The Book of Payments

This chapter looks in more depth at the different ways in which ideas about cashless societies were articulated and explored in pre-1900 utopian literature. Taking examples from the works of key writers such as Thomas More, Robert Owen, William Morris and Edward Bellamy, it discusses the different ways in which the problems associated with conventional notes-and-coins monetary systems were tackled as well as looking at the proposals for alternative payment systems to take their place. Ultimately, what it shows is that although the desire to dispense with cash and find a more efficient and less-exploitable payment system is certainly nothing new, the practical problems associated with actually implementing such a system remain hugely challenging.

In most countries the introduction of banknotes had the same impact as any other technological innovation: an increase in labour and capital productivity. In Spain the process of introducing banknotes took more than a century. A first and rather unlucky attempt was that of 1783 by the Banco de San Carlos, one year after being established by the state. Subsequently, the Banco de San Fernando (established in 1829), was responsible for the first successful banknote issue, although these circulated only in Madrid. Between 1844 and 1847 the first permits for provincial banks of issue were authorized (namely Banco de Barcelona and Banco de Cádiz) and in 1856 permits were extended to 20 more banks around the country. A plurality of issuers lasted until 1874, when the Government––short of money––granted the monopoly to the Bank of Spain. When the new unified banknote circulated freely around the country 10 years later, one could observe that, irrespective of other variables, the provinces with greater financial development were those that had hosted local issuing banks.

The post-independence economic vitality in Chile created conditions for innovation in the field of payments. Some attempts to create tickets (informal emissions) by business houses were quickly banned. Until then, the dominant idea was to devise means of payment only as coins minted in metal, such as gold, silver, copper and alloys. Despite this prohibition, the demand for means of payment in the 1840s increased along with the growth of the economy. Only in 1860, with the creation of the General Banking Law, were banks allowed to print their own money. With this development, the possibility of innovation in issuing payment methods was developed.

This case study illustrates how a diverse array of domestic and foreign currencies satisfied the money demands of the many interregional and international trade circuits articulated around New Orleans (the most important Southern port of trade) right before the American Civil War. It also explores how the plurality of currencies provided liquidity when it was the most needed, especially during and after the panic of 1857, through adjustments of currency exchange rates. Discounts and premiums of state banknotes provide information about the patterns of spatial division of labor and the imbalanced regional specialization of the American economy right before the Civil War. The nominal exchange rates of foreign currencies in New Orleans such as the British sterling pound, the French franc, the Austrian thaler, the Mexican peso, the Spanish and the Spanish American “patriot” doubloons inform our understanding of the integration of the American slaveholding, staple-exporting South to the world economy of the long nineteenth century.

Intermediation has been largely neglected in Latin American economic and business historiography. This study focuses on financial intermediation and on the links between the banking system and the commercial sector during Argentina’s export boom in the first few decades of the twentieth century. To that end, it shows how rural merchants served as financial intermediaries in the Pampas by examining the ways in which they provided short-term credit. The risks associated with lending activities and information asymmetries were two of the main reasons that drove banks and large firms to rely on local merchants as their agents or intermediaries in Argentina’s rural areas. Business records from rural merchants, notaries’ archives, and court files made it possible to conduct this empirical study of the historical nature of commercial credit intermediation in Argentina. The research is based on major advances in the theoretical understanding of credit markets and intermediation that have emphasized the problems of imperfect information and enforcement.

Most economies nowadays operate on the basis of one currency per country, although that is a relative novelty in historical terms. Around the turn of the millennium, Argentina also had several currencies that coexisted at a national, regional and community level. This article explores the division of labour that emerged in Argentina at household level to match currencies and expenses, without the use of money changers, between 2000 and 2005. Households learnt to manage the currencies of their income with those of their payments, and to relate that to what was more necessary and accessible. Each type of currency served a specific purpose and all of them combined were required to pay for necessary transactions in the economy. Currencies were complementary to each other, in such a way that no single currency could manage on its own what the various types of currencies could do.

Barter has been present in society for thousands of years. The advent of the commercial Internet in the 1990s enabled the rising of electronic barter trade networks and a new generation of entrepreneurs who invested in the concept. Tradaq was one of these networks born in Brazil during the so-called “dotcom bubble”. Using the example of Tradaq, this chapter analyses the benefits as well as obstacles involved in implementing an electronic barter trade network and points out lessons learned through the process, such as the lack of interregional economies of scale; frustrated expectations over the Internet potential for industry; members’ high churn rate; and trade overpricing practices.

