering and tax evasion.
What they forget to tell us is that physical forms of money, like cheques and cash, have some very good things going for them. Here come some of them.
For example, they are the only types of money that exchange at par. You see, if I give you a one euro coin, you get one euro. But if I pay you one euro with a debit card, you don’t get one euro: you get 98 cents. 1 euro minus the 2% transaction fee charged by the owner of the payment infrastructure. Great for them, not so good for you.
Physical forms of money also impose constraints on us. And as designers, we know that constraints are great things, and people use them in all sorts of interesting ways. If I am a bit short of money this month, I might leave my house on Saturday evening with, say, a £20 note, so that I don’t overspend. When I run out of cash, well, I go home. And if I break my leg and I can’t leave my house, I can give £20 to my neighbour to get me some groceries. If the neighbour is a bit of a crook and runs away with the £20, that’s all I lose: £20.
That might sound funny to us, but for a lot of people, the ability to get others to financially transact on their behalf is critical. People homebound because of illness, disability, or good old age, delegate financial transactions to others. They get others to pay bills for them, to buy things for them, to withdraw cash for them ... With cheques and cash, because of the constraints built into them, they can manage the risk this entails and build trust on others progressively. Again, if my neighbour runs away with £20, that’s all I lose. But if I give my debit card and my PIN to my neighbour to get me some groceries, and my neighbour runs away with it … see what I mean? New forms of money undermine our ability to manage risk when entrusting others with our finances. This is because their design assumes finances are personal, and they ignore the fact that very often finances are communal.
Cheques and cash are also very good at giving us feedback, and that helps us keep track of our finances. Once again, with my broken leg I give £20 to my neighbour to buy some bread and cheese for me. When my neighbour comes back and gives me the bread, the cheese and the change, I want to know if the change is right, but I cannot count the change in front of her. That would be really rude, particularly because she just did me a favour by going to the shop for me. Counting the change in front of her would be tantamount to telling her: “I don’t trust you”. But you see, in order to know whether I am getting the right change back, I don’t need to count it: that’s the beauty of cash. Just by looking at the change, I can get a pretty good idea of whether something is missing. Try that with a debit card, see how far you get.
Cheques are great at the feedback thing too. Chequebooks are made of cheques and stubs. So for each cheque I give out, the chequebook keeps a little record, and it’s there, in the chequebook itself, and so it’s very easy for me to know how much I’ve spent and when. Compare that with having to log into online banking in order to look at my transactions. You might think that looking at your bank transactions online is easy, but it involves 1) registering for online banking, following whatever crazy process your bank requires, 2) remembering a whole bunch of passwords and pass phrases, 3) often learning how to use a one-time code generator, 4) authenticate yourself to the right website every time, and 5) find your way around it so that you can locate your transactions. If we want to see our statements on our phones instead, that requires to already have online banking, download and install a mobile application, setting it up, identifying myself to it every time, and then look at the statements in a tiny screen. You might have grown accustomed to it and as a result you think it’s easy, but I must break it out to you: looking at your transactions online is NOT easy at all.
Another good thing about cheques is that they take ages to go through. You might think that's a bad thing, but that delay also gives the person issuing the cheque a chance to get cold feet, to change their minds, and cancel the transaction. Have you ever heard people complaining about how Amazon’s one-click makes it too easy to spend money? That’s because they have removed all friction, without realising that friction, like those delays in cheques, has a role to play. And in fact, this idea of bringing friction back is all the rage amongst banks right now, particularly in the context of financial scams.
And finally, and this one is very important to me, cash is the only form of payment that allows us to remain anonymous. That’s because it is the only form of payment that does not split a transaction between its value and its information: it is the only non-ledger form of payment we currently have. And only because of that, I believe it is worth preserving.
So with our new fancy money forms we have lost a whole bunch of things. The ability to exchange at par, the ability to manage our risk when trusting others with our money, the ability to easily track our finances, the ability to change our minds about a payment, and the ability to remain anonymous.
Can we recover all those things? Can we bring all that stuff back into our new forms of money?
Well, in the case of anonymity, it turns out that we can. This is Taler, a form of digital cash. Like physical cash, Taler does not split a transaction’s information from its value. When I pay you £10 with Taler, you get the value straight away. There is a twist, though. With cash, the ability for the payee to remain anonymous is what makes tax evasion possible. So Taler removes that. Transactions guarantee the anonymity of the payer, but not of the person receiving the money. The payee must declare her payment income, making tax evasion hard. So Taler is cash, only better!
Taler proves that it is possible to build some of the design strengths of physical money forms, in this case anonymity, into our digital money forms. Not only that: Taler proves that digital money forms give us the opportunity to improve our physical money forms.
If we can bring back anonymity, can we bring back all the other things? Well, that’s what my PhD is about.
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