Transforming ‘Money’ Countrywide

Go Lean Commentary

CU Blog - Transforming Money Countrywide - Photo 2Big changes are coming with electronic money (e-Money). The countrywide deployments will be transformative!

There are so many benefits:

  • Security – Smartchips and PIN options can ensure against unauthorized use.
  • Risk-aversive – The informal economy and Black Markets are mitigated, thereby fostering tax revenues.
  • Portability – e-Money can be used in Cyberspace and in the real world (merchant POS, ATMs).
  • Functional – Payroll and Government Benefits can be easily loaded; credit programs can also be added.
  • Far-reaching – Benefits outside of the payment transaction; the scheme increases M1, which increases available bank capital for community investments. (M1 is the measurement of currency/money in circulation – M0 – plus overnight bank deposits. As M1 values increase, there is a dynamic to create money “from thin-air”, called the money multiplier. The more money in the system, the more liquidity for investment and industrial expansion.)

The actuality of e-Money is not just academic, it is ubiquitous in the role-model country of India, and their “rupee” currency. This emerging economy of 1.2 billion people forcibly transformed the money supply in their market this past year (November 8), with good, bad and ugly results. See the full story of the designs and developments here:

Title: What the U.S. can learn from India’s move toward a cashless society
By: Vivek Wadhwa, Distinguished Fellow at Carnegie Mellon University

CU Blog - Transforming Money Countrywide - Photo 1

Silicon Valley fancies itself the global leader in innovation. Its leaders hype technologies such as bitcoin and blockchain, which some claim are the greatest inventions since the Internet. They are so complex that only a few mathematicians can understand them, and they require massive computing resources to operate — yet billions of dollars are invested in them.

India may have leapfrogged the U.S. technology industry with simple and practical innovations and massive grunt work. It has built a digital infrastructure that will soon process billions more transactions than bitcoin ever has. With this, India will skip two generations of financial technologies and build something as monumental as China’s Great Wall and America’s interstate highways.

A decade ago, India had a massive problem: nearly half its people did not have any form of identification. When you are born in a village without hospitals or government services, you don’t get a birth certificate. If you can’t prove who you are, you can’t open a bank account or get a loan or insurance; you are doomed to be part of the informal economy — whose members live in the shadows and don’t pay taxes.

In 2009, the government launched a massive project, called Aadhar, to solve this problem by providing a digital identity to everyone based on an individual’s fingerprints and retina scans. As of 2016, the program had issued 12-digit identification numbers to 1.1 billion people. This was the largest and most successful I.T. project in the world and created the foundation for a digital economy.

India’s next challenge was to provide everyone with a bank account. Its government sanctioned the opening of 11 institutions called payment banks, which can hold money but don’t do lending. To motivate people to open accounts, it offered free life insurance with them and made them a channel for social-welfare benefits. Within three years, more than 270 million bank accounts were opened, with $10 billion in deposits.

And then India launched its Unified Payment Interface (UPI), a way for banks to transfer money directly to one another based on a single identifier, such as the Aadhar number.

Take the way that credit-card payments are processed: When you present your card to a store, the cashier verifies your signature and transmits your credit-card information to a billing processor such as Visa, American Express or MasterCard — which works with the sending and receiving banks. The billing processors act as a custodian and clearing house. In return for this service, they charge the merchants a fee of 2 to 3 percent of the transaction. This is a tax that is indirectly passed on to the customer.

With a system such as UPI, the billing processor is eliminated, and transaction costs are close to zero. The mobile phone and a personal identification number take the place of the credit card as the authentication factor. All you do is to download a free app and enter your identification number and bank PIN, and you can instantly transfer money to anyone — regardless of which bank he or she uses.

There is no technology barrier to prevent a UPI from working in the United States. Transfers would happen within seconds, even faster than the 10 minutes that a bitcoin transaction takes.

India has just introduced another innovation called India Stack. This is a series of secured and connected systems that allow people to store and share personal data such as addresses, bank statements, medical records, employment records and tax filings, and it enables the digital signing of documents. The user controls what information is shared and with whom, and electronic signature occurs through biometric authentication.

