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Speaker 1: The Coin Bureau Podcast is a production of My Heart Radio.

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Speaker 1: Hello everyone, and welcome to the coin euro podcast. This

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Speaker 1: is Mad Mike Mooch and I am guy. Welcome everyone,

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Speaker 1: Um Mike, where are we recording from today? We are

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Speaker 1: like we are in Sweden? Sweden? Yeah, lovely, I'm enjoying it.

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Speaker 1: They're very hospitable here. They're very chilled, aren't they very

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Speaker 1: They're very chilled, great food, very affordable furniture. Yeah yeah yeah.

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Speaker 1: I mean you have to you have to make it yourself,

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Speaker 1: which which is a bit like everything in life if

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Speaker 1: you think about it. Very profound, very profound. So we've

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Speaker 1: shipped are We've shipped our portable studio here to Sweden.

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Speaker 1: And because we just felt like it, Sweden sounded cool.

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Speaker 1: Get it before it gets really really cold, I guess.

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Speaker 1: And obviously Sweden's in the news a lot at the

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Speaker 1: moment because abber reforming, aren't they or they've reformed and

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Speaker 1: now I didn't know they split? They split split? This

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Speaker 1: is a night there. Are they all alive? They're all

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Speaker 1: alive that they've reformed, um and are now going to

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Speaker 1: be performing as holograms. Let's just give a quick recap

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Speaker 1: of what we talked about last time before we launched

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Speaker 1: into today's episodes, So good. Last time we talked about

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Speaker 1: the history of money, didn't we. We talked about money

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Speaker 1: as a technology that's evolved over time to become more usable,

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Speaker 1: more useful, and it's it's driven human innovation, it's driven

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Speaker 1: our achievements. UM. And we also looked at the different

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Speaker 1: types of money. I found that really good fun UM

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Speaker 1: looking at the way in which certain things we used

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Speaker 1: as money. UM. We talked about commodity money, didn't we

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Speaker 1: And you could pay you could pay in salt. That

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Speaker 1: was one of my favorite. And we got the Latin work.

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Speaker 1: We got the words salary from that a particular high

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Speaker 1: point UM. And we also looked at things like the

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Speaker 1: gold standard and the pros and cons of that UM

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Speaker 1: and how we moved from a commodity money system to

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Speaker 1: the current system money that we have today, which is

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Speaker 1: obviously the Fiat system. And do you remember what FEAT meant?

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Speaker 1: I don't. This is a This was was full of

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Speaker 1: meat balls and snaps. So I'm yeah, my brain is

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Speaker 1: not working. I'm gonna give you a pass. You're in

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Speaker 1: You're you're a new dad, obviously not sleeping, You're obviously

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Speaker 1: semi semi conscious. Yeah, I was on the bottle last night,

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Speaker 1: hartially crazed. Um. Yeah, fiat, which is how, which is

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Speaker 1: how the Latin wasn't it. That's right, that's right. It's Latin,

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Speaker 1: and it means let it be done, let it be,

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Speaker 1: let it done. So basically, fiat money is money. I

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Speaker 1: decree it has valued because the government issuing it says

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Speaker 1: it has value, and the government backs up those claims

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Speaker 1: with all. It's not what people say that. Oh yeah,

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Speaker 1: with with with its gold standard, which isn't gold standard,

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Speaker 1: but which is now more just like a lead standard. Yeah,

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Speaker 1: as in the currencies backed by lead. Yeah, as in

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Speaker 1: by power I think firepower, Yeah, exactly, yeah, by hot lead. Um. Yeah,

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Speaker 1: the currency is backed by by the power of government,

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Speaker 1: by the power that government has a monopoly on violence.

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Speaker 1: Some people would say, um. And in the past, we

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Speaker 1: obviously talked about the fact that money was backed by

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Speaker 1: gold in a vaults somewhere and how you could you could,

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Speaker 1: in theory for a long time, take a bank note

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Speaker 1: to the bank and exchange it for that particular amount

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Speaker 1: of gold, which was pretty crazy. But that's that ceased,

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Speaker 1: and we've eventually worked our way to this system where

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Speaker 1: you could not possibly do that, you'd get laughed out

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Speaker 1: of the bank. Um. But do you want to hear

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Speaker 1: a couple of fun facts about God? Yeah? Good, because

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Speaker 1: you're going to anyway. Um. So, when I was searching

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Speaker 1: this the other day, I came across the Bank of

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Speaker 1: England's website and I was having a look on that

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Speaker 1: the Bank of England holds forty four hundred thousand bars

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Speaker 1: of gold in its vaults that is worth around two

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Speaker 1: hundred billion pounds really. Yeah, and this, unfortunately, this is

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Speaker 1: only the second largest hall of gold in the world.

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Speaker 1: Do you know who has the largest It's not Jay

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Speaker 1: z has more golden the Bank aving That wouldn't surprise me.

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Speaker 1: It's it's the Federal Reserve the Americans. Yeah, basically Uncle Sam,

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Speaker 1: Uncle's Uncle Sam. But interestingly, the Bank of England's gold

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Speaker 1: reserves that that two hundred billion pounds worth, it corresponds

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Speaker 1: to between four and five percent of the actual pounds

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Speaker 1: in circulation. Really, so that is the extent to which

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Speaker 1: the British currency is act today. And I think it's

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Speaker 1: probably a similar story. In fact, I would I would

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Speaker 1: hazard a guest and say it's a lot less for all.

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Speaker 1: This is why governments around the world have been able

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Speaker 1: to print so much money, especially over the last eighteen months,

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Speaker 1: because of the pandemic and because of the economic slowdown

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Speaker 1: that we've had. And this obviously leads to inflation, which

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Speaker 1: we're experiencing now. So the supply of money has increased,

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Speaker 1: there's more money sloshing around in the system, which means

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Speaker 1: that the money, all that money is kind of worth

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Speaker 1: less because there's so much of it. It's less of

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Speaker 1: a commodity. Um and this is what we're seeing with

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Speaker 1: prices going up and I mean yeah again, estimates various

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Speaker 1: to the rate inflation. Some people think that the government,

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Speaker 1: the US government is is deliberately under representing, under under

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Speaker 1: estimating the true level of inflation. But it's definitely climbing.

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Speaker 1: It's kind of complicated by the fact that prices are

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Speaker 1: going up because of supply chain issues and things like that. Obviously,

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Speaker 1: the global shutdown has has made life pretty difficult for

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Speaker 1: exporters and trade and all this sort of thing. But

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Speaker 1: hyper but inflation is happening, and there's also the danger

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Speaker 1: of course, and some people think this could happen about

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Speaker 1: possible hyperinflation UM and hyperinflation is basically, I guess the

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Speaker 1: boat way to sum up hyper inflation is money in wheelbarrows.

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Speaker 1: So this is where they print so much money it

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Speaker 1: becomes completely worthless. People lose confidence in the currency. Prices rocket.

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Speaker 1: So we saw this, We saw this in Venezuela. Yeah, Venezuela,

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Speaker 1: sort of perhaps most recently Zimbabwe as well Germany before

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Speaker 1: exactly yet before before everything kicked off again. Yes, so

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Speaker 1: in yeah, in in Bimar, Germany, after the First World

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Speaker 1: War and before the second. Yeah, they had massive runaway

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Speaker 1: hyperinflation um. And yeah. And you hear stories from Venezuela

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Speaker 1: and also Argentina, like Argentina hyperinflation um. And you hear

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Speaker 1: stories about people being getting there sort of weekly or

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Speaker 1: monthly salary and basically being given it in carrier bags

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Speaker 1: full of money, and then having to run to the

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Speaker 1: shop in order to buy what provisions they could because

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Speaker 1: the prices were going up all the time. So by

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Speaker 1: the time you got to the checkout, what you're what

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Speaker 1: you were trying to buy would often have gone up.

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Speaker 1: The price would have gone up even more so what

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Speaker 1: you save as space at the checkout. Yeah, and then

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Speaker 1: just I've left my yeah, run it through our crap.

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Speaker 1: I've left my card. Wait here once, just wait one second.

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Speaker 1: I mean I find going to the supermarket, especially when

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Speaker 1: it's busiest or stressful enough things it is. So life

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Speaker 1: is hard. Yes, so hyperinflation is obviously is pretty catastrophic.

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Speaker 1: And yeah, this happens. This happens all the time. Let's

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Speaker 1: start by talking about cash, and we're gonna we're gonna

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Speaker 1: use the exam throughout this next bit of me paying

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Speaker 1: you ten pounds. You're going to be pretty wealthy by

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Speaker 1: the end of this wonderful something to look I can

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Speaker 1: get my shopping delivered. Yeah, exactly, exactly all you're asking nymphs.

