Siberia leads the cash revolution
Electronic money is hard currency for Russian migrant workers - and for rich Nigerians, too.
Monday 06 May 1996
Alas, theft has become common enough, as the former Soviet Union struggles with its change to capitalism. The Siberian company town of Purpe, run by and for Purnefte Gaz, is fighting back. It has converted itself to running on electronic cash.
Having flagged behind the developed world for most of history, Siberia has now leapfrogged most of us. It has catapulted from the abacus to the electronic purse in one go, jumping 100 years of commercial evolution.
Almost all of Purpe's 100 shops take payment by e-cash - using a credit card-like piece of plastic. But instead of a magnetic strip it has a microchip on the back (as, indeed, will most European credit and retail loyalty cards within a couple of years).
Purpe's 40,000 card-users carry a balance of virtual cash on their cards, enough for immediate needs. Balances are topped up by visits to one of the town's Automated Telling Machines, which will debit a person's current account, transferring the money on to the card. ATMs in nearby towns will change the money back into cash, although several retailers outside of Purpe accept e-cash.
Because of rampant Russian inflation, it has been necessary to pay interest for amounts held on the card. Indeed, the cards hold three purses of money: a rouble account, paying interest; a US dollar account, which does not, and a rouble credit card.
"Everybody is using it," says Maria Maher, a senior executive for business development with ICL's research division near Dublin, which has developed the scheme in partnership with Siberia's PurBank. "It is the replacement for cash."
Nor is Purpe the only place where e-cash has developed beyond the pilot stage. While the Mondex project in Swindon has generated less trade than expected, it has been accepted enthusiastically elsewhere around the world. Tight-knit communities, such as company towns, are well suited, as are university campuses, with many American universities set to follow the example of Florida, which introduced e-cash in March this year.
Ironically, the idea has been received best in places where credit cards have never been popular. That has meant there has been plenty of cash in vulnerable pockets, and plenty of thieves to extract it.
There are 2,000 electronic purse users in Lagos - one of the most crime- ridden cities in the world - where the rich can now wander with however much virtual cash they want in their pockets, at little risk. With an electronic purse, transactions above a minimum level require authorisation with a PIN number. Top-ups also require the PIN number. It is regarded as a highly secure system, with little attraction for thieves.
The Lagos and Purpe schemes use a fully audited system, ensuring that all outgoings are recorded through the issuing bank, which means there is an "audit trail" that enables banks to refund the victims of theft or loss of electronic purses.
But audited systems have been questioned by civil libertarians who are worried by the prospect of a central body knowing how we spend our money. For the same reason the technology excites commerce, aware of the possibilities for targeted marketing to consumers.
Another reason that banks are thrilled by the electronic purse is that it will create a large block of money that is neither in circulation, nor in people's bank accounts. The banks will be able to invest this, gaining extra profits, particularly where a fully audited system is adopted, allowing them to track where e-cash is held. It is also much cheaper to process e-cash than handle cash.
But e-cash also offers the consumer enormous benefits. The international business traveller of the future might end up having a large range of currencies in different purses on the same card.
So when will the electronic purse arrive here? Many experts predict it will be in common use within the next 10 years. Others warn of the conservatism of Britain, and believe that we will cling to cash much longer. This is one instance where we may lag a long way behind Siberia and Lagos.
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