We have a real digital currency like Bitcoins and we have seen the emergence of “pseudo money” like Amazon Coins, or Facebook Credits. These two are totally different and should not be compared. The idea to create “money” that can be used within the confines of a companies ecosystem is not new at all.
In the Netherlands for instance the public transport sector created a dedicated payment card (i.e. close proximity, check-in – check-out, aka “OV-kaart”) to travel. One of the ideas at its conception was to be able to buy goods and services at shops located in the the bus and train terminals at first and then to expand beyond these locations if possible. Not only does this constitute a further fragmentation of the payments landscape urging users of the travel service to yet again have an additional payments product. But creating coins goes a steps further then the inconvenience of fragmentation alone:
- 1) these coins and credits are no real money – and as such not regulated and supervised – as long as they are confined to the company. Once the ecosystem is getting involved the coins become money and need to be regulated and secured as money. (i.e. this has been hindering the role out of digital money within the public transport system in the Netherlands).
- 2) the customer/user has to convert real money into coins and credits and will therefor fragment its value by storing it over multiple “environments” with all disadvantages that come along with that. Where real money can be used without any hindrance this money becomes mostly locked up in the confined environment of the issuer.
- 3) The issuing companies urn on float and on lost value. The customer does not get anything in return.
- 4) The issuing companies are aiming to control the money-flow based on its position in its own network. It acts as a publican: if you want to pass the roadblock you need to pay! This is exactly the same as telecom how operators for years have thought to capitalize on the use of their network. This is hindering innovation, creating high prices for simple services, no competition and a big urge to d-tour the roadblock.
Amazon and Facebook need to create means to monetize their business models that are basically based on “free” or very low margins. Coins/credits are easy targets, but if the rest of us should be pleased with them?