The idea of a cashless society, as promoted for the last half-century or so, combines two key ideas, namely the disappearance of cash from Mr and Mrs Smith’s pockets and the role played in this change by a technologically-led move towards the dematerialization of money. Nevertheless, even though a kind of consensus is noticeable upon the progressive disappearance of cash and check payments, from a longer-term perspective the two key ideas of cash and dematerialization appear problematic at best. In fact, dematerialization goes hand in hand with materialization and depends a lot on how these terms are interpreted.

In this chapter we focus on the emergence of the idea of a “cashless/checkless society” in the 1960s as an example of how futuristic visions often drive new applications long before their economic viability is established. Variants of the “cashless/checkless society” vision appear throughout the developed world during the second half of the twentieth century, but for the sake of clarity and brevity, we will discuss the form it took in the United States from 1950s through the 1970s. As a result we illustrate how consensus that can drive actual technological developments is a key feature of how applications of information technology have been responsible for the increase in productivity of business organizations during the late twentieth century.

Access to mass retail banking, with financial self-service and plastic cards, occurred later in Spanish financial institutions than it did in those of other nearby countries. However, more mature technologies were adopted, such as teleprocessing (first through online networks, and later online, in real time), which favored the leadership of certain banking institutions and the implementation of cashless technologies. As a whole, the cases analyzed show the impact that the traditions and practices of each banking system have had on the new payment systems. In a globalized world, different institutional and business environments persist that account for the idiosyncrasies typical of payment systems.

In recent years, Mexico has undergone strong growth in the use of cashless payment instruments, primarily the use of credit and debit cards, electronic funds transfers (EFTs) and mobile banking. Although these payment instruments have been available in the country for some time (the bank credit card was introduced in the sixties), their rate of adoption was not remarkably fast, until the last 15 years. The recent acceleration is due to the drive of the financial industry to adopt innovations in payments and penetrate into new market segments, mainly low income earners with little access to financial services, as well as growing interest from the government to encourage cashless payment methods. But despite the large increase in the use of these instruments over the last decade, the use of cash still persists in the Mexican economy. This chapter seeks to document this phenomenon and discuss some hypotheses on why things have happened this way.

This chapter presents a recollection of the events that occurred in Cyprus during and after the two-week period (15–28 March 2013) when the country was left with no banking system, subsisting solely on ATMs and payment cards. It examines the role of local bankers and key institutions, such as the International Monetary Fund (IMF), European Central Bank (ECB), and Eurogroup, in the light of corporate legitimacy; and appraises the transformation of the Cypriot society three years from the levy imposed on depositors. This work suggests that Automated Teller Machines (ATMs) and payment cards played a political role, securing peace through controlled circulation of money and transactions with restrictions. In addition, we argue that the new deal has sunk the real economy and pushed people towards practices and activities in the unrecorded sphere.

The following chapter describes and analyses a Chilean financial inclusion mechanism called CajaVecina. This mechanism was deployed by the Chilean state-owned BancoEstado and falls within the phenomenon known as the Cashless Economy. CajaVecina is a banking correspondent (BC) service that builds upon a dedicated point of sale terminal typically found at small, independent corner shops. Together with the debit card linked to a ‘universal’ sight account, the terminal enables people access to several banking and payment services. The chapter introduces the CajaVecina service and the relative success of its deployment and acceptance across Chile. Our focus it to explore the socioeconomic relationships around CajaVecina, namely how the user, the storekeeper (intermediary) and the bank connect. The sociology of money, of payments and the studies of neo-institutionalism are the basis for the analysis of fieldwork collected from a website designed to collect complaints from the users of the system. (Unless otherwise stated, empirical data in this article draws on public complaints logged and freely accessible at www.reclamos.cl (accessed January 15, 2016).) The conclusion shows that CajaVecina offers a form of financial inclusion considerably different to the services of BancoEstado at its regular retail branches.

