Abstraction that rules the world

Money has been and is defined in many different ways - sometimes more symbolically, as the source of evil in the world, sometimes pragmatically, as a means to an end. Currently, it is considered mainly as a kind of technique or technology that makes life easier for a person. In fact, he has always been like that.

More precisely, since it became something conditional, symbolic and abstract. While people exchanged various goods,. Metal coins were already a step towards conventionality, although a piece of precious metal is also a commodity. However, money became an abstraction and a tool in the full sense of the word when they began to use shells standing on their own, and finally - Bank notes (1)

Although paper money was known in China and Mongolia as early as the Middle Ages, the real career of the banknote began around the XNUMXth century, when it began to be used in Europe. At that time, deposit receipts issued by various institutions (including banks) began to be widely used in commercial transactions, confirming the deposit of the corresponding amount in bullion. The owner of such a security could at any time exchange it with the issuer for a monetary equivalent.

For commerce, banknotes became a breakthrough technique, but at the same time their number grew. угрозыwhich were already known in the era of ore. The more issuers, the more opportunities for fakes.

As early as the beginning of the XNUMXth century, Nicolaus Copernicus noticed that if money of different quality was in circulation, money was better collected by users, which caused them to be forced out of the market by inferior money. With the advent of banknotes, the practice of counterfeiting money flourished. It is not surprising that over time, individual countries tried to clearly regulate this market segment and significantly reduce the number of issuers. Currently, banknotes can usually only be issued by the national central bank.

Consequences of buying big planes

In the 60s, when airlines placed their first orders for the 747 and DC-10 wide-body aircraft, a problem arose. The gigantic cars and the large number of seats sold in them meant that the crowds of people coming to customer service points grew at the same time. Therefore, in order to prevent chaos, airlines began to look for a way to speed up the sale of tickets and the processing of passenger data. At the time, banks, shops, and dozens of new forms of service had problems of a similar nature that required uninterrupted access to money, without time constraints, such as opening hours of financial institutions.

2. Magnetic stripe cards

He solved the problems of banks ATM. In the case of airlines, a similar device has been developed that can track bookings and issue boarding passes. It was necessary to develop a machine for collecting money and issuing documents. However, for customers to trust such equipment, engineers had to come up with a method that would allow users to be easily identified, while convincing everyone involved that it was fast, simple and secure.

The answer was a magnetic card. Developed by IBM, it was introduced in the 70s, spread around the world in the 80s, and finally became ubiquitous in the 90s.

However, first the programmers had to figure out how to place the data on each card. In the end, a fairly simple solution was chosen - multitrack recording, a relatively new technology that allows two separate sets of data to be encoded on a single magnetic stripe. Each industry can independently set the standards for its own path. There was even room for a third track, which allowed the savings and loan industry to record transaction information on the card itself.

Each of the three tracks was 0,28 cm wide with a small record divider. The first path assigned to the aviation industry included, among other things, an account number (19 digits), a name (26 alphanumeric characters) and various data (up to 12 digits). The second track, assigned to banks, contained the main account number (up to 19 digits) and various data (up to 12 digits). The same format is still used today.

In January 1970, American Express issued $250 to Chicago customers. magnetic stripe cards and installed self-service ticket counters at the American Airlines ticket counter at Chicago O'Hare Airport. Cardholders could buy tickets and boarding passes at a kiosk or from an agent. They approached the stalls.

The magnetic stripe payment card has become one of the most successful technologies in the last half century (2). It came out in the mid 80's. smart card technology. Smart cards look the same, and most still contain a magnetic stripe for use in places where smart card readers are not available, but have a microprocessor built into the plastic part of the card.

This chip keeps track of card activity, which means that about 85% of transactions can be authorized based on the information stored in the chip alone, without passing through the network.

Thanks to the "organizers" of the entire project - payment systems such as Visa - card payments provide the customer with a money-back guarantee in case of default on the part of the contractor. This guarantee is provided by the bank, the settlement company and the payment institution without the participation of the client. Since the 70s, plastic cards have become the most important alternative to cash.

Cashless world?

Despite their successes, cards have not yet been able to replace physical money. Of course, we hear everywhere that the end of cash is inevitable. Countries like Denmark are closing their mints. On the other hand, there are many concerns that 100% electronic money is 100% surveillance. Are the new monetary methods, ie. kryptowalutyovercome these fears?

