By Ken Moore, Chief Innovation Officer, Mastercard
Historically, we’ve thought of money solely as the balances we have in the bank or the cash we hold in our wallets. More recently, we’ve broadened our thinking to include new assets like loyalty points and new forms of value such as cryptocurrencies. As we look ahead, the concept of money will continue to broaden to include other assets such as data, tokens representing physical and digital goods, central bank issued digital currencies, and even solar credits. This reimagining of money can lead to new business models, economies, and ways of exchanging value in everyday transactions.
As new forms of value expand, they can also be programmed to work for us in different ways. For example, driverless fleet vehicles could determine maintenance requirements, assess service contracts, book appointments, and manage payments autonomously. Similarly, household appliances and industrial machines could order and pay for goods ranging from laundry powder to groceries based on usage and needs. These types of programmable transactions illustrate just some of the ways that payments could evolve.
At its heart, Mastercard’s mission is to make transactions safe, simple, smart, and accessible both today and tomorrow. We’re scaling and securing the crypto/blockchain ecosystem so our customers and consumers can seize its opportunities and navigate its risks. We’re ensuring people can use their cards to buy and spend cryptocurrency and non-fungible tokens (NFTs), while collaborating with central banks to advance public-private digital currencies, and providing cryptocurrency intelligence and identity verification.
Creating and exchanging value
While money’s role in society is changing, we’re also witnessing the emergence of the metaverse, which includes immersive commerce experiences that span digital and physical worlds via augmented, virtual, and mixed reality platforms. In a few years, consumers will move seamlessly between these worlds while carrying their payment options, assets, and identities with them in new types of digital wallets.
Five to seven years from now, we will routinely and seamlessly exchange these assets in everyday transactions, and this “universal value exchange” will lead to new business models, new economies, and new sources of wealth:
- Creator Economy: Business models are emerging around the creator economy, being driven by independent content creators wanting to maintain digital links to their content and receive royalties as its shared, read or referenced by audiences.
- Data Economy: Open banking has enabled consumers to share their financial data across applications. This consumer-permissioned model could be extended to other data sets (e.g., history of purchases and searches), enabling users to begin monetizing their data.
- Crypto Economy: Decentralized Autonomous Organizations (DAOs) could enable people to participate and work in new ways, building sources of wealth through equity tokens based on their contribution to the growth of the organization.
New ways to conceptualize, earn, and spend money — and to extract and exchange previously inaccessible value — can empower individuals. It will enable them to tokenize a broad set of assets, including their personal data, so that they can be used as efficiently as cash. They will be able to own fractions of assets and investments previously out of reach. And the underbanked will have new opportunities to access financial systems and participate in the economy.
What’s next – watch the signals
The concept of money and the exchange of value are impacted by various factors, including the following:
- The cryptocurrency market is expected to expand — despite price volatility, growing pains and the current “crypto winter” — from $1.2 billion in 2021 to $2.8 billion in 2028. Consumer acceptance of crypto is attributed to the rising popularity of digital assets as investments, security, fast processing, the formation of new legal guidelines, and technologies that simplify use. According to the Mastercard New Payments Index by Mastercard and the Harris Poll, 36%* say they are somewhat or very likely to try paying with crypto in the next year. 59% agree that they would feel more confident about crypto if they knew it was issued or backed by a reputable organization, and 63% agree the government should regulate the cryptocurrency and stablecoin sector.
- Ten countries have launched central bank digital currencies (CBDCs), and more than 100, representing 95% of the global GDP, are exploring the idea. CBDCs are traditional money in digital form, issued by a country’s central bank. Interest is driven by a desire to support the digitization of economies, streamline payment systems, enhance monetary policy, and improve financial inclusion.
- Tokenization is on the rise. New types include 1) converting the ownership rights of a tangible asset — real estate, financial instruments, precious metals, whatever — into a digital token on a blockchain or 2) leveraging NFTs as receipts for digital assets or copyright validation for original work such as images, music, and videos. In this way, assets can be stored, secured, subdivided, and traded via blockchain technology. Previously illiquid assets become liquid and fractional ownership becomes possible.
To stay abreast of this fast-changing landscape, consumers, investors, and companies can watch the signals: How are the underlying technologies maturing? What new use cases for non-traditional currencies are emerging? How are central banks’ policies for CDBCs aligning and diverging from country to country? How effectively are regulators addressing obstacles related to security, data privacy and consent, and interoperability? The answers to these questions will unearth opportunities and redefine the concept of value.
Mastercard helps customers and consumers securely explore these new opportunities. Learn more about how we’re shaping the future of money and helping to make crypto and digital currencies accessible to billions of consumers.
Ken Moore is the chief innovation officer at Mastercard.