On Disruption
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Ultimo aggiornamento il 12 febbraio 2015 alle 9:58

Who is disrupting the world of payments

Few things are as fundamental to our everyday lives and yet so easily overlooked as money. Not overlooked, precisely, because it’s on our minds, usually in the form of anxiety about having enough. But when it comes to the history, machinations, and evolution of the perplexing technology known as money—who on Earth has time to... Read more »

Few things are as fundamental to our everyday lives and yet so easily overlooked as money. Not overlooked, precisely, because it’s on our minds, usually in the form of anxiety about having enough. But when it comes to the history, machinations, and evolution of the perplexing technology known as money—who on Earth has time to think about that?

I do! (Even when I don’t have time, I obsess over it, anyway.) To be honest, when it comes to reading and writing about money, I am bored to tears by articles about hedge funds, IPOs, the comings and goings of overpaid CEOs, and pretty much anything that smacks of the pursuit of money for money’s sake. Rather, what has me incurably curious about money is how it’s changing, particularly but not exclusively because of digital technologies, and in turn how those changes influence human behavior, welfare, and the quest to build a more prosperous and equitable society.

If you don’t think we’re living in a time of monetary and financial upheaval—well, welcome back from your decade-long visit to that bunker under Greenland’s ice sheet. You need only to turn on a computer for 30 minutes to glimpse dizzying changes and innovation in areas such as payments, currencies, banking, security, saving, remittances, and more.

As I draft this post, Bitcoin is in the midst of a crisis of faith. Square just announced a partnership with a huge US supermarket chain, while another retail giant in the US, Target, is still reeling from the fallout of a massive security breech. Two powerhouses in mobile money, Vodafone and MoneyGram, just teamed up for international money transfer service. Meanwhile, the defenders of old-fashioned cash keep trucking out (occasionally compelling) arguments that physical money isn’t going away anytime soon.

It’s impossible to keep pace with it all, but that doesn’t make this revolution any less exciting, and I’m delighted to have this opportunity to contribute to the conversation by way of this SmartMoney column. My primary goal with these posts is to talk about disruption, although not in the usual sense of the word. When tech-sector types use this term, they’re generally talking about businesses, business models, and innovations that send some older technology into the abyss. (Hello, Blackberry!) That’s fine and, sure, marketplace battles are informative. But what’s more interesting, I think, are the ideas and inventions that disrupt or completely upend conventional ways of looking at the world.

The first paper money did this. So did the first credit cards, credit unions, ATMs, and, for better or worse, the euro. PayPal did it back in the day. So did personal financial management tools like Mint, gift cards, and, more recently, mobile money services like Kenya’s M-Pesa.

Bitcoin, I believe, has done it too. For some historical and chronological context, Bitcoin is hardly the first alternative currency born outside the realm of central banks. (This lingo can get pretty soupy, with currencies described as virtual, community, private, crypto, or commodity. Don’t get mired in the diction swamp; the crux of the matter is that they’re not state money.) Yet Bitcoin’s technology, distributed nature, mysterious origins, and wall-to-wall media coverage have combined to shake something loose. To remind the public at large that money need not be limited to central bank-issued euros, dollars, or yuan. I wonder about the fate of Bitcoin just as much as the next person, and will likely be writing more about Bitcoin news in future columns. But when it comes to disrupting how people think about money and igniting our imaginations, Bitcoin has already won.

I’ll leave you with a few thoughts about another disruptor—a startup this time. To my eye, Dwolla looks like something truly new and different, as opposed to a business offering just a slight tweak to the status quo or the proverbial solution in search of a problem. The Iowa-based company’s primary business is moving money from A to B on a network completely separate from that of the credit card giants, at a tiny fraction of the cost that similar transfers would have cost just a couple of years ago. For you World Cup fanatics, here is a cool example of how Brazil-bound soccer lovers in the US saved more than $32,000 in fees by using Dwolla instead of a more traditional transaction processor.

All of which is to say that this is a remarkable time to be watching, learning, and covering money. We should not be so naïve as to think that money-related innovation and entrepreneurship will stabilize financial markets, end currency wars, or cure colossal problems like sovereign debt or lost pensions. I remain cautiously optimistic, however, that new developments in banking, payments, currency, and related financial services promise to benefit not just the 1 percent, but the rest of us as well.

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