Bernard Lietaer - The future of money

Why should we expect that one of the most conspicuous legacies of the Industrial Age our national currencies would remain impervious to change? Even bankers, such as Citibank's CEO John Reed, agree that 'banking will become a bit of application software on an intelligent network'. The 1998 merger between Citibank and Travellers Insurance proves that he means it. Similarly, the integration of frequent-flyer-miles incentives with traditional national currency-based credit cards shows the trend towards the future. In fact 40% of Frequent-flyer miles are now not earned by flying; and two-thirds of British Airways' air miles are cashed in for something other than flights.

Implications for banks and financial services From the 1980s onwards, banks found that they were forced to move into new arenas of businesses, performing totally different functions and facing different competitors. Instead of making money from the spread between customers' Savings deposits and loans to businesses, banks are now in 'financial services'. Their biggest profit centres are likely to be credit cards, foreign exchange, derivative trading, securization, specialised insurance products or other exotic 'financial products' designed for sale to individuals and businesses.

As the Internet expands, it brings with it a second wave of computerisation including Open Financial Services. 'Open Finance' is defined by Forrester Research as 'emerging affluent consumers enjoying best-of-breed financial services combined with easy electronic movement of money. Open Finance means using technology to extend premium financial services that the wealthy enjoy to the mainstream investing public.' This opens up a whole series of new issues for everybody, including tax authorities (see sidebar).