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Speaker 1: That's a good business idea like that. Um, so yeah,

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Speaker 1: we'll we'll talk about cash now and the other ways

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Speaker 1: in which we move money around on a daily basis.

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Speaker 1: Because now some of what some of what we're going

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Speaker 1: to talk about, it might seem on the face of

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Speaker 1: it kind of a little a little basic, a little

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Speaker 1: elementary to you. I'm learning to you. It's going to

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Speaker 1: leave calcul you are going to have your mind blown.

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Speaker 1: But it is easy to lose sight of how just

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Speaker 1: how we transact with each other all the time. So

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Speaker 1: let's imagine we're making a cash transaction. I am paying

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Speaker 1: you ten pounds, and so what are the benefits do

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Speaker 1: you think of that of transacting in cash? Is there

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Speaker 1: anything that kind of leaps to mind? Um, traceless? Do

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Speaker 1: you know what I mean? It's kind of it. It's anonymous, really,

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Speaker 1: isn't it. So you could be paying me for something

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Speaker 1: that might be a little bit shameful, Yes, legal, but shameful,

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Speaker 1: like an adult magazine or something, or you know, or

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Speaker 1: something else or something else something, Yeah, something that I

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Speaker 1: don't want other people to know about, something maybe illicit,

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Speaker 1: or something that you know, I just I would rather Yeah,

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Speaker 1: it's personal. Yeah, it's personal. It's just between me a

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Speaker 1: Brazilian butt lift for ten pounds for the best jump.

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Speaker 1: It's not the best example, a portion of a Brazilian uplift. Yeah.

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Speaker 1: So yeah, it's anonymous. There is no one else involved

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Speaker 1: in that transaction. It's purely peer to peer, as you

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Speaker 1: is a term you're hear in crypto a lot um.

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Speaker 1: It's me and you and yeah, so it's it's anonymous.

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Speaker 1: There's no one else involved, no one else knows anything

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Speaker 1: about the transaction. It's also instant, so I hand you

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Speaker 1: the ten pounds, you hand me the voucher for the

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Speaker 1: butt lift or design buying, and we both go on

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Speaker 1: our way. There's no nothing else needs to happen. It's finished.

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Speaker 1: It's it's done. Um and yeah, we're it's it's it's quick.

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Speaker 1: There's no sort there's there's no kind of chargebacks, there's

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Speaker 1: no having to wait for the money to clear in

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Speaker 1: your account or anything like that. We're done and we

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Speaker 1: can move on. And also what's great about being instant

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Speaker 1: is say we're doing a business transaction and you know,

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Speaker 1: you're a supplier of Brazilian butt lifts or whatever it is.

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Speaker 1: You The good thing for you about it being instant

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Speaker 1: is then you can take that money and perhaps pay

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Speaker 1: your employees or the suppliers, you know, because you have liabilities,

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Speaker 1: you have obligations, And the great benefit of the transaction

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Speaker 1: being quick is that you then have that money straight

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Speaker 1: away and you can yeah, and you can spend it. Okay,

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Speaker 1: So on the face of it, then a cash transaction

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Speaker 1: is pretty good. But what are the are the drawbacks?

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Speaker 1: Is there anything that is anything that strikes you? I

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Speaker 1: mean you physically have to be there, Yeah, exactly, you

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Speaker 1: can't you can't sort of post cash, or you can,

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Speaker 1: but it's not I mean, yeah, a ten pound note

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Speaker 1: inside a inside a birthday card from your aren't get

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Speaker 1: is borrowed by the Yeah, you have to rely on

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Speaker 1: a third party. You have to rely on the post um.

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Speaker 1: So yeah, I mean you can, you can move cash around,

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Speaker 1: but essentially you're absolutely right, you have to be in

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Speaker 1: the same place. And this is the big this is

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Speaker 1: cash's major problem. This is the big drawback of using cash.

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Speaker 1: You have to be face to face because no one

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Speaker 1: is going to be comfortable sending large amounts of money.

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Speaker 1: And it's also to send large amounts of money, you know,

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Speaker 1: using the post would cost you you constantly having to

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Speaker 1: buy stamps and envelopes and all that sort of stuff,

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Speaker 1: and you'd be worried that it's not not instantaneous. Yeah,

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Speaker 1: you're you're you're reliant on on the postal service. Um.

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Speaker 1: So yeah, that's that's the major problem with cash. You

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Speaker 1: have to be in the same place. And there's also

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Speaker 1: a kind of there's also you're you're quite vulnerable if

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Speaker 1: you're carrying cash, you can lose it easily. Yeah, And

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Speaker 1: I was either from from from lacking in the ops

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Speaker 1: getting you or if if you just you drop it. Yeah,

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Speaker 1: I mean yeah, I'm quite good like this. I generally

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Speaker 1: tend touch with never to sort of lose or drop

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Speaker 1: my wallet, but I mean terrible awful yeah, yeah. Yeah.

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Speaker 1: In fact, I've seen you. I've seen you many years ago.

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Speaker 1: I think you were sort of putting you. I think

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Speaker 1: you had a couple of drinks and you were trying

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Speaker 1: to put your wallet in your back pocket and it

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Speaker 1: was just missing and you were just dropping it on

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Speaker 1: the floor. And then you did the same with your

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Speaker 1: phone and you dropped it on the floor. And I

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Speaker 1: was like, that sounds about right. Yeah. I was like, Mike,

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Speaker 1: come on, you know so yeah, and certain people are hopeless.

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Speaker 1: But I was thinking about this on the way over

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Speaker 1: here today. I was thinking, you know, I've got my

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Speaker 1: bank card in my wallet, and that gives me access

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Speaker 1: to not actually that much money, but you know, there's

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Speaker 1: about there's about a thousand pounds in my account at

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Speaker 1: the moment. Now, I'm perfectly happy to carry that bank

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Speaker 1: card around because there's inbuilt security on that. I would

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Speaker 1: feel really uncomfortable carrying a thousand pounds in cash around.

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Speaker 1: I mean it would take up a lot of space,

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Speaker 1: wouldn't it, But I'd be I'd be really paranoid about

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Speaker 1: dropping my wallet or or you know, or someone seeing

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Speaker 1: that I had a huge ward of notes in there.

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Speaker 1: It's not ideal. So that's another drawback of cash. Um

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Speaker 1: And again I think the other drawback would be it's

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Speaker 1: not much use if we're trying to do a large transaction,

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Speaker 1: like say we're trying to buy a house. No one

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Speaker 1: is going to appreciate you turning up with a car

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Speaker 1: load of cash to buy a house. So how do

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Speaker 1: we solve the problem of transacting at a distance? Then

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Speaker 1: how do we get cutter puls I set up a catapory.

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Speaker 1: That's a that's an innovative solution. But I would say

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Speaker 1: that the ability to transact at a distance without having

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Speaker 1: to be in the same room as someone is is

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Speaker 1: a massive innovation, one of the great innovation of our time,

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Speaker 1: because without it the world economy would fall apart pretty quickly.

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Speaker 1: Um So, And to do this, obviously we use digital money. Now,

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Speaker 1: this is this is a this is a broad term

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Speaker 1: digital money. Um So I'm going to break it down

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Speaker 1: a little bit um and consider the ways that we

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Speaker 1: that the things that fall under the umbrella of digital money. Um.

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Speaker 1: But it's basically you can think of it as any

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Speaker 1: form of money transfer that doesn't involve cold, hard cash,

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Speaker 1: So that would be things like card payments, credit card,

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Speaker 1: debit card, bank transfers. Um. And you've also now increasingly

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Speaker 1: got payment providers, things like papal yeah or Venimore Look

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Speaker 1: cash up cash app. We were right, we were really

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Speaker 1: in sync there. Yeah, yeah, I didn't think of cash app.

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Speaker 1: But obviously the benefits of these digital forms of money

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Speaker 1: are obvious. We don't need to be in the same place,

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Speaker 1: we don't have to carry large amounts of cash around,

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Speaker 1: we can transfer large amounts of money between each other

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Speaker 1: if needs be, and we don't have to use wheelbarers. Yeah.

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Speaker 1: This is I mean, this is great. But there are

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Speaker 1: of course drawbacks to digital payments. What are they? Okay? Well,

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Speaker 1: and I alluded to this earlier when I was talking

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Speaker 1: about cash transactions. But one of the drawbacks is that

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Speaker 1: any digital transaction, any digital money transaction, has to have

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Speaker 1: someone else involved. So if I'm going to send you

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Speaker 1: money digitally, if I'm going to send you this ten

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Speaker 1: pounds UM that I that I apparently owe you, um,

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Speaker 1: someone is going to have to facilitate that transaction because

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Speaker 1: I because you know, it's it's either going to be

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Speaker 1: a bank, there's going to be a card company involved,

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Speaker 1: or I might be paying you via PayPal, any any

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Speaker 1: of those ways. But there's someone in the middle of that.

