A few thousand years ago, it was incredible to imagine a society built up on money. If we look at the history of humankind, money only exists in a very small part of it, namely just in the last few millennia; it is a very new trend, if you wish.
Does that mean that it’s crazy to imagine a society which entirely functions without money?
In some countries of Northern Europe, like Finland and Sweden, they are already almost there. Everything, from purchasing a car to a bottle of water in a kiosk, is done through bank transfers. You do not need to carry around banknotes and coins any longer, but only the credit card, with which you can access all your money.
On the other side of the world there is a different example for an almost cashless society. There, you don’t even need to carry a credit card with you. All you need is a device that most people can’t let go anyways: your smartphone.
If you travel to China today, you will see companies like WeChat and AliPay everywhere. For most foreigners it is not really clear what these companies do. You don’t buy any of their products. You don’t enter into a contract with them. WeChat you might use as a social media app, but if you have full access there is a vast field of opportunities for you.
At every shop, from the biggest supermarket over all online shops to the little fruit market down the street, you have the barcode of WeChat on a small note next to the counter.
What is it for?
You use it to pay. With WeChat, which sounds like a normal social media app like Facebook, WhatsApp or Skype, you can wire money from your account to anybody else’s. You can send money to your friends and family, or, when you do your shopping, you scan the barcode of the shop, type in the amount you are billed, and simply press ‘send’.
It takes no more than 5 seconds, and while you may go out forgetting your wallet, your credit card or your cash, you would never forget your phone, would you?
The whole system works because everybody uses it. Wherever you travel in China, you will find WeChat and AliPay. They operate on the national level and because everybody downloads the App, it is just convenient.
Convenience: isn’t it the reason why we started using money in the first place? All human societies used to be based on trade. And in some ways they still do. Only today we do not trade raw goods anymore. We have created an intermediary, a medium of exchange: money.
It was not so easy to distinguish how many chickens one pick was worth. Every time you had to renegotiate. And what if the things you want to buy get bigger? What if you want to buy a car, or a house? How many chickens or pigs would you have to trade for that?
This is why we have money today. It is a neutral. Everyone accepts it because you can exchange the money you get for anything else you want. I might get money for the job I do and with that money I can pay my bills. It is, well, convenient.
If we look at history, we see that we started with coins out of raw materials: bronce, silver and gold. These coins would represent an actual value because the material they were made of had a value.
However, still, there was a problem. It may be more convenient to carry a sack of coins instead of one of chickens to the market, but you’d still have to carry a high amount of coins if you’d want to buy something big.
So we came up with a new invention. Paper money. The paper is actually worth close to nothing. The value comes from the fact that we accept it as something of value. And we accept it because it is, again, convenient.
An interesting coincidence is that the first evidence of the use of banknotes is found in a country far away, in China, the very same country that now switches to online payment over smartphone apps.
Originally, the idea was to have a squared peace of silk with signs and symbols to represent the value of a certain amount of coins.
These silk pieces at some point became the paper notes we used until today. This invention of the Chinese culture has changed the world economy over the past millennia and, as we see today, the whole world followed their idea back in the days.
The question is if this Chinese-led trend will repeat itself, and if we will all start using our mobile phones to pay instead of paper notes.