Mobile phones the only tech to rid dirty money: Expert

Mobile phones the only tech to rid dirty money: Expert

Summary: Using cash for payments has become unsustainable, and mobile phones are the only viable technology to supplant cash, according to Consult Hyperion Director David Birch.

TOPICS: Banking, Australia

As head of the UK electronic transactions consultancy firm Consult Hyperion, David Birch said in many countries, cash is used to fuel black market economies, which encompass tax evasion activities, drug dealing, and money laundering.

Birch claims that this situation is a result of ever widening tax gaps between different income brackets and the best way to address this issue is by replacing cash with mobile phones.

"In a country like Norway, which is by no means a lawless country, something like 70 percent of all the money in circulation is only used for criminal purposes," Birch said at the Future of Payments conference in Sydney. He noted that almost none of the money in Norway is used for retail purposes.

"Even in a relatively law abiding country like the UK, the black economy is heading towards becoming a quarter of the economy," Birch said.

With the rise of innovations such as NFC payments, Google Wallet, and Apple's Passbook, Birch firmly believes that the mobile phone will be the only technology capable of getting rid of cash.

"That's because the mobile phone is a point-of-sale (POS) terminal, not because the mobile is a card," he said.

Smartphone uptake has soared in recent years, and nearly everybody in the world has a mobile phone — or two. With everybody able to have a POS terminal in their hands, the idea of freeing ourselves from cash becomes a plausible outcome, according to Birch.

"If the payments industry made a concerted effort with regulators and law enforcement bodies to use this technology to drive out cash, everybody would be better off," he said. "The social cost of cash goes down, and it has other benefits as well."

The roll-on effect of a cashless society would be less money-related crime, according to Birch.

He highlighted some of the anti-cash movements across Europe, which are driven by workers and retailers to stave off armed robberies.

"The reason why I love mobile and hate cash is because there is a moral component to it — things like this can make a big difference," he said.

Thanks to the global financial crisis, which has lowered confidence in incumbent payment systems, there is now wider acceptance in using alternative currencies such as bitcoin, according to Birch. Payment companies need to make a note of this trend if these alternative technologies continue to gain momentum, he said.

"The idea that the US dollar is somehow more real than the Bristol pounds, or World of Warcraft gold pieces for that matter, is ludicrous," Birch said.

Topics: Banking, Australia

Spandas Lui

About Spandas Lui

Spandas forayed into tech journalism in 2009 as a fresh university graduate spurring her passion for all things tech. Based in Australia, Spandas covers enterprise and business IT.

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  • Can someone please tell me why phone NFC payments are better than cards?

    Not being antagonistic, I'd really like to know. What about a mobile phone makes it more secure or less likely to be used for illegal purchases that a card doesn't? None of the NFC fanatics I've met will give me a straight answer.
    • NFC payments better than cards? Don't think so

      Hi "Aerowind",

      There is a strong argument emerging that NFC as a payment technology does absolutely nothing that a card cannot. NFC can be viewed as simple substitute for the mag-stripe or chip+PIN authentication process performed at Point Of Sale - so what's the advantage you might say - exactly - there is none really. This is why NFC has struggled to gain traction for the last 12 years of so.

      The recent increase in Smartphones has revived interest in NFC but fundamentally the capability of NFC has been so under-utilised in Australia that implementation of any meaningful uses in the market have stalled.

      NFC might eventually succeed but there is a fundamental issue with it - customers to not feel in control of the transaction. People actually like the idea of pressing "OK" to control the payment. This is often associated with the concet of "ritual" when it comes to making a payment.

      Flogging technology for technology's sake never works in the long term.

      The core challenge of the NFC debate is the driven by industry disagreement over the "secure element". There are so many variants of this architecture and so many stakeholder that need to agree on things that the solutions are often fragmented.

      Do not be fooled by the hype and PR of what you hear around NFC - it is completely overstated when it comes to integration with mobile phones. NFC = Not For Commerce.

      Illegal purchases? Ironically most of the NFC payment models in the market are essentially credit card back-end and bank powered so don't see how they provide much value.
  • What next?

    If we move away from cash, what's next? A chip inside our wrist?

    Switching away from cash is a means to give the government more control. This is all well and good while we can trust the government to make the right decisions for us but when will we draw the line?

    An accountant I know already believes that the Australian Tax Office has too much power as is.