How the way we spend money is changing – Billion Dollar Deals – BBC Two

How the way we spend money is changing – Billion Dollar Deals – BBC Two

In this building money arrives from
shops all over the country at the end of each day the next morning it heads out
to be deposited into cash machines some believe in just ten years time this
place won’t exist in 2015 we crossed a line of no return card and contactless
payments overtook cash for the first time in history if I pay you this dollar
bill that’s a straightforward transaction between you and me no one
makes money from that transaction but if that transaction is digital
someone has to manage it there’s a space between you and me and that space is
where the money is made the amount spent by shoppers using contactless cards and
devices soared by a hundred and sixty four percent last year
there’s a huge industry emerging that wants you to stop spending cash our
vision is to have a cashless society because we believe that card payments
are the best way to pay and best way to be paid we we do make money when people
use their cards that is definitely part of how our business model but I’ll tell
you the money comes only if we’ve done our job properly and that’s by creating
convenience security and trust this brave new cashless world is slowly
becoming a reality a new app allows you to give buskers
money who no longer want to be paid in cash in Holland homeless people can be
paid by swiping a sleeve on their coat South Korea has already gone coinless
whereas Sweden is predicted to be the first country to scrap cash completely
by 2025 hunting in our PIN numbers was to be the single biggest change in the
way we pay in the UK since decimalisation in the 70s but the
landscape was changing rapidly and a deal made by the world’s biggest bank
would make it possible to imagine life without cash completely it’s 2007 the
Royal Bank of Scotland has recently opened their vast new headquarters at
Goga Byrne near Edinburgh they were the world’s richest bank with a balance
sheet supposedly larger than the entire UK economy
they do a deal with engineering company Jim Meltzer who have the technology to
make a new kind of payment possible contactless the banks want contactless
to work because if it helps in the war on cash if the banks can turn the small
transactions from cash to card then they increase the number of transactions that
they do and you have to bear in mind that the bank’s actually make money on
every transaction which they carry so the more transactions which are moved
from cash to card is a benefit for banks professor Drazen prelate has spent
nearly 20 years researching what’s going on in our heads when we make a decision
to pay with cash or card first she sees chocolates whadaya chocolates then she
sees a price and then she has four seconds to make a decision whether to
purchase this product P MRI detects spikes of activity in the region
of the brain known as the insula is the region associated with unpleasant
feelings like pain rejection disgust the dark negative part of the brain so this
is our indication that there’s pain of payment associated with with with
spending money but when you pay without cash the pain of payments has been
reduced and the person buys more when you are spending cash that is painful
but the who simply anesthetize a person with credit cards right we eliminate the
pain of pain since the economic crash of 2007 the argument that cash could be a
barrier to economic growth is also one gaining currency amongst the great and
good of banking in the same year that the financial
crisis plunged the world economy into recession a fledgling digital economy
was opening its virtual doors for business it was an economy that would go
on to be worth more than a hundred and forty billion dollars and it started
with the launch of the iPhone the App Store spurred a gold rush among
developers attracted by the easy access it granted them to the hundreds of
millions of credit cards linked to iTunes accounts soon after it was
developed Google followed suit today those two companies wield extraordinary
power it’s a hierarchical system that is
exceptionally reminiscent of feudal times so you have your king which is
Apple and underneath them you’ve got over that prevails over transport Airbnb
that prevails over accommodation or snapchat that prevails over like selfies
and all of them pay allegiance to the ultimate king which is either the Apple
or the Google at the top of the pyramid but we are just the serfs we’re the ones
that subject to all of these different Lords
the economy was launched on the smartphone and it changed everything yes
it made spending effortless but it was more than that this device knew who you
were where you were and what you wanted marrying that to payments created
extraordinary potential New York 2014 Marian Lake a banking executive for
JPMorgan Chase steps onto a stage to make a presentation 3,000 miles away in
Los Angeles Apple CEO Tim Cook is about to make the same announcement the moment
Cook speaks in LA a small green apple is placed on the desk before Marian Lake
it’s the signal she’s been waiting for she can now make her speech so she says
we are very excited Apple and JPMorgan have partnered to launch Apple pay a
mobile payment and digital wallet service built into your iPhone it lets
users make payments at contactless terminals using any Apple device by now the smartphone had become a
central point of commerce for the average shopper with over half of all
online sales being made through a mobile device Apple pay established the
templates and with every tap of the phone they took some of the bank’s cut
from every payment but they made it their policy not to see what you’ve
bought or keep data on the transaction when rival Google followed up with a
similar service a year later they weren’t interested in the money they
were interested in something else there’s something really interesting
going on here take a pamphlet pay there’s a small amount of money they
make in each transaction but with Android pay which is run by Google they
don’t take anything so what’s going on the answer lies in the small print of
the terms and conditions we may collect information about this transaction
including date time the merchants location a description provided by the
seller any photo you choose to associate with the transaction the names and
emails of the seller and buyer that type of payment method your description of
the reason for the transaction and the offer associated with the transaction if
any remember that space in the transaction
the space where business makes money now that space is about data you have become
the new currency so tech companies really see data is the new oil what they
can do with it is endless let’s not forget but data funds the internet yeah
all those apps everything you see most of it is paid for by advertisers and
that’s really the opportunity here for the tech companies payment data is
probably the best quality oil in the business data comes in all shapes and
forms but as payment data is a comprehensive record of how you spend
and live your life there is no cheating it it explicitly tells advertisers when
you’re most likely to spend how much and how frequently why our Facebook
gathering the data that they gather they’re gathering it for better
monetization right they have their that their mission statement which is to try
and what make the world a better community and that’s quite laudable but
at the end of the day it’s for the for the for them for the profit motive which
is absolutely fine because that sound business works but do I want them to
have the opportunity to control something as fundamental as where I can
spend my money no as in everything else there are
dangers of monoculture right I mean this kind of ecological perspective that we
understand in other businesses other industries we don’t want a situation
where we’re all reliant on one kind of money and if that goes wrong you know
we’re all screwed so the hassle and pain of paying with
cash could be eliminated forever but let’s stop and ask ourselves is a post
cash economy what we really want it appears not there are ever more digital
ways of pain and yet demand for cash has never been higher
the Bank of England estimate that there are 62 billion pounds of notes and coins
in circulation and they don’t even know where half of it is four five years ago
I was a big advocate of e-learning and getting rid of cash but I’ve completely
changed my mind because cash really is neutral cash has this longevity aspect
it’s always there there’s hardly any sort of real-world act of God that can
eliminate the cash you hold in your hand and that is very satisfying and it’s
it’s you know very reassuring and given that money is ultimately a sort of
security identity it’s all about security I think that aspect of cash is
one of its most appealing qualities central bank’s tech firms and
contactless technology might not have managed to kill cash yet but thanks to
them the way we think about it has changed forever
cash in the shape of coins first began being used 600 years before the birth of
Christ and it was an invention every bit as
sophisticated as the iPhone small metal objects exchanged as a token of trust
that trust is now being handed to tech companies but as hard as these tech
companies and governments try to get rid of cash they can’t because there’s
something in the way of the plan us human beings and our continuing faith in
this stuff the stuff that makes the world go round


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