How innovation is changing How innovation is changing How innovation is changing

February 15, 2023 | 5 min read

A stake in the future: how innovation is changing money

Trying to predict what is going to happen in the future can be a risky business, particularly in an era when change is happening fast. But having a handle on trends and where they’re heading is an important part of being an innovator.

With that in mind, Marqeta gathered together three forward thinkers from the financial world for a special API Chronicles livestream titled The Future of Money: Tracking the transformation of money for businesses and consumers.

Moderated by The Banker’s Liz Lumley, the panel comprised David Birch, author and commentator on digital financial services, Kristian T. Sorensen, co-founder of Norfico, consultancy and The Tokenizer news portal, and Cameron Parry, CEO and founder of Tally Money. Here’s what they had to say….

Tokenization: a smarter way to transact?

Perhaps the biggest focus of the session was the trajectory of the digital representation of rights and assets otherwise known as tokenization. And in addition to touching on CBDCs, the panel saw the transition from centralised financial institutions to decentralised individuals as the development most likely to shape the way humans measure and exchange value.

On this, David Birch said the future of money was about the value that’s being transferred between owners, adding: “In the past, if you were trying to talk about this in the sense of what will we be transferring that’s valuable, we only really thought about the things that we had. But there was a great breakthrough with the arrival of Bitcoin.

“There was a flowering there and what this really is about is a faster, cheaper financial infrastructure and that’s where the serious people are talking about the future of money now.”

Kristian T. Sorensen was very much in agreement, stating: “If there’s one thing the history of digitisation has taught us it’s that if you can do something cheaper and faster by digitising it, it will eventually happen. This development around tokenization is moving from the crypto enthusiast to what can we actually do with these technologies and improve the financial services industry and even our idea of value of exchange.

He went on to say: “People have been trading everything throughout history, and money was originally invented to make trade cheaper. We’ve spent the past decades innovating on top of that intermediary or that interface. But instead of continuing to innovate on top of that, I think we are now at a place where we can start innovating on a more fundamental level.”

For Cameron Parry, the question boiled down to asking what were the problems with money as we know it now. He said: “I think what we really need to take a cold hard look at is the underlying substance of the things that we’re using or the base thing that we all come back to with payments and the exchange of value.

“I think money should be designed to serve the people and I think that’s a great place to start because ultimately, we’re trying to come up with innovations for the end consumer, which is the general public and I think that’s really where we need to focus on all these discoveries.”

David Birch then illustrated how tokenized value transfers might work. He explained that P2P transactions like, for example, paying someone to chair a conference wouldn’t necessarily involve a conversation between two parties. Instead the chair’s fee would be settled by smart wallets, perhaps offering shares in a major global corporation and a portion of a world renowned work of art.

“The ability to tokenize and trade liquid assets means different groups of assets will be used for different things. But if there were some kind of smart wallet that could store any kind of token for any kind of transaction, I predict that if this were to happen tomorrow 99% of what most people would store in their wallet would be U.S. dollars.”

Expanding opportunities to grow personal wealth

Kristian T. Sorensen moved the conversation from transactions to stores of value, such as retirement funds. “We still use the monetary value of our pension savings as the indicator of pension size, but in fact, most of us our pensions are typically a mixture of stocks and bonds, which are still only a fraction of what I could and should potentially invest in to save for my pension. I mean, why not have some certain kilowatts of electricity in my savings because I probably know that I will need heat and light when I grow old. I would love to have a tokenized wine collection and I do have the wine already but also maybe access to a tokenized wine collection.

“We are moving towards the ability to invest in everything. And I think that is also where the wallet discussion branches out from just a means of payment but also a storage of value. Because in my wallet, I may have some woodlands in Lithuania, a bit of mine in South Africa and a bit of a building in Manhattan. So the idea of the wallet beyond a payment wallet I think is important.”

Later, the group tackled the issue of anonymity versus transparency, and felt that privacy would define competitive advantage in the future of money. Anonymity, they said, would be a disadvantage due to concerns about traceability. But, for David Birch, technology was “developing beautifully” and would enable people to conduct private transactions in which all participants could trust.

Cameron, however, wondered about the implications of state-backed digital currencies and what this meant in terms of potential political control over population. He felt that financial innovation would be delivered faster and more dynamically by the private sector.

The future wrapped up: what tomorrow holds

Winding up the livestream, each participant gave their thoughts on where money was heading. For Cameron Parry, it would be defined by the end users: “It’s the consumer that really moves innovation along. There are a lot of things that get developed, that are a solution looking for a problem, but it always comes back to a question of who is benefiting. The future of money and payments should still be heavily led by that.”

Kristian T. Sorensen said: “You invest your money with two purposes. One is the speculative side of it – you hope that it increases in value. But there’s also a defensive side of it in that you hope that inflation doesn’t take away from the value of your investment by spreading out your investments in entirely different asset classes. I think that is something that we will see materialise and the demand should increase for those kinds of services.”

David Birch added: “We’re still living with the sort of money of the Industrial Revolution – that is, central banks, which were a post-Medieval settlement between merchants and kings.

“Tokenization seems to me to be a reasonable sort of post-industrial solution to the general problem of the transfer of value, wealth, and managing regulations. I feel there’s a kind of inevitability to it going in that direction.”

Marqeta’s The Future of Money: Tracking the transformation of money for businesses and consumers livestream can be viewed or heard in full here.

API Chronicles brings together communities of visionaries and digital builders in a series of livestream events, blog content, and resources. Further details can be found here.


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