Take the example of opening a mobile-phone account. It is cumbersome everywhere, because the telecom carriers need to verify the user’s identity and credit history. In India, it often took days to produce all the documents that the government required. With the new “know-your-customer” procedures that are part of India Stack, all that is needed is a thumb print or retina scan, and an account can be opened within minutes. The same can be done for medical records. Imagine being able to share these with doctors and clinics as and when necessary. This is surely possible for us in the United States, but we aren’t doing it because no trusted central authority has stepped up to the task.

India Stack will also transform how lending is done. The typical villager currently has no chance of getting a small-business loan, because he or she lacks a credit history and verifiable credentials. Now people can share information from their digital lockers, such as bank statements, utility bill payments and life insurance policies, and loans can be approved almost instantaneously on the basis of verified data. This is a more open system than the credit0scoring services that U.S. businesses use.

In November, in a move to curb corruption and eliminate counterfeit bills, Indian Prime Minister Narendra Modi shocked the country by announcing the discontinuation of all 500- and 1,000-rupee (about $7 and $14) notes — which account for roughly 86 percent of all money in circulation. The move disrupted the entire economy, caused pain and suffering, and was widely criticized. Yet it was a bold move that will surely produce long-term benefit, because it will accelerate the push to digital currency and the modernization of the Indian economy.

Nobel Prize-winning economist Joseph Stiglitz said at the World Economic Forum meeting in Davos, Switzerland, that the United States should follow Modi’s lead in phasing out currency and moving toward a digital economy, because it would have “benefits that outweigh the cost.” Speaking of the inequity and corruption that is becoming an issue in the United States and all over the world, he said: “I believe very strongly that countries like the United States could and should move to a digital currency so that you would have the ability to trace this kind of corruption. There are important issues of privacy, cybersecurity, but it would certainly have big advantages.”

We are not ready to become a cashless society, but there are many lessons that Silicon Valley and the United States can learn from the developing world.
Source: Linked-in Business Social Media – Posted February 14; retrieved February 16, 2017 from:

CU Blog - Transforming Money Countrywide - Photo 4Studying the lessons from other societies and deploying cutting-edge payment systems are missions of the movement behind the book Go Lean … Caribbean; it serves as a roadmap for the introduction and implementation of the Caribbean Union Trade Federation (CU) and the aligning Caribbean Central Bank (CCB). This Go Lean/CU/CCB roadmap depicts e-Money as a hallmark of technocratic efficiency, with agility to keep pace of technology and market changes.

To be ubiquitous – the capacity of being everywhere, especially at the same time – requires coordination of all engines of society. This is the quest of the Go Lean roadmap, to optimize these engines, as stated with these 3 prime directives:

  • Optimization of the economic engines in order to grow the regional economy to $800 Billion & create 2.2 million new jobs.
  • Establishment of a security apparatus to protect the resultant economic engines.
  • Improvement of Caribbean governance to support these engines.

The Go Lean/CU/CCB roadmap anticipated an e-Money scheme, one for cruise lines using smartchips payment-identity cards. This is part-and-parcel of the plan for a regional currency for the Caribbean Single Market, the Caribbean Dollar (C$), to be used primarily as an electronic currency. (A regional currency model exists with the Euro currency for 19 European states and 337 million people). These cashless schemes will impact the growth of the regional economy in both the domestic and tourist markets. Consider this one CU scheme to incentivize more spending among cruise line passengers:

The cruise industry needs the Caribbean more than the Caribbean needs the industry. But the cruise lines have embedded rules/regulations designed to maximize their revenues at the expense of the port-side establishments. The CU solution is to deploy a scheme for smartcards (or smart-phone applications) that function on the ships and at the port cities. This scheme will also employ NFC technology – (Near Field Communications; defined fully at Page 193 – so as to glean the additional security benefits of shielding private financial data of the guest and passengers.

This is an example of an electronic money scheme facilitating more commerce (e-Commerce). So the CCB will settle all C$ electronic transactions – cashless or accounting currency – in a credit card-style interchange / clearinghouse system.

There are a lot of details to “sweat out” – this is heavy-lifting. So the same as the U.S. can learn many lessons from India’s cashless moves in the foregoing article, the Caribbean can benefit too. A cashless society is the prize that mature economies want. It would be a win-win. See the portrayal of this Indian model in this Appendix VIDEO below.