Monetary institutions around the world - from the European Central Bank to African countries - are increasingly skeptical of cash. The tax authorities insist on abandoning it, because it is much more difficult to evade taxes in a controlled electronic circulation. They are also supported by the police and other law enforcement agencies.which, as we know from crime films, suitcases with banknotes of large denominations are most fond of ... Moreover, in many countries, the owners of stores at risk of robbery are becoming less willing to keep cash.

The Scandinavian countries, sometimes referred to as post-cash, seem best prepared to say goodbye to material money. In Denmark, this was still in the early 90s, while in recent years it was only about a fifth. The local market is dominated by cards and mobile payment applications. The Danish Central Bank even recently tested the use of virtual currencies.

According to the announcements, by 2030 cash will disappear in Sweden. In this regard, it competes with Norway, where only about 5% of transactions are made in cash. It is not easy to find a shop or restaurant there (3) that will accept a large amount in the traditional form.

3. Cashless bar in Sweden

this is facilitated by the special culture prevailing there, based on the great trust of the population in state institutions, financial institutions and banks. However, there was also a shadow economy in the Scandinavian countries. But now that four-fifths of all transactions are made with electronic money, they have all but disappeared. Even if a store or bank allows cash, when we trade in large amounts, we have to explain where we got it from. Bank employees are even required to report major transactions of this kind to the police. Getting rid of paper and metal also brings savings. When Swedish banks replaced safes with computers and got rid of the need to transport tons of banknotes in armored trucks, they significantly reduced their own costs.

Even in Sweden, however, there is a sort of resistance to cash hoarding. Its main strength is the elderly, who find it difficult to switch to payment cards, not to mention mobile payments.

Pose tym some point out that total reliance on the electronic system can lead to big problems if the system fails. There have already been such cases - for example, at one of the Swedish music festivals, the failure of payment terminals led to the revival of barter trade.

Not only Scandinavia is moving towards cashless trade. Belgium has a ban on the use of paper money in real estate transactions. A limit of 3 euros was also introduced in cash payments within the country. French authorities report that 92% of citizens have already abandoned paper money in their daily lives. 89% of Britons use only e-banking on a daily basis. In turn, the Bank of Korea predicts that by 2020 the country will abandon traditional money.

As it turns out, the transition to a cashless economy is taking place outside the wealthy West and Asia as well. Saying goodbye to Africa may come to cash sooner than anyone thinks. For example, Kenya already has several million registered users of the MPesa mobile banking app.

An interesting fact is that one of the poorest countries in Africa, not internationally recognized Somaliland, separated in 1991 from Somalia, mired in military chaos, is ahead of many developed countries in the field of electronic transactions. This is likely due to the high crime rate that prevails there, which makes it dangerous to keep physical money with you.

Electronic money? Yes, but preferably anonymous

If you can only buy with electronic payments, all transactions will leave their mark. They, in turn, make up a special history of our life. Many people do not like the prospect of being watched everywhere by the government and financial institutions. What skeptics fear the most is the possibility of completely stripping us of our fortune with just one click. We are afraid to give the banks almost complete power over us.

In addition, e-currency offers the authorities an ideal tool to effectively deal with the recalcitrant. The example of PayPal, Visa and Mastercard, which at one time blocked Wikileaks payments, is very indicative. And this is not the only story of its kind. Therefore, in some circles, also unfortunately criminal, cryptocurrencies based on chains of encrypted blocks () are gaining popularity.

Cryptocurrencies can be compared to virtual "currencies" that have appeared on the Internet and in games since the 90s. Unlike other forms of digital money, the most popular cryptocurrency, . Its enthusiasts, as well as supporters of other similar electronic coins, see them as an opportunity to reconcile the convenience of electronic circulation with the need to protect privacy, because it is still encrypted money. In addition, it is a "social" currency, at least theoretically controlled not by governments and banks, but by a special agreement of all users, of whom there may be millions in the world.

However, experts say that the anonymity of cryptocurrency is an illusion. One transaction is enough to assign a public encryption key to a specific person. The interested party also has access to the entire history of this key, so the transaction history also appears. They are the answer to this challenge. mixery coin. However, when using a mixer, we must fully trust a single operator, both when it comes to paying out mixed bitcoins and not disclosing the relationship between incoming and outgoing addresses.

Will cryptocurrencies prove to be a good compromise between the “historical necessity” that electronic money seems to be and the commitment to privacy in the sphere of earning and spending? May be. Australia, which wants to get rid of cash within a decade, is offering citizens something like the national bitcoin in return.

