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« Chinese whispers | Main | Payments without banks »

I bank, you bank, we bank

By Dave Birch posted Feb 3 2009 at 6:06 PM

[Dave Birch] I was at the National Endowment for Science, Technology and the Arts (NESTA) get together, weBank ("can people replace institutions"), as were a number of Forum friends including James Gardner and Giles Andrews, Anthony Evans from BarCampBank and many others. I was really surprised by the turn out, as I had no idea how many people are interested in social banking and such like. There were a lot of different P2P lending organisations and institutions, a wide variety of organisations in the audience, and an interesting overlap with the world of digital money and alternative currencies. The speakers were Giles and James together with Umair Haque and Christian Alhert. (Umair wrote a piece about "next generation currencies" that I was going to blog about before I realised that we was going to be at weBank -- now I'm going to blog about it and podcast him.)

There was a presentation about Zopa which gave an overview. There's no need to repeat it here except to say that the top requests at the moment are for car loans, weddings and (which I have to say I was surprised about) surgery and medical expenses. And a note to the Chancellor: they have only 0.2% bad debt.

There was also a talk from Kubera money, about "rotating savings and credit associations" (ROSCAs) but the chap said he didn't want to give away anything about the company because it was pre-launch so I didn't write anything down. He did introduce some interesting points about the way in which these kinds of credit associations work in existing trusted circles (and therefore don't need to credit check, which saves lots of money) and I thought that might be an interesting subject to explore at a future seminar.

Midpoint & Transfer introduced us to the "foreign exchange revolution". The idea is to match currency buyers and sellers directly and cut out the exchange (and spread) from f/x transactions. It all sounded quite promising -- I worked on a feasibility study for a similar idea for a UK-based financial services company about five years ago, only for a handful of major currencies, but they concluded that it was not something they wanted to pursue -- and I thought their claim that they would guarantee that any f/x would match intraday was bold (it turns out that they will buy the currency needed to make the match if no sellers are on the system).

I enjoyed the panel discussion, because I always enjoy panel discussions that have real experts on them and James, Giles and Umair all made terrific points. A couple of memes that I have flagged for future reflection: the cost of regulation (is it worth it?) and the scaling of social lendin (does it only work on a small scale),

Now, of course, I was more interested in the digital money aspects rather than the lending aspects, but the idea of creating new currency by creating new kinds of "credit" is central, I think, and to follow Umair's lead and demand that genuinely innovative thinking about banking means genuinely innovative thinking about culture and relationships, it makes me wonder about the kind of structures that make sense. Suppose, for example, I lend (via Zopa) not Sterling or Euros but bandwidth or entertainment? Could I match (like the Midpoint and Transfer guy) supply and demand closely enough to make the business model work, like a barter system for future and options?

None of this seems implausible to me -- and other people, such as lateral thinking guru Edward de Bono (who wrote the CSFI pamphlet on "The IBM Dollar") -- have had the idea before, but I wonder if we are at a technology-induced cusp, where the pervasiveness and maturity of mobile phones means that transacting in a subset of truly exotic currencies becomes viable? I'm going to write an article about this for a magazine.

These opinions are my own (I think) and presented solely in my capacity as an interested member of the general public [posted with ecto]

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Comments

Hi Dave,
Isn't pre-pay airtime most of the way towards a informal digital currency in its own right?

You can transfer value into airtime for yourself or another either locally or in another country. individuals can trade airtime amongst themselves and in some cases you can also transfer it back to cash...

Simon
Mi-Pay Ltd

Dave, looking forward to your article.

Re: your question, as Edward de Bono would say: creative thinking is about thinking of new ways of doing things that create value. Otherwise, it's just thinking differently.

So, what value do we create when we trade in units of value backed by bandwidth, entertainment, vegetable baskets, gasoline gallons, and the sort. Unless we are in the context of rapidly depreciating fiat currency, not much, if not negative value.

Until the fiat currencies of the world crash for good, how can we create value?

Well, maybe allow money to more freely in some cases than others in a way that reflects values. For some, values may be local community, for others, a church, an alumni, cause, environmentally friendly businesses, socially responsible factories abroad, small business organic farms in the developing world, etc.

In other words, we can move an ultra-competitive world that concentrates wealth in a few hands and creates negative externalities for all, to a world where money is given to those that create positive externalities for all.

Cell phone technologies can help as a monitoring device for the values. This is b/c it is technology that can be used to report compliance to standards even in the more remote village in the world. See for instance MicroEnergy Credits, which gives loans to people in developing countries to buy "green" energy devices in exchange for energy credits which are reported to be in effective use by loan loan/compliance officer via cell phones.

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