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Speaker 1: And so that means oversight, you know, that means that

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Speaker 1: that transaction is no longer anonymous, so it's logged and

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Speaker 1: people can see. So if I'm trying to buy something

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Speaker 1: that I don't want people to know about, you know,

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Speaker 1: I don't want people to know that I'm having a

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Speaker 1: Brazilian butt lift. Or if you're donate thing to say

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Speaker 1: wiki leaks exactly. Yeah, yeah, I perhaps I'm donating to

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Speaker 1: an organization that the government isn't comfortable with, and wiki

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Speaker 1: leaks is a great example. Isis Or on the other hand,

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Speaker 1: maybe I want to give money to ISIS. Um. Yeah,

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Speaker 1: so there's someone, because someone is in the middle to

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Speaker 1: facilitate this transaction, they can also see this transaction happening.

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Speaker 1: They can and they can stop it. Um. And if

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Speaker 1: you talk to if you talk to anyone who especially

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Speaker 1: works in retail, and they and they do they do

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Speaker 1: online bank on online sales or anything like that, they'll

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Speaker 1: tell you that things like chargebacks are a real problem.

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Speaker 1: So if you send if you send a product out

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Speaker 1: to someone and they're not happy with it for any reason,

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Speaker 1: or you know, they claim it doesn't arrive or anything,

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Speaker 1: it's you know, something goes wrong, then they can initiate

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Speaker 1: a charge back, and so the transaction is kind of

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Speaker 1: frozen or reversed. UM. And I think PayPal, especially if

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Speaker 1: you have as a merchant, if you have too many chargebacks,

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Speaker 1: if things go wrong, like say you say you send

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Speaker 1: things out via the post, if the post lets you down,

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Speaker 1: if the postal service lets you down, then you get

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Speaker 1: these you get these chargebacks coming towards you. There's nothing

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Speaker 1: you can do about it. Um. And then all of

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Speaker 1: a sudden, papal will freeze your account, which obviously puts yeah, exactly,

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Speaker 1: which puts a real spanner in the works. So having

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Speaker 1: someone else involved isn't ideal because it means oversight, because

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Speaker 1: it means that the transaction can be stopped, it can

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Speaker 1: be reversed, it can be interfered with UM. And also

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Speaker 1: we have to we have to trust these people, we

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Speaker 1: have to put our faith in them UM. And in

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Speaker 1: order to I mean here in the here in the West.

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Speaker 1: I'm going to talk about the developed world quite a

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Speaker 1: lot because we are so used to using all of

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Speaker 1: these things, but we don't often consider that we have

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Speaker 1: to put our faith. We're putting a lot of faith

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Speaker 1: in these people. If we make a large transaction, say

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Speaker 1: we're putting a lot of faith in in the banks

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Speaker 1: involved making that transaction. Um, we have to trust them.

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Speaker 1: Now in order that we can trust them, there's another

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Speaker 1: layer added in and that's obviously government, So they government

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Speaker 1: and regulators. Because we have to trust these people, because

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Speaker 1: we have to trust these third parties, the likes of

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Speaker 1: PayPal or banks or whatever, there has to be another

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Speaker 1: layer of oversight involved, and this is where government and

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Speaker 1: regulators come in, so they maintain the trust that we

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Speaker 1: have in in these in these companies, so they make

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Speaker 1: sure that they're behaving properly. So that's a kind of

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Speaker 1: another layer in involved in a digital payment. Not only

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Speaker 1: have you got the middleman, but you've also got yeah,

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Speaker 1: you've also got to the entity overseeing the middlemen. So

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Speaker 1: there's a lot of scrutiny. And this is the price

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Speaker 1: that this is one of the prices that we pay

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Speaker 1: for the convenience of digital payments we have we have

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Speaker 1: to we have to live with the fact that there

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Speaker 1: are people involved and there are people watching. And so

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Speaker 1: the payments we make in this way, they're traceable, they're

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Speaker 1: linked to our identities. The third parties can see what

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Speaker 1: we're spending our money on. And if governments or law

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Speaker 1: enforcement or anyone like that requests or asked asked to

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Speaker 1: see those transactions, um, those third parties are often legally

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Speaker 1: obliged to pass them on. So if you're a fan

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Speaker 1: of privacy, if you don't want if you don't want

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Speaker 1: everyone to know, if you don't want the government to

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Speaker 1: know what you're spending, um and that and again, like

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Speaker 1: wiki leaks is a great example here, you might not

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Speaker 1: want the US government to know that you're donating to

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Speaker 1: wiki leaks. Um. So if you like privacy, this is

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Speaker 1: a problem. Also, the US government was able to stop

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Speaker 1: you donating to WikiLeaks. Yeah yeah, so, um, not only

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Speaker 1: is there oversight, not not that I donated, but well

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Speaker 1: you wouldn't say, well, this is why wiki leaks started

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Speaker 1: being paid in bitcoin. But we're we're getting slightly ahead

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Speaker 1: of us. Yes, there, because I we will come back

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Speaker 1: to that. Um. So before we look at how digital

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Speaker 1: payment are made, because I want to kind of break

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Speaker 1: this down into how this money moves around because there

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Speaker 1: are so many misconceptions around it. But first we need

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Speaker 1: to talk about the big problem that digital payments need

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Speaker 1: to overcome. And this is called the double spend problem.

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Speaker 1: And this is really important to understand. This is a

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Speaker 1: key uh, this is a key foundation of sort of

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Speaker 1: everything that's involved with digital payments, with modern money and

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Speaker 1: also with cryptocurrency, this idea of double spends. So the

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Speaker 1: big problem with any asset that's digital is that can

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Speaker 1: easily be copied. I mean, it can be a case

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Speaker 1: of just you know, just copy and paste. So, um,

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Speaker 1: think back the last time sent someone sent you a

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Speaker 1: funny image over WhatsApp or something like that. There's no

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Speaker 1: you have no way of of of ensuring that that

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Speaker 1: image is unique. It's it's easy to copy and redistribute.

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Speaker 1: And you could say that, I mean meme culture, it

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Speaker 1: would work without it. Um. So you know, these these

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Speaker 1: files can easily be copied and sent to anyone else

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Speaker 1: and you have no way of preventing that. Um. And

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Speaker 1: if if that wasn't if if it wasn't for that,

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Speaker 1: if digital files couldn't be easily copied and redistributed. I mean,

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Speaker 1: the lives of anyone under about forty five would just

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Speaker 1: instantly fall apont just people would just be they wouldn't

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Speaker 1: know what to do with themselves. UM. So, any form

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Speaker 1: of digital money exists basically in the form of files,

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Speaker 1: and digital files are easy to copy. So if I

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Speaker 1: sent you such a file as a payment, you can't

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Speaker 1: be sure that I haven't copied it and sent it

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Speaker 1: to someone else. Now, obviously, this this uncertainty makes the

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Speaker 1: asset worthless. So the system collapses because you have no

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Speaker 1: confidence in the money. If I can send you these

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Speaker 1: digital pounds and then send the same digital back, copy

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Speaker 1: and paste and send the same digital pounds to someone else,

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Speaker 1: that's that's no good to anyone, UM and people. You

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Speaker 1: couldn't rely on people to stay honest like that. So

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Speaker 1: this is why the third parties. This is another reason

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Speaker 1: that the third parties we talked about earlier exists. They

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Speaker 1: are overseeing. They're the ones that make sure this doesn't happen.

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Speaker 1: They act as bookkeepers. They keep records up to date,

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Speaker 1: so they track the fact that I've sent that ten

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Speaker 1: pounds to you. Um and they update the books which

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Speaker 1: means I can't then send that ten pounds again, you see,

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Speaker 1: so um and they're able to do this because someone

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Speaker 1: again is regulating them so so that you know, the

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Speaker 1: croupiers are being watched by the pit operator. Every there's

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Speaker 1: there's all this oversight. So essentially, what it comes down

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Speaker 1: to is that two layers of security are needed when

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Speaker 1: it comes to digital payments. So firstly, you need third

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Speaker 1: parties to process and oversee those payments, and you need

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Speaker 1: a regulatory body in place in order to keep the

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Speaker 1: third parties themselves on this and make sure that they're

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Speaker 1: not cooking the books and awarding themselves, you know, extra

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Speaker 1: extra pounds that they've magiced out of thin air. So

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Speaker 1: there's a lot of there's a lot more people involved

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Speaker 1: when you make a digital payment, when I pay, when

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Speaker 1: I send you ten ten pounds, it's a lot more

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Speaker 1: people involved than just the two of us. UM. And

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Speaker 1: again this is this is a big this is a

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Speaker 1: big issue when it comes to digital payments. Now we'll

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Speaker 1: come back to this whole problem of double spending when

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Speaker 1: we talk about bitcoin, because actually the inventor of bitcoins,

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Speaker 1: Toshi Nakamoto, the big problem that he had to overcome

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Speaker 1: with creating this digital currency, this digital cash. The big

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Speaker 1: problem he had to overcome was the double spend. How

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Speaker 1: do you prevent it? But that is a topic for

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Speaker 1: another episode. Shall we take a break, Let's have a break.

