Consumers are spoiled for choice when it comes to choosing the right alternative commodity-linked currency to pay for their groceries.
First we got the Bitcoin Visa card, the perfect gift for those who want an easy way spend a cryptocurrency that has gained 800 percent this year on goods whose price is up a relatively mild 3 percent. Swipe the card and your bubbly Bitcoin is instantly converted to boring sterling.
Now we have the gold Mastercard, created by Glint, a start-up that wants to "reintroduce" gold as money. You use the app to buy gold, and the card to spend it as pounds. Glint's marketing blitz is typical fintech, but the pitch is admirably old-school, setting out in detail how the gold is locked up in a secure vault in Switzerland. This will be music to the ears of gold bugs who think 3 percent inflation is a travesty of debased coinage, and who would prefer something shiny and metallic to lines of code.
It bears repeating that neither Bitcoin nor gold are convenient methods of payment. If they were, people would be using them, not hoarding them. Despite the grand talk of reintroducing sound money into the economy, this is no return to Ancient Mesopotamian fixed ratios of silver and barley. These commodities are being awkwardly shoehorned into payment cards that essentially concentrate all of the risk onto the cardholder -- transaction fees, exchange-rate volatility, the possibility of investment losses -- and leave the merchant handling pounds blissfully unaware.
Why would a consumer bite? For the Bitcoiners, there's the speculative thrill in walking into a store and, depending on the time of day, walking out either with the whole store or nothing at all. And for the gold bugs, there's the promise, however speculative, of a trusted hedge against inflation that can be instantly monetized without complex structured products. Maybe the reward of having more spending power at Selfridges than the schmuck behind you is worth the risk.
The sound-money crowd does deserve credit for at least trying to enrich a generation that has been hit hard by the financial crisis. Safe saving opportunities have dwindled, housing is less affordable, and real wages are falling. Young people are doing less well than their parents at the same age. Viewed as a tool for financial freedom, a Bitcoin or bullion card might seem more attractive to a fed-up millennial than the government's recently unveiled discounted rail pass.
But let's not forget what payment cards can do in terms of tracking our every spending move. Trendy fintech start-ups know full well that data is the real currency of the new economy, a lucrative carrot to dangle in front of marketers, credit agencies and hedge funds. Our addiction to convenient swiping, spending and shopping is being scrutinized by everyone from Google to Apple. Spanish bank BBVA recently showed off a map of several cities created entirely through spending data, showing not just what people were doing but what it said about them, their living standards and their personal preferences. Data, not fiddly and untrackable cash, is king.
Alternative-currency payment cards aren't subprime loans. But they could still encourage consumers to trade and bet what they can't afford. And even if they don't, it will be others who will get to profit from the data behind them. Is this a blow against capitalism, or another manifestation of the profit motive? My (sound) money is on the latter.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
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