The Go Lean book asserts that the Caribbean should keep their “eyes on the same prize” of a cashless society. If India can, then so can we; this Third World country is now considered an “emerging” economy for elevating more of their citizens to middle class status. The book posits that to thrive in the new global marketplace there must be an agile technocratic administration for the region’s currencies. This is the charge – economics, security and governance – of the Go Lean roadmap, opening with these pronouncements; Declaration of Interdependence (Page 13 and 14):

xxiv. Whereas a free market economy can be induced and spurred for continuous progress, the Federation must install the controls to better manage aspects of the economy: jobs, inflation, savings rate, investments and other economic principles. Thereby attracting direct foreign investment because of the stability and vibrancy of our economy.

xxv. Whereas the legacy of international democracies had been imperiled due to a global financial crisis, the structure of the Federation must allow for financial stability and assurance of the Federation’s institutions. To mandate the economic vibrancy of the region, monetary and fiscal controls and policies must be incorporated as proactive and reactive measures. These measures must address threats against the financial integrity of the Federation and of the member-states.

xxvii. Whereas the region has endured a spectator status during the Industrial Revolution, we cannot stand on the sidelines of this new economy, the Information Revolution. Rather, the Federation must embrace all the tenets of Internet Communications Technology (ICT) to serve as an equalizing element in competition with the rest of the world. The Federation must bridge the digital divide and promote the community ethos that research/development is valuable and must be promoted and incentivized for adoption.

The Go Lean book details a series of community ethos, strategies, tactics, implementations and advocacies to foster the proper controls for electronic/mobile payments in the Caribbean region:

Community Ethos – Economic Principles Page 21
Community Ethos – Money Multiplier Principle Page 22
Community Ethos – Security Principles Page 23
Community Ethos – Governing Principles – Lean Operations Page 24
Community Ethos – Governing Principles – Cooperatives Page 25
Community Ethos – Ways to Bridge the Digital Divide Page 31
Strategy – Mission – Fortify the monetary needs through a Currency Union Page 45
Tactical – Separation of Powers – Central Banking Page 73
Implementation – Assemble Central Bank Cooperative Page 96
Implementation – Ways to Deliver Page 109
Planning – 10 Big Ideas – #2: Currency Union / Single Currency Page 127
Anecdote – Caribbean Currencies Page 149
Advocacy – Ways to Grow the Economy Page 151
Advocacy – Ways to Create Jobs Page 152
Advocacy – Ways to Mitigate Black Markets Page 165
Advocacy – Ways to Foster Cooperatives Page 176
Advocacy – Ways to Impact Cruise Tourism – Smartcard scheme Page 193
Advocacy – Ways to Foster Technology Page 197
Advocacy – Ways to Foster e-Commerce Page 198
Advocacy – Reforms for Banking Regulations – Central Banking Efficiencies Page 199
Advocacy – Ways to Impact Main Street Page 201

The points of effective, technocratic currency stewardship were further elaborated upon in previous blog/commentaries. Consider this sample: A Lesson in Economic Fallacies – Casino Currency – US Dollars? Central Bank of Azerbaijan sets its currency on free float The Future of Money Venezuela sues black market currency website in US New Security Chip in Credit Cards Unveiled Move over Mastercard/Visa Cash, Credit or iPhone … RBC EZPay – Ready for Change The Need for Regional Cooperation to Up Cyber-Security MetroCard – Model for the Caribbean Dollar PayPal expands payment services to 10 markets Bitcoin virtual currency needs regulatory framework to change image One currency, divergent economies

There are things that we in the Caribbean want from India … and things we do not want.

We want their lessons learned so that we can get more impact in our society, like:

  • more cruise tourism spending
  • foster more e-Commerce
  • increase M1 money supply in our region
  • mitigate the informal economy and Black Markets,
  • steer oversight for technology engagements
  • grow the economy
  • create jobs
  • enhance security
  • optimize governance

India has to feed 1.2 billion people. We do not want that population! India has a large Diaspora scattered throughout the world. We do not want that either. We simply want our people to prosper where they are planted in our Caribbean homeland. This means we have to better compete, adjust and adapt to this ever-changing world.