Bitcoin cannot replace money

However, the financial world doubts that cryptocurrencies will really replace traditional money. Today, Bitcoin, like any alternative currency, is fueled by declining confidence in money issued by governments. However, it has huge drawbacks such as dependence on internet access and electricity. There are also fears that the cryptography behind Bitcoin will not survive a collision with quantum computers. Although such devices do not actually exist yet and it is not known if they will ever be created, the very vision of instant account clearing discourages the use of virtual currency.

In its annual report for July this year, the Bank for International Settlements (BIS) dedicated a special chapter to cryptocurrencies for the first time. According to the BIS, their aim is to replace the functions of public trust financial institutions such as central and commercial banks, distributed ledger technology () as well as . However, according to the authors of the study, cryptocurrencies cannot become a replacement for existing solutions in the field of money emission.

The main problem with cryptocurrencies remains with them high degree of decentralizationand creating the necessary trust causes a huge waste of computing power, is inefficient and unstable. Maintaining trust requires each user to download and verify the history of all transactions ever made, including the amount paid, the payer, the payee and other data, which requires huge computing power, becomes inefficient and consumes a huge amount of energy. At the same time, trust in cryptocurrencies can disappear at any time due to the lack of a central issuer that guarantees their stability. Cryptocurrency can suddenly depreciate or stop functioning altogether (4)

4. Symbolically represented bitcoin ball

Central banks stabilize the value of national currencies by adjusting the supply of means of payment to the demand for transactions. Meanwhile, the very way cryptocurrencies are created means that they cannot flexibly respond to changes in demand, because this is done according to a protocol that determines their number in advance. This means that any fluctuations in demand lead to changes in the valuation of cryptocurrencies.

Despite periodic significant growth in value, Bitcoin has not proved to be a very convenient means of payment. You can invest in it or speculate it on special exchanges, but it is more difficult to buy milk and buns with it. The decentralized technology that underlies cryptocurrencies, therefore, will not replace traditional money, although it can be used in other areas. BIS specialists mention here, for example, the simplification of administrative processes when conducting financial transactions or cross-border payment services for small amounts.

Internet of things and money

They are currently attacking the cash position mobile payments. All over the world in recent years there has been a trend to encourage people to use their mobile phone while shopping. In mobile payment systems, the phone simply becomes a credit card, storing the same details as the card and communicating with the merchant's small credit card terminal using a radio technology called (5)

5. Payment in the near field communication method

It doesn't have to be a smartphone. In the age of the Internet, even our refrigerator, communicating with our smartphone, will order oil on our behalf when the sensors show that it is running out of stock. We only approve the deal. In turn, the car will pay for the fuel itself by establishing a remote connection with the payment terminal on our behalf. It is also possible that the payment card will be "stitched" in the so-called. smart glasses that will take over some of the functions of a smartphone (the first so-called ones have already gone on sale).

There is also a completely new approach to online payments - using smart speakerssuch as Google Home or Amazon Echo, also known as home assistants. Financial institutions are exploring the possibility of applying this concept to insurance and banking. Unfortunately, privacy concerns, such as random recording of family discussions using smart home equipment and Facebook's recent scandal over user data collection, may slow the development and spread of this technology.

Financial Technology Innovators

It was new in the 90s. PayPal, a service that allows you to make convenient payments online. There were plenty of alternatives for him right away. For several years, new ideas have been focused on mobile solutions using smartphones. One of the first startups of this new wave was the American dwola (6), which introduced an online payment system designed to bypass credit card operators.

6. Dwalla Administration and Headquarters

Money deposited from a bank account to a Dwolla account can be instantly sent to any other user of this system by entering their phone number, email address or Twitter name in the phone application. From the user's point of view, the greatest attraction of the service is the very low cost of the transfer, compared to banks and, for example, PayPal. Shopify, a company that sells online shopping software, offers Dwolla as a payment method.

The newest, and already much brighter than the rest, star in this fast-growing industry - Revolut - something like a package of foreign currency bank accounts combined with a virtual or physical payment card. This is not a bank, but a service of a class known by its name (abbreviation). It is not covered by the deposit guarantee scheme, so it would be unwise to transfer your savings here. However, after depositing a certain amount in Revolta, we get many opportunities that traditional financial instruments do not offer.

Revolut is based on a mobile app. Individuals can use two versions of the service - free and extended with additional premium features. The program can be downloaded from Google Play or the App Store - the application is prepared only for the two largest platforms. The registration process should not cause difficulties even for novice smartphone users. You need to create a four-digit password that is required to run the application.

