“Money, it is conventional to argue, is a medium of exchange, which has the advantage of eliminating inefficiencies of barter; a unit of account which facilitates valuation and calculation; and a store of value which allows economic transactions to be conducted over long periods as well as geographical distances,” writes Harvard historian Niall Ferguson in The Ascent of Money: a Financial History of the World.
For a long time, money was embodied in precious metals like gold and silver. The earliest known gold coins were produced in Lydia, in what is now Western Turkey about 2500 years ago. But, with the introduction of banknotes in seventh-century China, money started to decouple from physical objects with intrinsic value.
“Today . . . we remain more or less content with paper money - not to mention coins that are literally made from junk,” writes Professor Ferguson. “ . . . we are happy with money we cannot even see. Today’s electronic money can be moved from our employer, to our bank account, to our favorite retail outlets without ever physically materializing. It is this virtual money that now dominates what economists call the money supply . . .The intangible character of most money is perhaps the best evidence of its true nature.”
Given this intangible character of money, it is not surprising that major advances in information technologies have in turn led to major advances in the way we deal with money and payments. In the 1960s, 1970s, and 1980s, mainframes, minicomputers, data networks, transaction processing and data bases enabled financial innovations like ATMs and credit cards. Then in the 1990s, the wide adoption of the Internet and World Wide Web led not only to online banking, but paved the way for online shopping and e-commerce in general.
Smart mobile devices, broadband wireless networks, cloud-based services and big data are now ushering the next major phase in the evolution of money and payments. Money is continuing its centuries old transformation from being embodied in objects with intrinsic value, like gold and silver, to being nothing more than information in the digital wallets of our mobile devices as well as in our digital accounts someplace out there in the cloud.
Since just about everyone in the world, rich and poor alike, now has access to mobile devices, this major chapter in the history of money brings with it a universal inclusiveness that has been missing in the previous links between information technologies and money. Mobile digital money is coming, - over time, - to every individual in every corner of the world.