This chapter recounts the origins of Visa’s debit card, and analyzes why it took more than 20 years to become widely adopted by the member banks. Dee Hock, the founder of Visa, began talking about an “asset card” in the early 1970s, noting that it could easily replace paper checks and perhaps even cash. Visa launched their first debit card product in 1975, known as Entrée, but it was issued by only a handful of member banks. After briefly describing what Visa is and how it is structured, the chapter explains why most banks chose not to issue the Entrée card at the time, and why they eventually changed course in the early 1990s. Shortly after the card was widely issued, the Visa system began processing more debit than credit transactions, bringing it closer to Hock’s vision of a comprehensive Electronic Value Exchange system.

This chapter offers a glimpse at the early history of credit card fraud in the USA. It argues that fraud became prevalent when travel and bank card issuers disembedded cards from their original department store context. It then provides three interrelated frameworks for understanding the challenges fraud posed to issuers—as a network problem, a cultural problem, and a legal problem. Though travel and bank card firms eventually overcame these challenges, card fraud continued (and continues) to plague the industry, suggesting fraud may be endemic to payment card systems.

This chapter looks at the ephemeral life of the first electronic purses: Mondex (1991) and Visa Cash (1996). Launched at the dawn of the Internet era, both were technologically advanced and Mondex in particular invested heavily in security. But in spite of large, international players buying into the concept, both systems failed to develop widespread customer acceptance and therefore, enough business volume to become viable. Mondex, VisaCash and a long list of other e-cash and electronic purse schemes have demonstrated that convincing people to adopt high-tech alternatives to cash is extremely hard and can be very expensive. This chapter thus provides valuable lessons in what to avoid to those interested in electronic money.

This chapter sheds light on the materiality of payment devices. It makes a simple proposition: that the matter of money—the tangible qualities of sets of transactional objects and how they are handled and move around—matters. This is illustrated by examining two forces to which money is connected. The first is adaptation, and concerns changes over time in the stuff of money itself, the transformations payment devices have had to undergo to function successfully as money. The second is calculation, and relates to how exactly the material properties of money, once settled, might shape the financial decisions we make. With respect to the latter, the chapter shows that money may not be as transparent a medium as is so often thought.

This chapter presents a retrospective of politics, economics and user behaviour all fused together to propel the new formation of a local payment scheme in Russia. Developments accelerated rapidly between March 21, 2014, and the closing days of April 2015, when the first transactions through ‘a local switch’ were announced. These developments brought to light how issues of financial inclusion are all the more important, and help make a case for propelling new innovative payment services as vital for the future of financial inclusion. The chapter examines the pre-existing conditions of user demand, economical and technological requirements for the system to exist in the first place as well as the political agenda put forward to speed up the schedule to its rapid implementation. This chapter also documents the latest achievements of the scheme and proposes a short-term narrative of what might happen with the boldest payment bet from a country that leapfrogged from almost barter economy to digital payments in the short span of 25 years.

In this chapter we use data available from the first stage of Survey of Uruguayan Households Finance (SUHF1) and ECH 2012 to analyze access to financial services such as credit cards and bank accounts. We estimate univariate and bivariate probit models for bank account and credit cards holdings. Evidence indicates that households’ income, education level and working status are the main determinants of the probability of holding credit cards and bank accounts in Uruguay. In addition, we perform a counterfactual exercise which allows us to predict the effect of making the payment of salaries through the financial system compulsory. Our prediction is that bank account and credit card holdings would increase at around 6 and 4 percentage points, respectively.

Fast growing economies with limited formal banking services experience greater financial exclusion and transaction curtailment, but mobile technology offers fast cheap money transfers and facilitates transactions. African appetite for mobile banking developed along the explosion in mobile phone technology. Mobile phone companies stood up to the challenge, but had to address peculiar geographies of remoteness and inaccessibility. Strategies of financial inclusion were developed by the sophisticated financial system in South Africa, which affected the unbanked’s demand for mobile money services. M-Pesa is the most successful and fastest growing mobile money service product. It has already delivered numerous innovations in mobile money products and services. Regulatory rigidity affected the take-up of mobile money services in some African markets, but overall mobile communication networks introduced innovative products to extend mobile banking into remote rural locations. The rapidly expanding mobile money service market stimulates entrepreneurial activity, creates employment and serves as a major contributor to state revenue where liberal market economic policies permit.