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Speaker 1: Let's have a break. Welcome back to Part two, Part two,

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Speaker 1: How Digital Money works Magic. We're going to get technical here,

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Speaker 1: so let's look at how banks transfer money between themselves.

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Speaker 1: The real rock and roll stuff, the stuff that goes

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Speaker 1: on behind the scenes when we make payments to one another. Yeah,

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Speaker 1: the nuts and bolts. UM. I want at this point

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Speaker 1: to give credit to a book called The Basics of

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Speaker 1: Bitcoins and Blockchains by a chap called Anthony Lewis here

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Speaker 1: because big Anthony, big up, Anthony, Good work, Anthony. Yeah,

427
00:24:17,040 --> 00:24:19,639
Speaker 1: his book is excellent at explaining this. There's loads of

428
00:24:19,840 --> 00:24:23,720
Speaker 1: useful diagrams and illustrations and things like this. But yeah,

429
00:24:23,840 --> 00:24:26,160
Speaker 1: I've I've I've used I've used that book a lot

430
00:24:26,400 --> 00:24:29,879
Speaker 1: researching this, UM. And I urge you to read it everyone,

431
00:24:29,880 --> 00:24:33,160
Speaker 1: because it's it's great. UM. And yeah, obviously it does

432
00:24:33,200 --> 00:24:35,320
Speaker 1: what it says on the tin, but it goes into

433
00:24:35,680 --> 00:24:37,760
Speaker 1: a lot of a lot of detail like this that

434
00:24:37,920 --> 00:24:43,400
Speaker 1: is really important to know. So big up, Anthony, thank you, so, Mike.

435
00:24:43,560 --> 00:24:46,639
Speaker 1: If people think about it at all, they tend to

436
00:24:46,680 --> 00:24:49,920
Speaker 1: imagine that when we make a bank transfer, money kind

437
00:24:49,960 --> 00:24:53,800
Speaker 1: of gets sent from one account to another. So back

438
00:24:53,800 --> 00:24:58,120
Speaker 1: to our example, I'm transferring you ten pounds. Um. Yeah,

439
00:24:58,200 --> 00:25:01,720
Speaker 1: the assumption would be that somehow that ten pounds makes

440
00:25:01,760 --> 00:25:04,680
Speaker 1: its way from my bank account to your bank account,

441
00:25:04,680 --> 00:25:09,199
Speaker 1: and everyone's happy. But this isn't the case. This is

442
00:25:09,320 --> 00:25:11,159
Speaker 1: this is not true at all. So we want to

443
00:25:11,160 --> 00:25:15,320
Speaker 1: get this. We want to get rid of this idea, Yeah, exactly,

444
00:25:15,440 --> 00:25:18,760
Speaker 1: to spell that rumor get rid of this idea that

445
00:25:18,960 --> 00:25:23,399
Speaker 1: somehow kind of money itself, physical money, if you like,

446
00:25:23,600 --> 00:25:27,560
Speaker 1: is moving behind the scenes. What is moving, Well, it's

447
00:25:27,720 --> 00:25:32,119
Speaker 1: mostly numbers on spreadsheets. But let me explain. So let's

448
00:25:32,160 --> 00:25:37,879
Speaker 1: start off with the simplest, the simplest type of transaction.

449
00:25:38,200 --> 00:25:42,360
Speaker 1: Let's quickly before we talk about bank transfers about how

450
00:25:42,800 --> 00:25:45,680
Speaker 1: they do this, let's quickly talk about assets and liabilities.

451
00:25:46,880 --> 00:25:51,159
Speaker 1: So the money that's in your bank account, Mike, is

452
00:25:51,160 --> 00:25:55,600
Speaker 1: an asset that belongs to you, Okay, But for the bank,

453
00:25:56,000 --> 00:25:59,520
Speaker 1: that money is a liability. So the bank actually owes

454
00:25:59,600 --> 00:26:01,600
Speaker 1: you that money. So all the money in your bank

455
00:26:01,600 --> 00:26:05,400
Speaker 1: account is currently the liability of whoever you're banking with.

456
00:26:05,520 --> 00:26:08,600
Speaker 1: So if you ask for that money, let's say you

457
00:26:08,800 --> 00:26:12,320
Speaker 1: go to a cash machine or you you make a

458
00:26:12,359 --> 00:26:15,000
Speaker 1: card payment, you know, you instruct the bank basically to

459
00:26:15,080 --> 00:26:18,359
Speaker 1: make a payment, then the bank is duty bound to

460
00:26:18,520 --> 00:26:22,080
Speaker 1: fulfill that obligation, to fulfill that liability to give you

461
00:26:22,200 --> 00:26:25,199
Speaker 1: that money when you ask for it. Um. So this

462
00:26:25,240 --> 00:26:27,640
Speaker 1: is important to remember. So it's our asset and it's

463
00:26:27,640 --> 00:26:31,040
Speaker 1: the bank's liability. UM. So we'll be talking kind of

464
00:26:31,080 --> 00:26:33,040
Speaker 1: in terms of assets and liabilities a bit from this

465
00:26:33,119 --> 00:26:35,199
Speaker 1: point on, so just to let you know, you know,

466
00:26:35,240 --> 00:26:39,720
Speaker 1: to clear up any any confusion around that. So there

467
00:26:39,760 --> 00:26:43,040
Speaker 1: are four different types of bank transfer, um, and we're

468
00:26:43,040 --> 00:26:45,200
Speaker 1: going to see how they actually work. Now, I don't

469
00:26:45,200 --> 00:26:47,200
Speaker 1: want to get too technical on this. There are loads

470
00:26:47,240 --> 00:26:50,480
Speaker 1: of different terms and things, and again, um, Anthony Lewis

471
00:26:50,560 --> 00:26:52,680
Speaker 1: in his great book, he takes you through all these terms.

472
00:26:53,040 --> 00:26:55,840
Speaker 1: I'm going to kind of go lightly on those because

473
00:26:56,040 --> 00:26:58,280
Speaker 1: I think it might kind of clog things up a

474
00:26:58,280 --> 00:27:00,760
Speaker 1: little bit. Sure, So let's start off with the simplest

475
00:27:00,880 --> 00:27:03,080
Speaker 1: type of bank payment. And that's the same bank payment.

476
00:27:03,160 --> 00:27:05,640
Speaker 1: So I'm paying you ten pounds, but we both bank

477
00:27:05,680 --> 00:27:09,440
Speaker 1: with the same person exactly, bank with the same bank exactly.

478
00:27:09,800 --> 00:27:14,000
Speaker 1: So this is this is straightforward. I instruct the bank

479
00:27:14,119 --> 00:27:17,200
Speaker 1: to pay you ten pounds, so the bank then updates

480
00:27:17,200 --> 00:27:21,320
Speaker 1: its records, so it takes ten pounds out of my account,

481
00:27:21,640 --> 00:27:25,160
Speaker 1: out of the out of the assets I have, and

482
00:27:25,480 --> 00:27:28,840
Speaker 1: it updates its records to move to to add ten

483
00:27:28,840 --> 00:27:33,160
Speaker 1: pounds to your account. Okay. So this type of transaction

484
00:27:33,240 --> 00:27:36,240
Speaker 1: we say it clears, so it clears internally. The bank's

485
00:27:36,280 --> 00:27:39,200
Speaker 1: records are updated, and it will show my assets to

486
00:27:39,400 --> 00:27:42,720
Speaker 1: be ten pounds fewer and your assets to be ten

487
00:27:42,720 --> 00:27:48,159
Speaker 1: pounds more. It's it's fairly simple and basically, um it's uh,

488
00:27:48,600 --> 00:27:51,600
Speaker 1: this is numbers being updated on on a huge database

489
00:27:52,160 --> 00:27:54,919
Speaker 1: from the bank's point of view. Therefore, it will be

490
00:27:55,040 --> 00:27:58,920
Speaker 1: liable for ten pounds fewer to me, but it will

491
00:27:58,920 --> 00:28:03,560
Speaker 1: owe you ten pounds more. Okay, sure, pretty straightforward. Nothing

492
00:28:03,840 --> 00:28:07,119
Speaker 1: too complicated has had to happen here. It's basically a

493
00:28:07,160 --> 00:28:10,639
Speaker 1: case of a spreadsheet being updated. But things start to

494
00:28:10,680 --> 00:28:14,439
Speaker 1: get a little more complicated when we have different banks.

