Electronic Money
The European Commission met last week to decide on how to implement its e-money directive on mobile phones. Starting as a simple (though expensive) communication tool, the cellphone is evolving into a PDA, PC, Portable TV Set, Internet Radio, and now mobile wallet. All rolled into one!

Hundreds of years ago, money existed as metal coins (often gold). And each metal coin was stamped with the king's royal seal - to make it officially acceptable throughout the kingdom. Metal was later supplemented with special paper - with increasingly complex techniques of printing the seal, making it difficult to duplicate. Today, money has become digital information. And digital signatures are replacing the royal seal.

Since money is a mechanism for making & receiving payment, what is required is a fast, reliable (read: secure) service at an affordable cost. In a government controlled scenario, this comprises mainly of paper money, with the onus of cost and responsibility (for security) being on the government.

Current technology has already implemented paperless or virtual money (credit or debit cards) - where private enterprises manage the payment mechanism for a transaction fee. Meanwhile at the back-end, money, like most other modern-day entities, exists chiefly in the form of electronic entries in computerized databases (which are used to compute balances).

Definition of Money (circa 1900)
Money is that which passes freely from hand to hand - in final discharge of debts, accepted without reference to character or credit of giver and without (questioning) intention of receiver.

Monetary value stored on a chip card - pre-paid card or 'electronic purse' - or on computer memory - network or software money - which is accepted as a means of payment by undertakings other than the issuer.

Mobile Money
Did you know that the Norwegian Govt. has recently licensed cellular payment platform Contopronto to become Europe's first E-bank ? This platform allows cellular phone users to make payments and money transfers to any bank, credit card, business or individual through their cell phone. It is interesting to note that this platform has already completed a 12 month pilot in Norway. During this pilot, Oslo-based mobile operator You Communications has used Contopronto to give its customers a cellular "wallet". Along with others like McDonald's & Oslo Taxi who have also incorporated the payment system as part of their standard offerings.

The Mobile Wallet
The Mobile Wallet is :
The mobile wallet is linked to your GSM phone number. You can send and receive e-money on your SIM card. And make payments in shops & restaurants & online stores who accept mobile money. You can also deposit and withdraw e-cash.


The Mobile Wallet is NOT :
The mobile wallet is NOT a credit card - it is more like a debit card. The mobile wallet has NO connection to your GSM phone bill.

Example of how to send e-money
Send an SMS to 9999 with the command PAY Recipient mobile no will receive an SMS telling him that he has received the from you. If recipient is not registered, he will have to do so at the e-bank's web-site. Once registered, the money is available immediately. He can now make payment immediately to anybody who has a mobile wallet. And receipts may be sent by SMS.

Just as corporations may transfer e-money to travelling executives, so also parents can transfer fixed sums of e-cash directly to their children's mobile as pocket money.

It seems quite plausible that in the next few years, we will be able to recieve & pay e-money via our mobile phones. But this exchange of e-money is bound to have a price attached as transaction fee will add to mobile call costs.

And as always, security will be the main concern. Visualize a scene where a hacker could sit as close as a few metres away and track all the transactions made using your "SIM card" ! Or worse, he could make away with big amounts belonging to you while you are taking a stroll. And then there is privacy.

E-money and Privacy
While almost all the flexibility of paper money can be achieved by e-money, there is one aspect that may not be possible at all, that is making/receiving payments without leaving any trace. (Part of the global phenomenon of diminishing individual privacy ?)

All in all, despite money having become a part of the worldwide information superhighway (infobahn), with credit/debit cards & bank cheques becoming equivalent to e-money, we are still far from the cash that we hold in our pockets, which we can spend without needing an intermediary and (most often) without leaving any trace.

Cryptology - the Modern-day Seal
Someone had once said, "Cryptology is the future". Nothing could be closer to the truth! Today encryption techniques (or cryptology), forms the "secure" part of everything electronic. (And slowly, everything is getting electronic !) Of the available techniques, "Public-key Encryption" represents the future of privacy, secure transactions, documents & databases.

And just as the evolving technology of printing (deployed to produce paper money) reduced the power of medieval guilds, so too will digital signatures & cryptology fundamentally alter the nature government interference in economic transactions and create new power structures involving private corporations. Moreover, since encryption is the only way to hide digital data from prying eyes, cryptology indirectly represents the future of e-money, banking and finance.

Finally
It's a nice idea to walk into a shop and use your cellphone to get cash back. But naturally, there will be major questions of security, bandwidth and technology (in that order of importance).
In due course, the wrinkles will be ironed out (most of it at least). But the common man will start using mobile money when the cost has to be affordable. (Just as he started using the cellphone for making calls when call rates bottomed to a reasonable figure.)
And of course, nobody can put it better than the consultants : "E-Money arrives in Europe - clients please take note of new legislation" !