CLOUDDimensions: Monetary Instruments Though the Lens of WHO, WHAT, WHEN & WHERE (Part 2 – Credit & Debit Cards)

Since the first installment of monetary instruments through the lens of CLOUD Dimensions, I’ve had the pleasure of attending both SWIFT’s Operations Forum of the Americas and am in the midst of the South by Southwest Interactive. Earlier today, I attended two panels at SXSWi. One was on the topic of consumer lending, and the second was on the topic of bank innovation.  Each of these events have added to my thinking on this topic, as well as reinforced my belief that we need to dig below our conceptions of money and banks to truly understand where the advance of technology is taking both us and our future economy.

Throughout the second panel, ably led by Brett King of Banks 2.0 fame, I found myself repetitively tweeting the same meme that is developing here on monetary instruments. “Money has always been mobile.” We once moved it around by stagecoach. With the advance of technology, we’ve added checks, debit and credit cards to the mix. And, as was pointed out during the bank innovation panel at SXSWi, we are now adding mobile devices to the mix, too.

Whether by stage coach, card or mobile, however, each of these mechanisms is simply a distribution mechanism for the money itself. Mobile hasn’t reinvented money, it has just become the stagecoach of the 21st century. So, to understand the future of banks and monetary instruments, we must continue to think about the ways in which we use money as a medium of exchange, unit of account, and a store of value. Because it is in its role as a store of value, that the magic of money can be advanced in the 21st century. Money began as commodity money. Early coins, like shekels, had value based on the weight of a commodity. In the case of shekels, that commodity was barley (citation to wikipedia). Of course, money is now digitally recorded, so we must ask ourselves, how do we ‘weigh’ the value of money in the 21st century?

I began this journey over the meaning of money at Sibos in Amsterdam, and the conversation continues at Chris Skinner’s blog at the Financial Services Club in his post on “Money is meaningless.” CLOUD has added some additional comments on this topic at the FSC blog. The other comments are also worth your attention.

To be continued….

CLOUDDimensions: Monetary Instruments Though the Lens of WHO, WHAT, WHEN & WHERE (Part 1 – Checks)

As I was reading through my opinion piece from Sibos 2010, so graciously included by the editors in the latest SWIFT Dialogue magazine, a number of additional thoughts began to strike me about our monetary instruments and the sheer number of tags that intersect through them.

Late last year, I put together a series of posts in the standards section of our CLOUD website on the dimensions of CTML, outlining the basics of WHO, WHAT, WHEN and WHERE I Am™.  Each of these individual posts looked at these dimensions through the lens of an individual, however, these axes can extend beyond people.  They are equally capable of being applied to other physical artifacts, like our monetary instruments, the most common of which are check, debit cards and credit cards.

The goal of this discussion is to explore these four dimensions and how they intersect through our monetary instruments, starting with the most traditional of instruments, a check and then building on this same exercise with other instruments like credit and debit cards.  These individual posts on monetary instruments will lay the foundation for a broader whitepaper on payment systems and how they could work in a future CLOUD-enabled Internet.  I’m looking forward to the work session on the payments landscape in 2011 at SWIFT’s Operations Forum – Americas in NYC next week to get a better sense of the industry’s current thinking on the topic.

As you read through this thinking, it may be useful to pull out a check from your wallet, purse, briefcase or office drawer and take a look at it from the view of CLOUD’s dimensions. The first thing I noticed when I looked at one of my own checks was the fact that there are three separate instances of a WHO tag on this piece of paper.  One of these WHO tags is in the top left and bottom right corners of most checks.  In the case of my check, my name, my wife’s name and our address is in the top left corner.  This same exact tag is also found in the bottom right corner. Of course, in this case, the WHO tag is represented as a machine-readable number, my account number, but in essence, it represents the same information that is found in the top left corner.

The next set of WHO tags is found in the bottom left-hand corner of the check and not far above it in the same region of the check.  This WHO is both the human-readable and machine-readable tags representing the bank that holds my account. The machine-readable tag is commonly known as a routing number.  The final WHO tag is the one which we write on the “Pay to the Order Of” line.  It indicates to whom these funds will be remitted.

Before moving on to the WHAT I Am and WHEN I Am™ tags found on our checks, it is important to point out that a check is not actually money (obvious but worth restating).  In a sense, it is a distribution tag that states how my funds are to be moved.  The same is true of debit and credit cards.  They aren’t money either.  They, too, are distribution mechanisms that state how, when and under what terms money is to be exchanged.  I won’t dwell on the topic here, but it is possible, and very likely, that we each have not only checks that we use for our banking relationship but debit cards and credit cards that come from the same institution.  In the case of the debit card, it really isn’t a different monetary instrument at all but simply another distribution tag that streamlines the paper process of a check.  And, for that matter, the credit card is the same as the debit card, except I’m not moving the underlying funds from my own account but “borrowing” them under specific credit and interest terms for the money that I will have available to me in the future, just not now.  More on this line of thinking later…

So, let’s return to our check and the CLOUD Dimensions associated with it.  In the top right hand corner of our check, we have a line for the date, something we call WHEN I Am in the language of CTML.  This WHEN I Am could be today or a date in the future.  It is a way of saying to the payee and the bank when the funds can be exchanged. We also have a place for a WHAT, which we represent both numerically and in words.  Of course, I’m referring to the amount of funds to be exchanged.

What I discovered going through this exercise is that this one ‘monetary instrument’ is basically a large physical tag cloud to use an Internet term.  On this one piece of paper, there are a significant number of tags, each representing not only a unique piece of information but also representing a number of interacting relationships, all of which have “context” because the tag cloud all occurs on this one piece of paper.  The next post on CLOUD Dimensions and monetary instruments will look at this idea of tag clouds and their representation by credit and debit cards.

CLOUDDimensions: WHAT I Am™

As was pointed out in the first post on the topic, there are four dimensions to the future CLOUD “hypercube”: WHO, WHAT, WHEN and WHERE, and it has been several weeks since I posted some thoughts on the third dimension in this series on WHEN.  WHAT I Am has been left until last, because as I’ve discovered, it is the hardest one.  Fortunately, during my flight over to Brussels for the Sibos conference in Amsterdam a week ago, the reasons for the difficulty started to dawn on me.

Data Versus Databases
 As we point out in our video vignette on Separating the WHO and the WHAT in the CLOUD, there is a significant difference between data elements, the entities collecting the data elements and the databases in which they are stored.  Nova Spivack of Lucid Ventures made an excellent comment about this part of the semantic web during Sibos in Amsterdam. In his words, “In the semantic web, databases wrap themselves around the data.”  That is a wonderful framework by which to go deeper in to my thoughts on the final dimension of CLOUD:  WHAT I Am™.