495
00:28:15,040 --> 00:28:18,800
Speaker 1: So you bank with one bank, Bank A, and I

496
00:28:18,840 --> 00:28:21,720
Speaker 1: bank with another bank, Bank B. So the same thing

497
00:28:21,800 --> 00:28:23,719
Speaker 1: kind of happens when I send you this ten pounds

498
00:28:23,720 --> 00:28:26,120
Speaker 1: in that our balances at each of our banks they

499
00:28:26,119 --> 00:28:30,160
Speaker 1: are adjusted on the on the records that the banks hold.

500
00:28:31,240 --> 00:28:33,760
Speaker 1: But your banks the problem comes in the fact that

501
00:28:33,840 --> 00:28:38,520
Speaker 1: your bank's liabilities are the amount that it owes you.

502
00:28:38,960 --> 00:28:43,240
Speaker 1: They have increased by ten pounds, whereas my bank's liabilities

503
00:28:43,560 --> 00:28:47,000
Speaker 1: have decreased. Okay, So from the point of view of

504
00:28:47,240 --> 00:28:51,120
Speaker 1: your bank, this isn't great because suddenly they're liable to

505
00:28:51,320 --> 00:28:55,520
Speaker 1: more money for you. Does that make sense? So obviously

506
00:28:55,640 --> 00:28:57,960
Speaker 1: this needs to be this needs to be settled up

507
00:28:58,080 --> 00:29:02,440
Speaker 1: because that if that isn't then your bank is not

508
00:29:02,440 --> 00:29:05,600
Speaker 1: going to be too happy about it. So now once

509
00:29:05,840 --> 00:29:07,440
Speaker 1: back in the past, this would have kind of this

510
00:29:07,440 --> 00:29:09,880
Speaker 1: would have been done physically, and what would have happened

511
00:29:09,920 --> 00:29:15,080
Speaker 1: was that cash was basically transferred between banks um. So

512
00:29:15,120 --> 00:29:18,600
Speaker 1: we're talking loading up cash into into a into a

513
00:29:18,680 --> 00:29:22,720
Speaker 1: land car, into a van um and transporting it between

514
00:29:22,720 --> 00:29:25,240
Speaker 1: the two. So my bank would owe your bank a

515
00:29:25,240 --> 00:29:27,840
Speaker 1: certain amount of money and at some point that that

516
00:29:27,880 --> 00:29:31,280
Speaker 1: money would have to be transported over. Now, obviously you

517
00:29:31,280 --> 00:29:33,800
Speaker 1: can see the problems with that. UM. If you've seen

518
00:29:33,800 --> 00:29:37,520
Speaker 1: the movie Heat instance, I mean, if you've seen any

519
00:29:37,600 --> 00:29:42,360
Speaker 1: number of Hollywood movies. But yeah, security vans, armored cars, whatever,

520
00:29:42,440 --> 00:29:44,960
Speaker 1: they get robbed, they get held up. So that's and

521
00:29:45,000 --> 00:29:48,520
Speaker 1: then the liability changes, I think, goes to someone else.

522
00:29:49,240 --> 00:29:54,880
Speaker 1: Then things get really complicated. Um. So obviously if they

523
00:29:54,880 --> 00:29:56,440
Speaker 1: were to operate like that, they have to spend a

524
00:29:56,480 --> 00:30:01,160
Speaker 1: lot of money obviously on on vehicles, personnel, security, all

525
00:30:01,160 --> 00:30:05,880
Speaker 1: this sort of stuff, insurance, etcetera, etcetera, etcetera. So this

526
00:30:06,080 --> 00:30:10,160
Speaker 1: is obviously not ideal. So the banks have evolved two

527
00:30:10,200 --> 00:30:13,640
Speaker 1: ways of doing this digitally. Now. The first way is

528
00:30:13,680 --> 00:30:20,040
Speaker 1: called correspondent bank accounts. So basically, correspondent bank account is

529
00:30:20,040 --> 00:30:25,800
Speaker 1: a bank account held by a bank at another bank. Okay,

530
00:30:25,880 --> 00:30:29,320
Speaker 1: so let's go back to our example. My bank has

531
00:30:29,400 --> 00:30:32,160
Speaker 1: an account at your bank, and then when we make

532
00:30:32,240 --> 00:30:36,400
Speaker 1: our ten pound transaction, my bank instructs your bank to

533
00:30:36,760 --> 00:30:41,560
Speaker 1: deduct ten pounds from my bank's bank account that it

534
00:30:41,640 --> 00:30:44,760
Speaker 1: holds with your bank. Does that make sense? Yeah, kind

535
00:30:44,800 --> 00:30:48,880
Speaker 1: of inception banking, but I like it. And then that

536
00:30:48,960 --> 00:30:52,400
Speaker 1: ten pounds is obviously credited to to your account, to

537
00:30:52,520 --> 00:30:56,040
Speaker 1: your list of assets if you like. Um, And this

538
00:30:56,160 --> 00:30:59,600
Speaker 1: allows the liabilities of both banks to be squared off

539
00:30:59,680 --> 00:31:03,800
Speaker 1: and neither ends up out of pocket. Okay, and the

540
00:31:03,840 --> 00:31:06,600
Speaker 1: clearing of the transaction. The transaction is basically approved and

541
00:31:06,640 --> 00:31:11,600
Speaker 1: finalized by the bank that receives the money. Okay. Um. Now,

542
00:31:11,640 --> 00:31:15,440
Speaker 1: the problem with correspondent banking is that it means every

543
00:31:15,520 --> 00:31:20,120
Speaker 1: bank needs to have a funded account with every other bank.

544
00:31:20,160 --> 00:31:21,720
Speaker 1: You can't just have an account. You actually need to

545
00:31:21,760 --> 00:31:24,520
Speaker 1: have money in that account in order to meet the

546
00:31:24,560 --> 00:31:28,600
Speaker 1: liabilities that that payments would that payments from your customers

547
00:31:29,280 --> 00:31:33,920
Speaker 1: would would create. Okay, so um. You know, there are

548
00:31:33,920 --> 00:31:36,960
Speaker 1: thousands of banks all around the world, and this becomes

549
00:31:37,040 --> 00:31:39,000
Speaker 1: pretty impractical when you have it when you have a

550
00:31:39,080 --> 00:31:43,640
Speaker 1: large and well developed banking system, because just managing all

551
00:31:43,680 --> 00:31:45,640
Speaker 1: of the accounts that these are the banks that would

552
00:31:45,640 --> 00:31:47,680
Speaker 1: be a huge amount of work. It would tie up

553
00:31:47,680 --> 00:31:49,840
Speaker 1: a lot of funds because each bank would need to

554
00:31:49,920 --> 00:31:51,760
Speaker 1: keep a certain amount of money, and you'd imagine it

555
00:31:51,800 --> 00:31:54,280
Speaker 1: would be a fairly large amount of money in order

556
00:31:54,320 --> 00:31:58,600
Speaker 1: to cover you know, most possible liabilities. So keeping all

557
00:31:58,640 --> 00:32:02,360
Speaker 1: the correspondent accounts funded would be expensive. It would take

558
00:32:02,400 --> 00:32:05,080
Speaker 1: a lot of time and a lot of work. So

559
00:32:05,120 --> 00:32:09,160
Speaker 1: they don't do that much. It still happens, but I

560
00:32:09,200 --> 00:32:11,840
Speaker 1: think not at the level it kind of used to. Um.

561
00:32:12,160 --> 00:32:14,520
Speaker 1: So that's an antiquated way of dealing with this problem.