This chapter looks into the development and characteristics of mobile payment systems in Turkey until 2013. With over 72 million mobile phone users and mobile phone ownership reaching a penetration level of 90 %, Turkey is an attractive market for mobile payments. Initiated by the leading GSM carrier Turkcell in April 2009, the driving forces for this technology are GSM operators and their technology partners (i.e. mobile payment aggregators). The system targets the relatively young population who are frequent users of online gaming sites and social networks. We argue that the power of Turkish mobile payments is related to their potential to contribute to a cashless society by tapping into a market that is underserved: low value, high volume, online entertainment transactions. In this way, Turkish mobile payment systems supplement, rather than substitute, other payment methods. In this chapter, we also discuss the strengths and limitations of mobile payments as viewed by consumers.

This chapter discusses the electronic payment system of Thailand with a focus on the development of mobile banking system and strategies of competition. The empirical study analyses the competitive landscape of mobile banking using the Managing Migration Paths Model. The study explores the mobile banking and electronic payment strategy of the leading banks in Thailand: Bangkok Bank, Kasikorn Bank, Siam Commercial Bank, Krung Thai Bank and Bank of Ayudhya. The discussion also presents a SWOT analysis of the mobile banking industry in terms of heading towards an m-money economy. The results show that banks see mobile banking as a convenient delivery channel to provide value-added services to customers. Competition forces banks to seek strategic alliances (network collaboration between the banking and ICT industry) towards offering innovative solutions in the payment market.

This chapter presents a cross-cultural study of factors driving the adoption of mobile payment systems. Mobile payment systems use the mobile phone or other mobile devices to make payments not only for transactions performed on the Internet but also in local stores. We find that the technical skills and requirements for mobile payments are widely available and the intention to adopt mobile payment services is high if the providers include features that are perceived to be useful for customers. The most trusted partners for mobile services are the traditional banks and credit card organizations. Cultural background also explains differences in people’s intention to use mobile payments. Our Chinese respondents value the benefits of mobile payment systems higher than the European subsample but do not differ from those in their assessment of risk and trust.

In this chapter, we research the introduction of mobile money in India and its developments to replace cash since 2010 amongst migrant workers in South India. Fieldwork included exploring the role of middlemen in this broad ecosystem as well as understanding whether individuals feel a sense of trust with the use of mobile money. Empirical findings report that, on average, there was a higher and regular transfer of money (regular monthly and emergency money) by users as compared to non-mobile users. Specifically, regression results show that mobile money users transfer money 64 % more often than non- mobile users. It also shows that mobile money users transfer about 44 % more emergency money than non-mobile users. Results also tell that usage also increases with age, education and marital status as well as greater frequency of interstate transfer of cash by mobile money users.

To sustain a wide range of applications, to attract app developers, and to foster innovation, smartphones come bundled with a plethora of sensors and peripherals that apps can use: an accelerometer for sensing movements, a gyroscope for sensing orientation, a magnetometer for sensing magnetic fields, a camera for taking pictures, and so on. Although initially considered innocuous, researchers have repeatedly demonstrated that sensors leak unintended information. These leaks could help malicious apps reconstruct banking PINs, Dual-Tone Multi-Frequency tones or spoken secrets. In this chapter, we provide an introduction to such attacks by reviewing their principles and effectiveness. We then illustrate them through two recent research papers. Such attacks are currently in their early stage. But we hope to raise awareness of their existence amongst practitioners, as they are likely to become more effective and prevalent on smart mobile platforms in the future.

This chapter discusses the future of mobile banking. To date, the majority of banks globally offer some form of mobile banking. Whilst mobile banking offers benefits to both customers and banks, the market has yet to fully mature, despite the availability of technology and customer demand. Changing regulatory regimes, industry consolidation, advancing technology, changing customer preferences, financial crises, increased competition between banks and non-banks and drivers of globalisation have changed the global retail-banking sector landscape. Technology, in particular the Internet, is heralded as the main force initiating change. Due to continued infusion of technology into financial services delivery, banks currently offer a plethora of distribution channels as part of a multi-channel strategy including mobile banking, which represents the next step in the provision of financial services. Diffusion of mobile banking, however, differs between countries and is slower within Europe compared to the rest of the world. Current knowledge in this area is limited. A further debate exists in relation to whether or not mobile banking is considered to be a primary or additional channel and is split between developed and developing countries. Little consensus exists in terms of these arguments. The need therefore to develop the conversation around industry adoption has never been greater.

