Censored Lecture: The Death of Money is Inevitable

THE ADVENT OF MOBILE MONEY
The first case of a mobile phone being able to be used to handle a payment was in 1998 as an experiment in Espoo Finland just outside of Helsinki, where two Coca-Cola vending machines were installed with a mechanism to accept payment by SMS text messaging. So rather than depositing coins to the vending machine, a user could send an SMS text message to a special phone number [unique to that specific vending machine] and the vending machine would momentarily receive the electronic command that money has been paid and release the intended soft drink. Meanwhile the payment would appear on the phone bill.

The innovations spread rapidly. By 1999 Norway introduced the first systems to handle the payment of parking meters by mobile using SMS. Austria offered the first case of train tickets paid by SMS in 2000. Soon lotteries, cinemas, fast food restaurants like hamburgers and pizza, taxis, etc would accept mobile payments. Croatia became the first country where you could live your whole day with every normal opportunity where you could use cash, was now also enabled for mobile/SMS payments. I was just in Brazil last year and saw that on the beaches of Rio de Janeiro you could pay for your ice cream by mobile phone. On another trip last year to Mexico, I was at a convenience store, and I saw that the person just before me paid by mobile phone.

Banks would also move into the mobile space, albeit quite cautiously. The first bank to offer alerts of bank account balances etc. via mobile phone using SMS was Merita Bank of Finland back in 1996. There was a rush of WAP related banking services [so called M-Pay] in the early parts of the past decade but many were short-lived projects. The movement of banking to mobile progressed slowly and the innovations came more from countries where the legacy banking industry was not well entrenched and the banking thinking was more modern.
Czech Republic was an early leader in banks adopting mobile services. And a major leader soon came out of South Africa, where for example years ago it was normal to get SMS alerts when money was withdrawn from a bank account or credit cards. I witnessed it myself when a colleague illustrated it to me at a cash machine/ATM in Johannesburg. He had his phone with him at the cash machine, he punched in the commands to withdraw money from his account. Before the cash machine had even started to count the money for dispersing from the machine, an SMS text message arrived to his phone, beeping, with the alert that x amount of Rand was being withdrawn from a cash machine at this address...

Then the first national mobile banking solutions appeared in the Philippines with the telecom operator [carrier] Smart launching Smart Money and its rival Globe launching GCash. The mobile wallet concept spread and by 2004, NTT DoCoMo offered the first fully modern mobile wallet solution as O-Saifu Keitai [mobile phone wallet] using the FeliCa contactless technology as part of the solution. This not only offered the user full mobile payments, but also the mobile banking, mobile credit cards, mobile payment history records, identity cards, and even the ability to provide electronic passkeys for access to offices, homes, hotel rooms and replacing car keys. The whole mobile wallet solution operated both wirelessly on the cellular radio network, and via contactless 'near field' communications like modern contactless payment systems. The most famous use of the Felica enabled Japanese mobile wallet phones is that when Tokyo subway users go to the trains, they just touch their phones onto the Felica readers at the turnstiles into the subway train system, and the one journey fee is automatically deducted from the account.

VIRTUAL MONEY
So then we have the concept of virtual currencies. These are best known for the micro-payment business model i.e. virtual gold inside Massively Multiplayer Online Games [MMOG, MMORPG] such as EverQuest and World of Warcraft, where tens of millions users play simultaneously in vast virtual universes of quests and battles and adventures. And the games have their own 'monetary system' ie virtual money, to help handle the economic issues. You can buy certain items like weapons and ammunition and items of sustenance like food, water, healthcare, etc. And you can find gold or treasures that have monetary value, and in many cases you can sell items inside the game as well. A monetary system is quite essential for such virtual worlds as Second Life for example. And then the more stunning part - for major online worlds like World of Warcraft, Lineage, Second Life etc, there is an 'exchange rate' either formally or informally, that allows virtual currencies to be converted into real money, ie US dollars etc. So if you know how to discover [or earn] some gold inside a wargame, you can then convert that virtual gold into real dollars that you can use in the real world. This opened a whole new micro-economy, also known as "farming", where a horde of Chinese and Vietnamese gamers play for money [for cents per hour] to earn as much value as they can, and the items and gold is purchased by gamers in Western Hemisphere.

Gold Farmers in China who play World of Warcraft in full 8 or 12 hour shifts, generating virtual wealth

But that traces back to humble roots of a children's online playground called Habbo Hotel, by Finnish company Sulake. This is the 'Second Life for Children' but actually pre-dates Second Life by many years. While most adults are blissfully unaware of Habbo Hotel, Habbo has become the biggest virtual world on the internet, and has a total population of 175 million Habbo Avatars created. Note that the average age of Habbo Hotel users is about 15 years, so this is a youth playground. If that was a country on the planet, Habbo Hotel would be the sixth largest country by population. And like real countries, there is an economy inside Habbo Hotel, fuelled by a virtual money system. And the mobile dimension to this story? Kids don't have credit cards or banking accounts. But they do have mobile phones. So Habbo Hotel allows kids to make payments for goods inside Habbo Hotel, by paying via SMS on their mobile phones. They can use their mobile phone to buy Habbo Hotel money, which then can be used to buy any items of virtual goods inside Habbo Hotel, like a cool T-shirt or some funky shoes, or a wild haircut, or a nice poster to the wall of the virtual room.

This then turns into something of a weird behavior pattern. In some worlds and some users, they can spend more on the virtual good for their avatar, than on the same "real world" good that they can buy for themselves in the real world. In South Korea, the biggest virtual world is Cyworld [about half of the total South Korean population has already created an avatar of themselves inside Cyworld]. and that is quite normal for some users to spend more of their money to decorate their avatar, than what they spend on real clothes, haircuts, make-up, etc on themselves.