Money is the object that is used for the payment of goods and services. It’s a public resource created by Government, for and on behalf of the people, to navigate commerce, as well as the repayment of debt. Through the years, as a commodity it has metamorphosed its forms, which have included livestock and ground provisions, to the point where it is now called money, or currency, consisting of both notes and coins and recognised as legal tender. This is what makes it valuable.

But as the world teeters on the edge of full digital immersion, it is becoming increasingly important to recognise that we must, yet again, broaden what we think about money. In ancient agrarian civilisations, a standard unit of currency was, say, a cow. Back then, it was pretty easy to place a value on that cow based on its pedigree, how much milk it was expected to produce, how many calves. In modern civilisation, the standard unit of currency is fiat money, which is used to determine the cost of things as determined by market forces of supply and demand. In other words, the higher the demand, the higher the cost.

Pandemic is driving digitisation

In 2021, the internet of things (IoT) is a concept that is in its nascent stage of development but on the cusp of becoming a reality in public consciousness, what with rapid digitisation occurring. If you think that the IoT is just some nebulous idea that has nothing to do with you, you’re wrong. The IoT, simply put, is a system of interrelated computing devices, mechanical and digital machines, and objects and people, which are provided with the ability to transfer data over a network without the requirement of human-to-human or even human-to-computer contact. If this is an idea that is hard to grasp, consider the capability of lounging at a beach somewhere while being able to use a smart device to, say, lock the back door of your smart home miles away. This is technology that already exists.

And what of the “things” in the IoT? This can refer to, let’s say, a smart car that has built-in sensors that can alert a driver when a tyre is losing air, or that an electrical problem has occurred. Or, imagine a heart monitor being implanted into a patient to warn them that a cardiac event is on the verge of happening. The mind-blowing possibilities are endless.

Think about what can happen when the technological universe of the IoT explodes, as it is bound to, and consumers, devices and things become even more connected. Because, make no mistake, this is where the world is headed, with the ongoing pandemic driving digitisation faster than ever. This is the world that will exist outside of The Jetsons. But this world, with all these changes, will require a change in how we transact business and commerce, beginning with fiat money. In the same way that the age of industrialisation made payment by livestock outmoded, today’s old money system will become outdated.

CBDC is here for a new digital economy

This is why digital money, or CBDC, has begun to be introduced in countries across the world. In Jamaica, the Bank of Jamaica (BOJ) recently announced that it has minted the first batch of digital currency, amounting to $230 million, as part of a pilot exercise, which is expected to end in December, and during which time the money is to be issued to deposit-taking institutions and authorised payment service providers. This is history in the making, considering that only a few countries have actually launched pilot CBDC projects — countries including China, Sweden, and the Bahamas. Note that, as at January 2020, 80 per cent of worldwide central banks were still merely engaged in CBDC-related research, making Jamaica quite forward-thinking in this regard, since this exercise has been described by the BOJ as “an intricate but efficient process”.

What good is this if there is little take-up?

Central Bank Governor Richard Byles, at a recent anti-money laundering virtual conference, acknowledged what we suspected would be the case, even as we are currently witnessing people’s attitudes towards the COVID vaccine: It’s going to be a hard slog to get people to recalibrate their notions about this new money and begin widespread use of digital wallets as alternatives to cash.

This new effort, by the way, will be National Commercial Bank’s second mobile payment system after Quisk, which has been on the market for two years and is offered in partnership with Advanced Integrated Systems.

The truth is that because fiat money works so well now there will be resistance to change it.

But as we hurtle towards a fully digital age, we must understand that today’s money will eventually not be accommodated in a world that is poised for ever-increasing tech-enabled services (not to mention cost savings and efficiencies) that can be derived from the financial services sector in this highly networked new era we anticipate.