562
00:32:14,520 --> 00:32:17,000
Speaker 1: But they've got something new. Now I assume exactly what

563
00:32:17,080 --> 00:32:19,520
Speaker 1: would that be. Well, i'll tell you. It leads me

564
00:32:19,640 --> 00:32:23,239
Speaker 1: nicely on to what are called central bank accounts, and

565
00:32:23,280 --> 00:32:26,200
Speaker 1: this is a more practical solution. The correspondent bank accounts

566
00:32:26,280 --> 00:32:28,840
Speaker 1: do exist. They are still used, and you know, I

567
00:32:28,880 --> 00:32:32,440
Speaker 1: think probably the bigger banks in this country they may

568
00:32:32,480 --> 00:32:35,680
Speaker 1: well still use them, because you know, there's only a

569
00:32:35,680 --> 00:32:38,920
Speaker 1: handful of a handful of banks. But what is what

570
00:32:39,120 --> 00:32:41,720
Speaker 1: is becoming more popular as a central bank account, a

571
00:32:41,760 --> 00:32:45,080
Speaker 1: more practical solution where a bank holds Every bank holds

572
00:32:45,080 --> 00:32:48,200
Speaker 1: an account with the central bank in its territory. So

573
00:32:49,080 --> 00:32:51,360
Speaker 1: for our purposes, the Bank of England, if you're in America,

574
00:32:51,400 --> 00:32:55,000
Speaker 1: the Fed, etcetera, etcetera. Now, the central bank does the

575
00:32:55,080 --> 00:32:58,680
Speaker 1: job of keeping these accounts updated as transactions are made

576
00:32:58,800 --> 00:33:02,840
Speaker 1: between banks. Okay, so all this the big spreadsheet, if

577
00:33:02,840 --> 00:33:05,800
Speaker 1: you like, the big account book, the big Excel sheet

578
00:33:06,200 --> 00:33:09,240
Speaker 1: is done, is kept up to date by the central bank.

579
00:33:09,520 --> 00:33:11,920
Speaker 1: So there are two ways that the central bank does this.

580
00:33:12,000 --> 00:33:14,040
Speaker 1: And I'm going to keep this as simple as possible,

581
00:33:14,080 --> 00:33:17,280
Speaker 1: because otherwise we kind of weak stray into the realms

582
00:33:17,320 --> 00:33:20,920
Speaker 1: of banking jargon and boredom and boredom. Yeah, they go

583
00:33:21,040 --> 00:33:23,160
Speaker 1: hand in hand, and we don't want to inflict that

584
00:33:23,200 --> 00:33:26,280
Speaker 1: on our listeners. So I'll keep it, I'll keep it simple,

585
00:33:26,320 --> 00:33:28,760
Speaker 1: and I'll try and keep it brief. So the two

586
00:33:28,760 --> 00:33:31,600
Speaker 1: ways that the central banking, the Central Bank keeps track

587
00:33:31,640 --> 00:33:35,200
Speaker 1: and updates the updates the records are these. So first

588
00:33:35,240 --> 00:33:39,680
Speaker 1: you have a deferred net settlement d n S now.

589
00:33:39,840 --> 00:33:42,720
Speaker 1: This is when the central bank keeps a record of

590
00:33:42,720 --> 00:33:45,880
Speaker 1: all transactions made over the course of the day, and

591
00:33:45,920 --> 00:33:49,240
Speaker 1: then at the end of the day it calculates which

592
00:33:49,320 --> 00:33:52,720
Speaker 1: bank owes money to the others. So obviously you know

593
00:33:52,800 --> 00:33:54,880
Speaker 1: your bank will be making transactions, my bank, we'll be

594
00:33:54,880 --> 00:33:57,840
Speaker 1: making transactions. All the other banks will be transacting. Some

595
00:33:57,880 --> 00:34:01,040
Speaker 1: banks will be up, some banks will be down, etcetera, etcetera.

596
00:34:01,240 --> 00:34:04,000
Speaker 1: So at the end of the day this is all calculated,

597
00:34:04,160 --> 00:34:07,000
Speaker 1: and then any banks that owe money to other banks

598
00:34:07,160 --> 00:34:10,840
Speaker 1: settle up with a single payment. Now, if if the

599
00:34:11,160 --> 00:34:14,600
Speaker 1: if the only transaction that had happened between our two

600
00:34:14,600 --> 00:34:19,080
Speaker 1: banks had been ten pounds from my bank to your bank, um,

601
00:34:19,480 --> 00:34:23,200
Speaker 1: then your bank would be would be awarded ten pounds

602
00:34:23,239 --> 00:34:25,640
Speaker 1: At the end of the day. Does that make sense? Yeah.

603
00:34:25,719 --> 00:34:28,040
Speaker 1: The key thing here is that it happens at the

604
00:34:28,200 --> 00:34:30,759
Speaker 1: end of the day. So is this like when you

605
00:34:30,920 --> 00:34:34,040
Speaker 1: used to spend on your bank hard and it would

606
00:34:34,280 --> 00:34:38,480
Speaker 1: see in your bank account. You'd look at it. Ah,

607
00:34:39,000 --> 00:34:41,399
Speaker 1: but loads of cash exactly. I was. I was out

608
00:34:41,400 --> 00:34:44,600
Speaker 1: on the rats last night. Don't remember what I spent,

609
00:34:45,600 --> 00:34:49,279
Speaker 1: may have dropped my wallet, may have may have brought

610
00:34:49,320 --> 00:34:52,520
Speaker 1: a couple of lucky ladies, a couple of lemon Sherbet's

611
00:34:53,640 --> 00:34:57,959
Speaker 1: wake up in the morning. Didn't seem that bad. Yeah,

612
00:34:58,000 --> 00:35:01,960
Speaker 1: a day later, I I have I'm eating gruel for

613
00:35:02,000 --> 00:35:04,719
Speaker 1: the rest of the of the month, exactly. And this,

614
00:35:04,840 --> 00:35:06,640
Speaker 1: I mean, this takes me back to when we were

615
00:35:06,640 --> 00:35:08,799
Speaker 1: at university together. I mean this used to happen all

616
00:35:08,840 --> 00:35:11,120
Speaker 1: the time. So this is this is about twenty years

617
00:35:11,160 --> 00:35:13,839
Speaker 1: ago now, isn't it? But maybe not quite? God? Really

618
00:35:14,200 --> 00:35:18,120
Speaker 1: is That's depressing? Okay? So this is the Yeah, I

619
00:35:18,200 --> 00:35:21,400
Speaker 1: remember that exactly as you say. You'd go out and

620
00:35:21,440 --> 00:35:23,720
Speaker 1: you'd spend a whole lot of money you wouldn't really remember,

621
00:35:24,560 --> 00:35:26,440
Speaker 1: and then you check your balance the next day. You know,

622
00:35:26,760 --> 00:35:28,960
Speaker 1: you die though, I guess you could go used to

623
00:35:28,960 --> 00:35:30,320
Speaker 1: go to a cash machine, didn't you You You get a

624
00:35:30,360 --> 00:35:33,960
Speaker 1: little prettier if your balance and you'd be like, oh, okay,

625
00:35:34,360 --> 00:35:36,960
Speaker 1: I've still got right, I've got more money than I thought,

626
00:35:37,080 --> 00:35:39,560
Speaker 1: and sure enough for the next time you spend it.

627
00:35:39,800 --> 00:35:43,280
Speaker 1: And this and this is what happens. Basically, these these

628
00:35:43,320 --> 00:35:47,000
Speaker 1: transactions weren't being cleared and settled in a timely manner.

629
00:35:47,600 --> 00:35:49,640
Speaker 1: They were being batched batched up at the end of

630
00:35:49,640 --> 00:35:51,600
Speaker 1: the working day. And I think sometimes the weekend could

631
00:35:51,600 --> 00:35:54,319
Speaker 1: be with that. That was a real sting, wasn't it,

632
00:35:54,600 --> 00:35:57,920
Speaker 1: Because you'd have two days of yeah, you go out

633
00:35:57,960 --> 00:36:00,840
Speaker 1: on a Friday and Saturday night, and the banks wouldn't

634
00:36:00,840 --> 00:36:03,600
Speaker 1: work Sundays and nothing would happen on Sundays, and then

635
00:36:03,640 --> 00:36:08,640
Speaker 1: Monday was just bleak, and then suicide Tuesday. Suicide Tuesday exactly.

636
00:36:08,640 --> 00:36:10,600
Speaker 1: And that's where it came from. It's the banking system.

637
00:36:12,040 --> 00:36:16,360
Speaker 1: Um so yeah, so this is this is kind of antiquated.