Now is the time for all stakeholders of the Caribbean to lean-in for the empowerments described in the book Go Lean … Caribbean. This change can help to make the Caribbean a better place to live, work and play. 🙂

Download the book Go Lean … Caribbean – now!


Appendix VIDEO – Digital payment providers cash in on India’s currency crunch –

Published on Dec 2, 2016 – Paytm and other digital payment providers in India are mobilising an army of workers to enrol small merchants and customers to permanently change their historic reliance on cash as they reap the benefits of the severe currency crunch affecting the country.

CU Blog - Transforming Money Countrywide - Photo 3Paytm and other digital payment providers in India are on an intensive campaign to woo small merchants and customers to permanently change their historic reliance on cash as they reap the benefits of the government’s currency clampdown.

From front page ads in national dailies to quirky social media posts, digital players including Paytm and MobiKwik have left no stones unturned to sign up people for mobile payments since Indian Prime Minister Narendra Modi’s announcement to ditch high value bank notes.

However getting shops and customers to go digital and shun their dependence on hard cash still remains a herculean task.

“The problem we face is that we are not educated enough to operate it (digital payment apps). We don’t have that smart phone that is why there are some problems,” said Lal Singh, a betel shop owner in one of New Delhi’s bustling markets, who uses a feature phone.

Around 65 percent of the mobile phones in India are feature phones which are used only for simpler calling and texting purposes.

Sales of cheap smartphones have boomed in recent years, but internet networks remain patchy, especially in rural India.

Credit Suisse estimates more than 90 percent of consumer purchases are made in cash, as millions still do not have bank accounts. Those who do have bank cards mainly use them to withdraw from cash machines. Financial literacy and technology usage also remains low, and many fear getting duped.

Modi’s push against black money has given digital payment providers an once-in-a-lifetime opportunity to expand their user base and the results have been promising so far, sparking widespread optimism.

MobiKwik, whose backers include U.S. venture capital firm Sequoia Capital and American Express, has added 150,000 merchants since the curb for a total of 250,000, and co-founder Upasana Taku said there has been a sea change in the modes of payment since the November 8 announcement.

“We look at it as a tectonic shift in user behaviour where people are now willing to adopt digital payments because the government has incentivised them. In many ways, this is the best marketing campaign any mobile wallet company could have ever wanted,” said Taku.

She is expecting a user base of around 150 million by next year.

Meanwhile, Paytm, India’s largest mobile payment and commerce platform and backed by Chinese Internet giant Alibaba Group Holding Ltd, has deployed a 10,000-strong sales force, and nearly doubled the number of small merchants signed up to its services to 1.5 million.

“So we were targeting 500 million users by 2020. Now, we are targeting them by 2018. So, we have fast forwarded that plan by two years and similarly, one lakh crore (1,000 billion) that’s the volume of dollar transaction volume that we were talking about, if we were targeting it in 2020, we are targeting it in 2018,” said Chief executive of Paytm, Vijay Shekhar Sharma.

There were concerns as well that once the cash crunch subsides, merchants and customers will go back to business as usual, using notes to pay for transactions but Sharma said the convenience value provided by the online payments will prevail over it.
Paytm now has 158 million clients, 8 million more since the note ban.

One of the factors which have prompted mom and pop stores and people to turn to Paytm and other e-wallet companies is that the new 2,000 rupee introduced by the government has turned out to be a blessing in disguise for the common man.

The hype regarding the new 2,000 rupee note was short lived as people were unable to use it to buy products for domestic purposes due to the non-availability of small money in the hands of shopkeepers and vendors at large.

The lack of 500 and 100 rupee bills in the market paved the way for e-wallet companies to become the way out for such vendors.
“This will give us a lot of relief. Exchange of change is a big issue. Some people have notes of higher denomination like 2,000 rupee notes, then how will we give the change for it,” said a roadside restaurant owner in Gurgaon, Bhuvan Kumar.

The move to demonetise the large bills is designed to bring billions of dollars’ worth of cash in unaccounted wealth into the mainstream economy, as well as dent the finances of Islamist militants who target India and are suspected of using fake 500 rupee notes to fund operations.

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