We can additionally use biometric verification using the fingerprint scanner on the phone. After opening an account, we already have an electronic wallet divided into currencies. In total, 25 currencies are currently supported, including the Polish zloty. One of the main advantages of Revolut is the absence of commissions for exchange transactions and the use of interbank market rates (no additional margin). Users of the free version of the package are limited - without commission, you can exchange the equivalent of PLN 20 0,5 per month. zloty. Above this limit, a commission of XNUMX% appears.

A simple registration procedure does not require identity verification. Theoretically, the user can then enter fictitious data and launch an electronic wallet - however, at this stage, he will receive a very limited product. In accordance with the EU rules on electronic transactions and the prevention of money laundering, a maximum amount of PLN 1 can be credited to the account without full verification. złoty during the year.

You can fund your account by bank transfer, from a payment card, via Google Pay - using the card details stored in the Google mobile wallet. Users of the free version of Revolut can also order a prepaid Mastercard or a virtual card (7), immediately visible in the application and designed for online purchases. The virtual card is issued free of charge.

7. Revolut card and app

There are many fintech companies and payment applications out there. Let's mention, for example, such as Stripe, WePay, Braintree, Skrill, Venmo, Payoneer, Payza, Zelle. And this is just the beginning. A career in this sector is just beginning.

You are not faking the hemoglobin level

Cash can be lost or lost when we face a thief. The same applies to the card, which does not need to be physically stolen to gain access to electronic money - it is enough to scan it and preview the PIN code. It is also possible to steal or hack a mobile phone. That's why biometric methods have been proposed as monetary technology tools.

Some of us already log into our smartphones and bank on our smartphone. fingerprintwhich can also be used to withdraw money from some ATMs. There are first banks where to keep records we enter with our voice. Voice authentication technology has also been tested by the Australian Revenue Service for four years. More than 3,6 million applicants have applied for the test, according to a spokesman for the institution, and the number is projected to exceed 2018 million by the end of 4.

The Chinese company Alibaba announced a few years ago that it intends to introduce payment authorization. face recognition technology – mostly from smartphones. During CeBIT, representatives of Alibaba presented a solution (“smile to pay”).

Recently, you can use the face to pay for order fulfillment in the Chinese version of the KFC chain (9). Alibaba's financial arm Ant Financial, which is an investor in the KPro (Chinese KFC) chain, has launched such an opportunity in the city of Hangzhou. The system uses a customer photo taken by a 3D camera, which is then stored in the database. To analyze photos, he takes into account as many as six hundred places on the face and the distance between them. Customers only need to sign a settlement agreement with Alipay in advance.

9. Biometric authentication of transactions using face scanning in Chinese KFC

In Wuzhen, a historic city visited by millions of tourists every year, it has become possible to go to many places to show a previously scanned face and link it to the option of a purchased entrance ticket. The entire process takes less than a second and the company claims the system is 99,7% accurate.

However, it turns out that not all "traditional" biometric methods are actually safe. In addition, they carry additional risks. Recently in Malaysia, criminals who want to start an expensive car with fingerprint reading on the ignition came up with the idea... to cut off the owner's finger.

Therefore, we are constantly looking for completely safe and effective solutions. In the financial sector, Hitachi and Fujitsu have been working over the past decade to commercialize technologies that identify people based on configuration of blood vessels (eight). After inserting a bank card into an ATM, a prompt appears on its screen to stick your finger into a plastic recess. Near infrared light illuminates both sides of the incision, and a camera below takes a picture of the veins in the finger and then compares it to the recorded pattern. If there is a match, a confirmation appears on the screen for a second, then you can enter your PIN and proceed with the transaction. Japan's Kyoto Bank launched the biometric program in 8, and so far, about a third of its three million customers have opted for it.

The solutions of the two companies mentioned above are different from each other. Hitachi takes an x-ray of his fingers and takes a picture from the other side. Fujitsu reflects light from the entire arm and uses a sensor to detect light that is not absorbed by the veins. Compared to many other biometric methods, vein scanners are fast and accurate. It's also hard to steal here. Even if the thief cut off our arm to fool the vein scanner, he would have to somehow keep all the blood inside the severed limb. Only blood with a certain level of hemoglobin absorbs light in the near infrared spectrum, on which the reader works.

However, there are many doubts about this technique. Research shows that customers don't like the idea of ​​a bank storing their biometric IDs in a database. Also, if hackers were ever to break into this database, the biometric experiment would end forever (and forever) for all clients whose accounts were attacked - they would not be able to get a new set of veins!