638
00:36:16,400 --> 00:36:18,960
Speaker 1: Deferred net settlement d n s IS is fallen out

639
00:36:18,960 --> 00:36:21,440
Speaker 1: of fashion, and I don't think anyone really mourns the

640
00:36:21,440 --> 00:36:24,640
Speaker 1: passing of it, because I mean, I, for one, find

641
00:36:24,680 --> 00:36:27,279
Speaker 1: it's so useful to know to be able to check

642
00:36:27,320 --> 00:36:29,200
Speaker 1: my balance. I mean, nowadays obviously we check it. We

643
00:36:29,239 --> 00:36:31,040
Speaker 1: all check it on our phones, don't we. But to

644
00:36:31,160 --> 00:36:34,960
Speaker 1: actually know that I'm up to date, if it says

645
00:36:34,960 --> 00:36:36,839
Speaker 1: I've got a hundred pounds in my account, then I've

646
00:36:36,880 --> 00:36:39,480
Speaker 1: got a hundred pounds in my account. And this is

647
00:36:39,520 --> 00:36:44,759
Speaker 1: thanks to something called real Time Gross Settlement RTGs, the

648
00:36:44,800 --> 00:36:48,600
Speaker 1: acronym you never thought you owed so much too. So

649
00:36:49,280 --> 00:36:53,239
Speaker 1: when under RTGs, the central bank updates the records of

650
00:36:53,400 --> 00:36:56,920
Speaker 1: each bank in real time. So this means account balances

651
00:36:56,920 --> 00:37:00,319
Speaker 1: are obviously updated in real time and as we've noticed, um,

652
00:37:00,360 --> 00:37:02,640
Speaker 1: and that I think is a great improvement. So yeah,

653
00:37:02,680 --> 00:37:06,640
Speaker 1: obviously RTGs is the system that's preferred nowadays. Um. It

654
00:37:06,760 --> 00:37:09,799
Speaker 1: does mean that banks have to have more in their

655
00:37:09,800 --> 00:37:12,040
Speaker 1: accounts with central banks to make sure that the payments

656
00:37:12,280 --> 00:37:16,840
Speaker 1: are constantly going through, but the convenience of it is obvious,

657
00:37:18,160 --> 00:37:21,240
Speaker 1: and so both d n S and RTGs. The clearing

658
00:37:22,040 --> 00:37:24,040
Speaker 1: is done by the central bank, so the central bank

659
00:37:24,080 --> 00:37:29,200
Speaker 1: kind of handles everything. But to complicate things still further,

660
00:37:29,520 --> 00:37:34,239
Speaker 1: not every bank can have a central bank account, so

661
00:37:34,719 --> 00:37:39,000
Speaker 1: the ones that do are known as clearing banks, and

662
00:37:39,080 --> 00:37:43,520
Speaker 1: they themselves clear the transactions of smaller banks who can't

663
00:37:43,560 --> 00:37:45,400
Speaker 1: get a central bank account. This is going to be

664
00:37:45,480 --> 00:37:48,640
Speaker 1: important when we come to talk about the unbanked later on.

665
00:37:49,520 --> 00:37:53,960
Speaker 1: But yeah, it's like your classics, like your HSBC, your Lloyd's,

666
00:37:54,000 --> 00:37:56,640
Speaker 1: your not West. I don't know if they're big ones,

667
00:37:56,880 --> 00:37:58,399
Speaker 1: that West a big one, that West is a big

668
00:37:58,400 --> 00:38:00,200
Speaker 1: one yet so they will all have accounts with the

669
00:38:00,200 --> 00:38:03,759
Speaker 1: bank in England. But but you're tied. Yeah, say there's

670
00:38:04,160 --> 00:38:06,320
Speaker 1: if such a thing exists, say there's a tiny little

671
00:38:06,400 --> 00:38:10,680
Speaker 1: high street bank in Yeah, so smaller banks you can't

672
00:38:10,760 --> 00:38:13,560
Speaker 1: you couldn't just start up your own bank and get

673
00:38:13,600 --> 00:38:15,840
Speaker 1: a an account with the central Bank. So you know,

674
00:38:16,480 --> 00:38:18,040
Speaker 1: what you end up with is a kind of pecking

675
00:38:18,120 --> 00:38:20,480
Speaker 1: order with central banks at the top. Then you have

676
00:38:20,560 --> 00:38:23,200
Speaker 1: clearing banks you're kind of big, well known household name

677
00:38:23,239 --> 00:38:26,560
Speaker 1: high street banks, and then smaller banks below that who

678
00:38:26,560 --> 00:38:30,240
Speaker 1: have their transactions cleared by the sort of bigger banks

679
00:38:30,239 --> 00:38:33,239
Speaker 1: slightly slightly higher up, who in turn have their transactions

680
00:38:33,239 --> 00:38:36,560
Speaker 1: cleared by the Central Bank. So let's just take a

681
00:38:36,640 --> 00:38:39,600
Speaker 1: quick time out here to say, to have a think

682
00:38:39,600 --> 00:38:41,520
Speaker 1: about all this that we've discussed so far. It should

683
00:38:41,520 --> 00:38:44,160
Speaker 1: be pretty clear by this point that there's a lot

684
00:38:44,200 --> 00:38:46,439
Speaker 1: more going on behind the scenes than I think most

685
00:38:46,440 --> 00:38:50,319
Speaker 1: people would imagine to transfer move this money around. You

686
00:38:50,400 --> 00:38:53,719
Speaker 1: just think it's a computer. Yeah, and it's like one

687
00:38:53,760 --> 00:38:56,239
Speaker 1: big computer that does it all. Perhaps, yeah, but it's

688
00:38:56,239 --> 00:39:00,400
Speaker 1: not exactly. And the more you kind of red about this,

689
00:39:00,480 --> 00:39:02,600
Speaker 1: the more you realize, actually a lot of people who

690
00:39:02,640 --> 00:39:05,000
Speaker 1: work in finance who work it, maybe not in bank.

691
00:39:05,040 --> 00:39:07,160
Speaker 1: You'd hope that bankers would know about it, but you know,

692
00:39:07,239 --> 00:39:12,640
Speaker 1: financial professionals and stuff unpicking this system of transferring money,

693
00:39:12,640 --> 00:39:15,239
Speaker 1: of moving money around, A lot of them can't even

694
00:39:15,280 --> 00:39:17,080
Speaker 1: do it because they couldn't give you. They couldn't give

695
00:39:17,120 --> 00:39:20,080
Speaker 1: you a detailed explanation of how it works because they

696
00:39:20,080 --> 00:39:24,120
Speaker 1: don't subscribe to the iHeart Coin Bureau podcast exactly what

697
00:39:24,280 --> 00:39:28,200
Speaker 1: happens when we start talking about cross border payments. So

698
00:39:28,280 --> 00:39:31,480
Speaker 1: now we've moved beyond the realms of different banks dealing

699
00:39:31,480 --> 00:39:35,480
Speaker 1: with those goddamn foreigners exactly their funny money than their

700
00:39:35,680 --> 00:39:39,200
Speaker 1: their funny money in their funny ways. The problems we

701
00:39:39,239 --> 00:39:42,440
Speaker 1: had when we'd go away on holiday and you'd just

702
00:39:42,520 --> 00:39:44,719
Speaker 1: be dealing with a brand new currency and you're going,

703
00:39:44,800 --> 00:39:47,479
Speaker 1: am I rich? Am I poor? And I how much

704
00:39:47,640 --> 00:39:50,080
Speaker 1: is this beer costing me? Am I getting fleeced for this?

705
00:39:50,160 --> 00:39:54,799
Speaker 1: Henna tattoo. Yes, is the answer to that? Yes, you

706
00:39:54,880 --> 00:39:58,960
Speaker 1: are wasting your money? Um yeah, absolutely. You go abroad

707
00:39:59,160 --> 00:40:02,120
Speaker 1: and you think, okay, this this is a funny looking

708
00:40:02,120 --> 00:40:03,759
Speaker 1: bank note, it's got a big number on it. Is

709
00:40:04,480 --> 00:40:09,160
Speaker 1: that good? Or should I wipe my ass with this? Yeah? Yeah?

710
00:40:09,280 --> 00:40:11,839
Speaker 1: That that question that that came up a lot. Yes,

711
00:40:11,880 --> 00:40:13,960
Speaker 1: So let's talk about cross border payments. But we're going

712
00:40:14,040 --> 00:40:17,480
Speaker 1: to stick with the same currency because things get way

713
00:40:17,560 --> 00:40:21,480
Speaker 1: more complicated when you start chopping currencies around. Um. So again,

714
00:40:22,000 --> 00:40:24,799
Speaker 1: let's use an example. I'm paying you ten pounds from

715
00:40:24,800 --> 00:40:28,680
Speaker 1: my UK bank account, but you've you've gone over to Ireland,

716
00:40:28,920 --> 00:40:31,960
Speaker 1: say maybe just to sort of get away whilst the

717
00:40:31,960 --> 00:40:34,360
Speaker 1: heat dies down and you know, just make yourself scarce.

