The way we deal with money is constantly changing — as is the nature of money itself. You can absolutely expect your money to change over the coming decades. In fact, the world of finance is on the cusp of revolutionary change. Top image: Breaking Bad/AMC.
To learn more about the future of money, I spoke to Heather Schlegel, an award-winning futurist and expert on the future of financial transactions. She has consulted at SWIFT (the Society for Worldwide Interbank Financial Transfers) and spoken at SXSW, TEDxZwolle and Sibos.
She's also the producer of an upcoming six-part series called "The Future of Money", a documentary that will put a positive spin on the evolution of currency and how we use it. And fascinatingly, Schlegel used her insights into finance — and the way it's already changing — to help her fund the project.
"I see a future where we'll be happier and fulfilled with our work situations," Schlegel told me. "Some people are living this future today. Many more will live it in the future."
Futurists don't tend to talk about the future of money, finance and related technological innovations. At the same time, most people tend to shy away from such topics, convinced that it can't possibly work for them. What's the problem? Why the lack of future vision?
One problem is a misconception with what the future is. Many people mistakenly imagine there is one future. But the future is a subjective place with many possibilities. There is not one future. We want certainty, so we look for specific concrete predictions, but you can't be certain about anything in the future. What is lacking is an understanding, a literacy around the future. One interacts with the future in a very different way from the past or present.
Innovations in trading, money and finance are nothing new to human history.
For sure, humans are amazing creatures and use whatever technology is available to us. Whether it's rocks, beads, coins, gold, paper money, a plastic card, electronic number in a spreadsheet or your mobile phone, derivatives, stock — we use the technology available to represent what we value and how to transact it.
You've said that, "We live in abundant times, the future can be even more abundant if we let it be." It's hard to believe this given the recent economic crisis in Europe and elsewhere. How will innovations in currency create the abundance of which you speak?
We are experiencing the limits to growth in the current paradigm. We have gone beyond the limits of the existing system and it's breaking — this is the crisis we are experiencing. At the same time, a new paradigm is emerging that embraces these breaking points while extending into new product possibilities. Many of these ideas (sharing, bartering, community currencies) are not necessarily new, but technology is renewing them. We are living through an economic paradigm shift.
Innovations in currencies and transaction methods increase diversity in the ecosystem which strengthens the ecosystem.
I share Ramez Naam's optimism that ideas and the application of technology will enable us to solve our problems, which he eloquently explores in his book, The Infinite Resource.
We're already starting to see some really neat innovations in how payments are made at vendor sites. Can you describe the current state of the technology? What can we look forward to in the near future?
Transaction innovations are using the existing infrastructures: Point of sale infrastructure, the internet or mobile infrastructure. While not perfect, these systems are strong and ubiquitous — products are leveraging these networks. Square is a great example of a bolt-on hardware (the square dongle) into existing infrastructure (earphone jack) using software (mobile app) and the internet (data network). We'll see more of this kind of creative usage.
Bitcoin made the news in 2013 in consideration of the financial crisis in Cyprus. This crisis underscored two issues, namely the ease at which state institutions can now hold on to our money, and the incredible potential for virtual currency.
Banks were still rebuilding consumer trust that was lost in the economic crisis. Trust in technology is high, so it's no surprise that there is high trust with bank adjacent technology companies like Paypal, Square and Amazon. This gives them an advantage to traditional banks. I think there is a huge opportunity for banks to diversify from traditional money holdings. I worked on a project with Innotribe, the Innovation Division of SWIFT (The Society for Worldwide Interbank Financial Telecommunication) called the Digital Asset Grid, which explored a digital safety deposit box for personal and sensitive data. One of my previous videos show a future with the Digital Asset Grid.
I see Bitcoin as a tiny baby. It has phenomenal potential and it's barely crawling. It's still growing, learning, bumping its head and being used for a variety of conflicting reasons. It's easier to manipulate as a monetary system because it's small and the conversion rate into the system can be gamed. Bitcoin is a harbinger of a new kind of currency. It, and others like it, will become more popular in time.
I've been thinking a lot recently about Bitcoin and other currencies, and how they could be a way to release the pressure from state hijacked economies. There is great potential to free up capital for circulation.
It would seem that the international monetary system is on the cusp of change, perhaps moving towards something more universal and accessible. But with all the troubles the Euro has been facing, is this the way to go?
There has been a lot of talk about a universal currency and this has come up in my research many times. I spoke with Bernard Lietaer, the economist who worked on the Euro, early in my research and he explained that he changed his perspective from a single currency like the Euro to include diverse economic systems. More diversity equals more system wide resilience and less likelihood of system breakdown.
Lietaer's TED Talk from 2009:
My own view is we go through economic cycles, from converging and consolidating to emerging and diversifying and back again. Today we are experiencing an emerging and diversifying movement with money, payments and transactions; and I don't see this direction changing anytime soon. Once we exhaust technology diversity in this area, I would not be surprised to see a consolidation occur.
Bartering would seem to be the most underrated and underdeveloped aspect of modern finance. How can technology serve as a better facilitator?
The challenge with bartering is the individual values associated with the items being bartered. That is why money is a great equaliser. However there are technologies that enable bartering on a 1:1 or flexible value exchange. Time banks value time as an absolute — an hour of my time is worth an hour of yours, regardless of our skills or what we are doing. With so many people on the planet, there are more people than ever that share your values and have stuff to trade — regardless of the values, the things wanted/offered and their location. Technology can serve as a match-maker to connect us with others who can provide what we're looking for. This is one application of the long tail. I explore this concept of IntentCasting in my short, Flowers For Grandma.
You've also said that the future of money making will be very different. What have you got in mind? And how will we preserve and invest this wealth once we have it?
We're already experiencing some changes with peer to peer lending, the DIY/maker/Etsy/artisanal food industries. Kickstarter and IndieGoGo both offer peer to peer backing; while Kiva enables us in developed communities to strengthen developing communities.
I myself used Kickstarter to raise initial funds for my TV series on the "Future of Money". But it's not just about raising the money, it's about connecting with people who share my same values. Through Kickstarter, I connected with people who want to see a positive vision of the Future of Money. I don't care if they back me $5 or $500.
To focus that it's not about the amount of money backed, I held an event asking people to back $5 to Disrupt the Financial Industry (for good).
Since I'm eating my own dog food, I'm living a little bit in the future. Without going into too many details there are other converging trends outside of the financial industry that have the potential to dramatically change how we make money. The Internet of Things, The Sharing Economy, The Knowledge Economy, Artificial Intelligence, Longevity Breakthroughs and The Singularity to name a few. I see a future where we'll be happier and fulfilled with our work situations. Some people are living this future today. Many more will live it in the future.
A big concern shared by nearly everyone is security and privacy. Organised crime is getting increasingly sophisticated — as witnessed by the massively coordinated theft of $US45 million ($60.9 million) from 2904 bank machines in 10 hours in 2013, and the threat of identity theft. How can we be sure that our money, in whatever form that takes in the future, will be safer?
It will be a test of time. This is a challenge with new and innovative technologies. We are used to using beta tested software for many activities — but when it comes to our sensitive and private financial and transaction data, we will either require robust privacy and security features (along with QA testing) or perhaps we could embrace full transparency, making these kinds of crimes irrelevant. The future is full of many possibilities!