So Hitachi developed a system in which a customer's bank card stores a biometric template, and the photo taken by the sensor in the ATM is matched with the photo on the card. Fujitsu uses a similar system. If the card is stolen, even the most advanced hackers will find it difficult to gain access to biometric data. This is because the cards are configured to only receive data from the ATM sensor, and not to transmit data to an external computer.

However, will we ever live to see the day when we can completely abandon banking, credit, debit, store, PIN cards, driver's licenses and even money itself - after all, it is our veins or other biological parameters that will become ours? wallets?

polymer cash

And what about security of money? This question goes for all kinds of them, from good old cash to subtle wallet tricks written all over the face.

As long as paper money dominated, the development of banknote security techniques played an important role in monetary technology. The design of the banknote itself - the degree of its complexity, the use of many detailed, diverse, complementary and penetrating graphic and color elements, etc., is one of the first, main barriers to a possible counterfeit.

The paper itself is also a protective element - excellent quality, which is important not only for the durability of banknotes and fakes, but also for the susceptibility of denominations to various technological processes at the production stage. It should be noted that in our country, cotton paper for banknotes is produced at a special paper factory of the Polish Security Printing House.

Various types are in use today. water marks - from monochromatic, with a sign lighter or darker than paper, through filigree and two-color, to multi-tone with the effect of a smooth transition from the lightest to the darkest tone.

Other solutions used include protective fibers, embedded in the structure of paper, visible in daylight, ultraviolet or infrared light, security threads that can be metallized, dyed, glow in UV rays, can be microprinted, contain magnetic domains, etc. The paper can also be chemically protected, so that any attempt to treat it with chemicals causes the formation of clear and indelible stains.

To further complicate the task of counterfeiters, complex banknote printing process, using various printing technologies. At the same time, additional security elements are introduced, for example, anti-copy backgrounds consisting of many very thin lines, smooth color transitions throughout the banknote during offset printing, elements printed on both sides of the banknote, which are combined together only when viewed in the opposite direction. light, microprints negatives and positives, various types of special inks, including latent inks that glow under the action of UV rays.

Steel engraving technique is used to obtain the effect of the bulge of individual elements on the banknote. The letterpress printing technique is used to give each banknote a separate number. In addition, it is used to provide optical protection (such as holograms).

The aforementioned National Bank of Poland uses many of the above methods, but new ideas are constantly emerging in the world. At least concretely understood avoiding paper. In September 2017, the conversion of paper ten-pound notes into polymer banknotes (ten). A similar operation for 10-pound notes was carried out there from September 5 to May 2016.

10. Polymer hole punch for ten holes

Polymer money is more resistant to damage than paper money. The Bank of England reports that their service life is as much as 2,5 times longer. They do not lose anything in their appearance even after washing in a washing machine. They also have, according to the issuer, better security than their paper predecessors.

quantum currency

Despite the pressure to implement electronic money, new cash security methods are still being developed. Some physicists postulate that, regardless of the type of money, it should be used for this. quantum methods. Scott Aaronson, a scientist at the Massachusetts Institute of Technology, proposed the so-called quantum money – the original creator was Steven Wiesner, back in 1969. According to his then concept, the banks had to "record" one hundred or more photons on each banknote (11). Neither five decades ago, nor now, no one has any idea how to do it. However, the idea of ​​protecting money with a polarized photon watermark is still intriguing.

When identifying a banknote or currency in some other form, the bank will check only one attribute of each photon (for example, its vertical or horizontal polarization), leaving all others unmeasured. Because of the theoretical prohibition against cloning, it would be impossible for a hypothetical counterfeiter or hacker to measure all the attributes of each photon in order to produce a copy or keep such electronic money in his account. It also couldn't measure just one attribute of each photon, since only the bank would know what those attributes were. This security method also seems to be more secure than the encryption used in cryptocurrencies.

It should be noted that this model private encryption. Until now, only the issuing bank could approve the issuance of banknotes to the market, while for Aaronsson quantum money, which everyone can check, becomes the ideal. This would require a public key that is clearly more secure than the one currently used. We do not yet know how to achieve sufficient constancy of quantum states. And it is clear that no one needs a wallet that at some point suddenly undergoes quantum “decoherence”…

Thus, the most far-reaching vision of the future of money is presented in the form of a biometric wallet based on our facial features or other biological parameters, which cannot be hacked because it is protected by quantum encryption methods. This may sound abstract, but it's worth remembering that ever since we moved away from the commodity-for-commodity model, money has always been an abstraction. Wouldn't it be, however, for any of us an abstraction in the sense that we don't have it.