Archive for the 'P2PMoney' Category

My bank money is too sticky!

Like the vast majority of people I think, I have only two places where I hoard money.

The first one is my physical wallet The amount is not significant, but I could not do without it, yet. Money in it is not sticky, in the sense that it’s flowing efficiently and rapidly out of my wallet, sometimes too rapidly. So cash is nice, except for one thing, it’s reach is rather limited, I have to hand-out cash to make a payment and be physically connected. So I turn to this storage of money for standard use, buying bread, paying taxis,… When I want to replenish my physical wallet, I turn to my second pile of money: my bank account.

My bank account is indeed the second place wher I store money. The amount is more significant and certainly too high from a pure financial consideration. While replenishing my physical wallet by going to an ATM is a bit of drag, it’s all-in-all quite ok. Money is flowing relatively well between the two. In fact, most of the flow out of my bank account is done for standard payments like grocery, electronics,.. and is done via a debit card. There again things are not that bad and; at this point money is not too sticky.

But then, there are all this other flows or non-existing flows which show that my bank money can be very sticky.

In the category of existing flows where money is a pain moving, I’d put things like buying financial assets, making payments to a foreign friend. If you want to buy a financial asset that is not offered by your bank, you then see how sticky money is, you have to make multiple operations to complete your transaction. Sure, banks have a interest in making your money sticky, they would rather having you buy financial assets they provide. But even there, money is not flowing swiftly: what’s the point of raising customer satisfaction when your money is captive anyway. Concerning payments to a foreign friend, we reach the ridiculous: you don’t see money flowing, but evaporating through fees and time delays. Before we had PayPal, transfering money to a friend in another country was close to the non-existant category.

Which leads to the category of non-existant flows, or at least not existing yet. And here, I’ll turn again to my P2PMoney pet project. Leaving in a global world, with many interactions with a growing community of contacts, I think we will have more and more a desire to see our money freely and swiftly being pooled, spent and redistributed among varying groups we belong to. And for these workflows, bank money is flowing like a rock.

So we have now Telecom operators coming with the concept of a M-Wallet. While I don’t know how fast I’ll turn to this third type wallet, there’s one thing I’m sure: I don’t want my M-money to be sticky. And being not sticky does not mean money flows swiftly for transactions that are in the operators best interest, it means it flows swiftly for thing I want to do!

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P2P Money: would you also need a pooled payment system?

At BarCampBank, we have been thinking lately of what we call P2P Money. In fact this is more like a pooled payment system that would allow us to decide and manage common expenses for the group. Beyond our immediate need as a community, we also see that as an enabler for the different project we are incubating in peer-to-peer mode.

 In short, here is a list of requirements that could characterize such a system:

  • Have a place where pledges for money can be stored and easily committed
  • Have a way for the group to define different future expenses, voting for prioritization and approval.
  • Have a way to make direct payment to the vendor in case of a large payment
  • Alternatively, have a way to transfer cash to one of the participant to make the payment
  • Have a way to enter, track, approve past expenses incurred by different participants (above feature would then provide a reimbursement mechanism)
  • There are already things existing along these lines. This is certainly one of the driving ideas behind Fundable . Fundable already makes possible so called “group actions”. Iit misses some of the decision making and tracking (accounting) that I described above. But it is a v 1.0 of a Business 2.0 application. So stay tuned for what comes next there.

     It is interesting to devise for a while what a new system like P2P Money would make possible or what systems it could replace eventually.

    First, it would make possible monetary coordination in loosely organized groups. Association could collect funds from their members (or non members) for routine small projects. Budding project groups could start acquiring resources without having to trust one of the member to serve as a treasurer. Transnational social network could jointly invest to promote their goals (something standard banking system make next to impossible).

    Second, it could eventually entirely replace the banking system for certain of these groups. I can easily imagine any club using such a system for its entire accounting and expense system. True, usually you do not pledge money, but treasurers would cerainly feel happy not to bank all the checks and reimburse members that bought material with through similar paper hassle. 

     Finally, things have to be put in perspective to give the boundaries to a pooled payment sytem. Bill Gates can easily decide to allocate $1B to a project within a matter of days. That represents 1M people ready to collectively pool an average of $1000. That’s a lot… So, no need to say that a pooling payment system won’t be a significant player before a while. But it makes possible entirely new patterns. If we indeed find a large collection of problems that can only efficiently be solved through the wisdom of crowds, we definitely need P2P Money. So be prepared for a long journey, but the prospects seem quite exciting. What do you think?