Strains of Digital Money

Abstract

This paper provides a basic framework that explains how the major types of known digital money solutions relate to each other, i.e. what are the similarities and differences, and hence the pros and cons, of each. The broader purpose is to offer fresh new perspectives on how digital money grids might be pieced together in the future, so as to make them: (i) safer, technologically and operationally; (ii) more convenient, user friendly, and useful by making them easier to integrate into broader digital solutions (i.e. more programmable); (iii) more contestable by different providers, creating more of a level playing field and stronger incentives to innovate; and (iv) much cheaper than current systems, especially for micro-transactions, which to this day remain unsupported by efficient payment mechanisms and yet constitute the vast majority of transactions in the mass market.

Keywords: Access to Finance, Financial Inclusion, Banking Regulation, Branchless Banking, digital financial services, mobile banking