This chapter explores the progress of European Payments Integration since the introduction of the euro. The significant project of creating a European Single Market for Payments, that would facilitate efficient and cost-effective cross-border payment transactions to underpin intra-European trade, began in earnest in 2002 with the creation of the European Payments Council (EPC) and the development of the Single Euro Payments Area (SEPA) initiative. With a fragmented payments market in Europe, characterized by different payment standards, formats, services and market practices, the SEPA project began a long journey of harmonization covering technical, regulatory and legal as well as product/service levels. The EPC developed dedicated technical and business rules for the creation of SEPA credit transfer and direct debit services as well as harmonization standards for SEPA card services. In parallel, the European payments industry required support from EU legislators to ensure a harmonised legal environment in which SEPA services could be recognized in the same way both domestic and across borders. Various legislative measures were thus developed and adopted at EU level, ranging from the Payment Services Directive of 2007 to the SEPA Regulation of 2012 and most recently the updated Payment services Directive 2 published in December 2015.

Different legislative initiatives have progressively converged in the creation of the so-called Single Euro Payment Area (SEPA). The main trigger was the professed Payment Services Directive (PSD) in 2007. However, recent developments have driven to the so-called PSD2 as part of what has been generally labelled as SEPA 2.0. This consists of developments that look at innovations and new payment devices as game changers. This chapter specifically looks at the Spanish case within the SEPA. Although cash payments are still highly used, Spain has been characterized for offering one of the world’s largest infrastructures for non-cash payments. Additionally, there have been recent changes in the pricing structure of the payment card industry, causing significant changes in non-cash payments’ adoption and usage. Even though the infrastructure is large, the use of cards still remains at an average EU level. The ATM network can partly explain this evolution. ATM transactions and POS transactions have opposite effects since the use of debit cards at ATMs increases cash withdrawals while the use of debit cards at POS reduces cash holdings for purchasing purposes. Another main feature regarding the setting of incentives for higher card use in Spain has been pricing regulation. This has made Spain an interesting case because the reduction in interchange fees has occurred without the need of a regulatory change but with some mediation from authorities in negotiations between banks and merchant associations.

Mexico is famous for many things, including its Mayan pyramids, gourmet food, chocolate, traditional tequila, impressive reefs and coral formations, to name but a few. This chapter reveals an additional trend among the Mexican population. Within a climate of prevailing mistrusts, technology aversion and misinformation, the majority of the Mexican market is not formally banked. The last 15 years have seen almost no growth in per-capita bank consumer credit. Lack of formal credit scores and uncertain payment behavior make credit-card offerings risky. Within this context, Mimoni, a consumer lending company, offers cash-free solutions through direct personal interaction.

This is the story of a successful industry–academia strategic research project in the area of financial innovation and financial behaviour. Four companies and two research institutions established five payment test scenarios and studied test users’ attitudes to money and payments. It was found that the Danish already e-aware population is ready to adopt mobile payments. When introducing them the studies showed that convenience is the main facilitator and the adoption of new payments depends on three factors: “Control, Value and Context”. This has proved to be a very useful finding. The collaboration has also helped build a growing fintech payment community and supported the further development of a cashless society where new payment solutions may help provide helpful payment solutions for all.

ebarts is a mutual exchange digital currency, which enables people to buy and sell without money. It has been created with a strong social purpose to unlock idle skills and resources within communities, and to encourage the growth of a social economy. ebarts are used in a secure, mobile-based marketplace for trading goods and services, and generate value from exchange. In this paper, we discuss the user-centred design process we have employed to build an ebarts marketplace platform, focusing on people’s expectations for creating and using ebarts. Our design reflects our findings that people are geared by a want to reduce waste and generate value from possessions, skills and time that would otherwise be wasted. Correlating people’s responses from focus groups indicates that social entrepreneurship can be nurtured by such marketplaces, and that there is need for a space to be created in society for individuals to engage their entrepreneurial creativity for their own benefit as well as directly affecting their communities. Finally, based on our development of ebarts we present a framework with which to understand the varieties of outcomes an ebarts-based marketplace can achieve and how it can strategically exploit the changes such marketplaces may bring.

Contributions to this edited book evolve around the central role banks have in retail payments (see Fig. 33.1 below). This analysis takes a long-term view all the way to the present while, in some cases, points to the future. Contributions come from different fields in academia, combined with others from active industry participants.