WC CFO TheStrategicCFO#44 Online NZ Final - Flipbook - Page 1
The end of CASH
”
plus the resilience
of cash.
The new technologies of ‘digital
currencies’ - such as Bitcoin and
Facebook’s Libra - mean that cash
can be paid directly from someone
who possess it to any other party, but
without the need for a reliable network
infrastructure to verify or authenticate
or approve the transfer. That means a
digital currency can be used anywhere
- online or offline, city or bush, between
businesses or individuals. If the network
goes down, no worries - digital cash,
like its physical counterpart, continues
to work.
That’s not entirely a good thing. Twice
during the Christmas shopping season
- once before and once after Christmas
Day - digital payments terminals
went down at Myer stores throughout
Australia. For hours, customers couldn’t
pay for their purchases in anything but
cash, and few of them cared to wait.
Losing millions of dollars in sales for
every hour of downtime, Myer paid a
high price for its wobbly infrastructure.
More significantly, when the call
went out at the beginning of January
to evacuate the coastal areas of
southeastern NSW and northeastern
Victoria, tens of thousands of
holidaymakers found themselves
unable to buy food or petrol (and
thus, unable to drive themselves
out of the evacuation zone) because
communication links had been severed
by bushfire. When those links went
down, ATMs, EFTPOS and all sorts
of digital payments services went
with them.
The effortlessness of a digital payment
disguises a vast amount of very
carefully tuned infrastructure, starting
with the EFTPOS terminal, heading
back to a credit card processor, then
to a customer’s bank, all of which has
to work perfectly (and within just
a few seconds), or none of it really
works at all. Australia has world-class
infrastructure, but because so much
of our payments depend on that
infrastructure, when it fails, our cashless
culture instantly becomes a moneyless
culture.
This lack of resilience will slow the
transition to an economy fully powered
by digital payments. Once burned
making a digital payment, we’ll think
twice about taking another risk. That
mattered less when this infrastructure
primarily handled larger-value creditcard transactions. Now that every
transaction of any size needs to flow
across this infrastructure with nearperfect reliability, we need to ask
whether these existing digital payments
truly meet our needs.
Most of the time, our
infrastructure does the
job well, but edge cases
such as emergencies
mean we can not rely
on them. We need a
solution that provides
the convenience of
digital payments
Facebook has become such an object
of distrust that getting the necessary
regulatory approvals for Libra proved
impossible. But Libra prompted the
People’s Bank of China to announce the
release of a ‘digital yuan’ in 2020 - with
large-scale tests to begin in Shenzhen
and Suzhou before the middle of this
year. The PBoC has already made it clear
that their intention is to fully migrate
the world’s 2nd largest economy into
digital currency - a data bonanza for the
Chinese government, which will acquire
the ability to track every transaction by
every Chinese citizen or business.
A digital yuan means that every business
doing business with China will need
to consider how it will work with and
manage digital currencies. Our banks
can store physical banknotes or their
equivalent in deposits -- but what
about digital currencies? The digital
yuan looks to be forcing us to mutate
our entire financial infrastructure to
accommodate digital currencies. The
Chinese invented paper money over
1100 years ago, transforming finance.
It looks like this decade will see a case
of history repeating.
CFOMagazine.com.au
