Estelle McCool, from King’s College London Maths School, is the winner of the second Bank of England/Financial Times schools blog competition. The competition invited students across the UK to address the question “What is the future of money?”
Our world today is dominated by globalisation. We’ve been trading globally since before the Vikings left Scandinavia, yet the face of world trade has been altered by technological revolution and the removal of economic barriers. A global currency seems the next logical step in international integration. But what would provide the prototype of this new money?
Preparing for the somewhat distant future, let’s think further than Pax Americana. Although cryptocurrencies are all the rage from Silicon Valley to Germany’s Silicon Allee, the future does not lie in the hands of white men from the west. The currency of the future will be brought about by the powerful economies of the future. According to the IMF, of the top ten fastest developing economies, six are in Africa. Focusing our attention in Africa is key for understanding of the future of money.
The currency of the future will most likely arise from existing infrastructure, as a gradual adoption would be the most feasible way to achieve an international currency. We need to also consider that for this to be a true international currency, it would need to be accessible to everyone.
So we’re looking for a future of money, relying on existing infrastructure, coming out of the developing world, that is accessible to all. Simple.
The major prototype could be Mpesa. A development from using mobile phone airtime as a medium of exchange, Mpesa originated in Kenya. The brilliance of the system is that it was based on existing infrastructure: shops selling mobile phone credit. Phone minutes were being sent from person to person, as a form of currency. It evolved very much like our modern day currencies with the exchange of something that holds intrinsic value, which now has a value separate from its functional use.
Mpesa now has 20m users in Kenya alone and is used in 96 per cent of Kenyan households. Cryptocurrencies are unsustainable due to the amount of energy they require and are exclusionary in nature, with the poorest struggling to access them at all. Mpesa can capture almost all economically active people, as it does not require a bank account, only a phone. In fact, Mpesa is actively fighting poverty, as it lends itself to micro-financing and giving the people the ability to save without a traditional bank account. Growth in Africa will be driven by its population and empowering individuals, especially women, to shift from agricultural to commercial work may be key in the rise of Africa on to the world stage.
The scale of Mpesa’s usage is massive; it transferred 6.9tn Kenyan Shilling in 2017. Mpesa has continued to spread, but rather than target the west, it’s moving into other African nations, like Tanzania, into Romania, one of the fastest growing economies in Europe, and into India, an emerging superpower. Admittedly, the future of Mpesa itself is still unsure, but the future of money does lie in the hands of the people moving up, not the powerful people of today.