718
00:40:34,760 --> 00:40:37,840
Speaker 1: But I need to send you this ten pounds to

719
00:40:37,920 --> 00:40:41,399
Speaker 1: your bank that's in that's in another country. So what

720
00:40:41,440 --> 00:40:44,040
Speaker 1: we're where we're at is now we're back at correspondent

721
00:40:44,080 --> 00:40:48,160
Speaker 1: bank accounts. So your Irish bank will maintain an account

722
00:40:48,160 --> 00:40:51,560
Speaker 1: at my UK bank. When I make the payment, the

723
00:40:51,600 --> 00:40:54,840
Speaker 1: ten pounds is simply being moved from my bank to

724
00:40:55,239 --> 00:40:59,000
Speaker 1: your bank's UK account. That makes sense, so it stays

725
00:40:59,080 --> 00:41:02,360
Speaker 1: within the current zone that it originates from. In this case.

726
00:41:02,440 --> 00:41:08,360
Speaker 1: In this case, the UK bigger banks may have subsidiaries

727
00:41:08,400 --> 00:41:11,120
Speaker 1: in other countries, in which case those subsidies would handle

728
00:41:11,120 --> 00:41:13,480
Speaker 1: this type of transaction. So say I, I say I

729
00:41:13,520 --> 00:41:18,239
Speaker 1: banked with HSBC. There's a good chance that there would

730
00:41:18,280 --> 00:41:21,360
Speaker 1: be an HSBC subsidiary in Ireland. I mean it's probably

731
00:41:21,400 --> 00:41:22,759
Speaker 1: there any way, I don't know. I haven't been to

732
00:41:22,800 --> 00:41:25,719
Speaker 1: Ireland for a long time. Um So in that case, yeah,

733
00:41:25,719 --> 00:41:28,720
Speaker 1: it would be it would be fairly simple. But what

734
00:41:28,960 --> 00:41:32,080
Speaker 1: if we don't want to transact purely in pounds? What

735
00:41:32,160 --> 00:41:36,080
Speaker 1: if I want to send you ten dollars? Okay, so

736
00:41:36,360 --> 00:41:39,880
Speaker 1: if my bank in your bank don't have US banking licenses,

737
00:41:39,960 --> 00:41:42,799
Speaker 1: we're talking to US dollars here obviously, then each must

738
00:41:42,840 --> 00:41:45,719
Speaker 1: have a correspondent bank account back to those again with

739
00:41:45,800 --> 00:41:50,279
Speaker 1: a U S bank you followed, Yeah, yeah, So if

740
00:41:50,320 --> 00:41:53,120
Speaker 1: it's with the same US bank, then that clears the

741
00:41:53,160 --> 00:41:56,840
Speaker 1: transaction and updates the records. But if it's with different banks,

742
00:41:57,080 --> 00:41:59,799
Speaker 1: then the transaction is cleared by the central bank, in

743
00:41:59,800 --> 00:42:04,319
Speaker 1: which case the FED. So again, in order to facilitate

744
00:42:04,360 --> 00:42:07,560
Speaker 1: all this loads of different banks in loads of different countries,

745
00:42:07,800 --> 00:42:11,200
Speaker 1: they need loads of different correspondent accounts and open with

746
00:42:11,239 --> 00:42:14,600
Speaker 1: each with each other's banks in order to in order

747
00:42:14,640 --> 00:42:19,120
Speaker 1: to move some some dollars around. So again, really really unwieldy. Um.

748
00:42:19,120 --> 00:42:22,080
Speaker 1: And that brings us on to the last type of

749
00:42:22,600 --> 00:42:27,839
Speaker 1: bank transaction, and that is a foreign exchange of forex transaction.

750
00:42:28,280 --> 00:42:32,320
Speaker 1: So here's the scenario. I want to pay you ten pounds,

751
00:42:33,360 --> 00:42:36,640
Speaker 1: but you want to receive it in euros in your

752
00:42:36,680 --> 00:42:40,239
Speaker 1: Irish bank account. Okay, So in this case, what we

753
00:42:40,280 --> 00:42:44,040
Speaker 1: need is a middleman who is basically willing to exchange

754
00:42:44,239 --> 00:42:47,680
Speaker 1: the two currencies, in this case pounds and euros, because

755
00:42:47,800 --> 00:42:51,359
Speaker 1: there's no way that the pounds that I'm sending can

756
00:42:51,440 --> 00:42:55,560
Speaker 1: somehow get turned into euros by the computer or or

757
00:42:55,560 --> 00:43:00,480
Speaker 1: anything else. You know, someone needs to actually exchange these exactly.

758
00:43:00,480 --> 00:43:03,319
Speaker 1: But broken, yeah, broke of the deals. So sometimes the

759
00:43:03,360 --> 00:43:06,960
Speaker 1: banks fulfill this role. So if my bank had an

760
00:43:06,960 --> 00:43:09,839
Speaker 1: account at your bank, one of these correspondent banks bank

761
00:43:09,880 --> 00:43:11,920
Speaker 1: accounts again, then they can transact and they've got a

762
00:43:11,960 --> 00:43:14,200
Speaker 1: few euros in the back of the sofa. Oh, we

763
00:43:14,239 --> 00:43:17,360
Speaker 1: could probably handle that ourselves, fill that, yeah, yeah, we

764
00:43:17,400 --> 00:43:21,560
Speaker 1: can clear that. Um. So if our banks don't have

765
00:43:21,640 --> 00:43:25,000
Speaker 1: this relationship, then we could use what's known as a

766
00:43:25,040 --> 00:43:28,479
Speaker 1: money transfer operator and m t O. There's another little

767
00:43:28,520 --> 00:43:33,719
Speaker 1: acronym for you and Shelley and m t O. Um.

768
00:43:33,880 --> 00:43:37,680
Speaker 1: So these are third parties like Western Union, which we

769
00:43:37,719 --> 00:43:42,239
Speaker 1: talked about earlier, MoneyGram scrill or wise wise used to

770
00:43:42,320 --> 00:43:46,880
Speaker 1: be called transfer wise. Yeah. Um, they handle foreign currency

771
00:43:46,880 --> 00:43:49,919
Speaker 1: transactions and they're used by hundreds of millions of people

772
00:43:49,960 --> 00:43:54,160
Speaker 1: across the world to send money in the form of remistances. Again,

773
00:43:54,600 --> 00:43:56,080
Speaker 1: this is something that we're going to talk about in

774
00:43:56,080 --> 00:43:59,480
Speaker 1: a minute. Um. But yeah, these sort of transactions are

775
00:43:59,520 --> 00:44:02,759
Speaker 1: obviously in credibly common people in other countries wanting to

776
00:44:02,800 --> 00:44:07,040
Speaker 1: basically send money home, but it's no use. Cash catapults,

777
00:44:07,160 --> 00:44:14,719
Speaker 1: the cash catapult. Why when will this idea be made flesh? Um, Yes,

778
00:44:14,840 --> 00:44:18,320
Speaker 1: so it's no good. Someone let's say someone from Kenya

779
00:44:18,800 --> 00:44:22,120
Speaker 1: is working in the UK. They want to send money back,

780
00:44:22,160 --> 00:44:25,560
Speaker 1: but they want their dependents, say their family in Kenya

781
00:44:25,840 --> 00:44:28,560
Speaker 1: to receive it as Kenyan shillings because they're not going

782
00:44:28,600 --> 00:44:30,960
Speaker 1: to once they're not going to want is the actual

783
00:44:32,000 --> 00:44:37,480
Speaker 1: Kenyan schillings. Yeah, obviously a relictive, relictive imperialism. Now, these

784
00:44:37,600 --> 00:44:40,000
Speaker 1: money transfer operators, these m t o s, they do

785
00:44:40,120 --> 00:44:43,479
Speaker 1: of course charge fees for their services, and these can

786
00:44:43,560 --> 00:44:47,080
Speaker 1: be as high as ten percent using Yeah. And so

787
00:44:47,239 --> 00:44:51,759
Speaker 1: imagine if you're sending a hundred pounds from from the

788
00:44:51,880 --> 00:44:54,520
Speaker 1: UK to Kenya. Is that because of the variants and

789
00:44:54,640 --> 00:44:58,480
Speaker 1: different likes so exchange rates and they need to cover

790
00:44:58,560 --> 00:45:02,120
Speaker 1: that or is it just take these people are desperate. Well,

791
00:45:02,239 --> 00:45:04,640
Speaker 1: I think it's I think it's probably a bit of both.

792
00:45:04,680 --> 00:45:07,640
Speaker 1: Someone someone I was listening to recently on another podcast

793
00:45:07,680 --> 00:45:10,920
Speaker 1: did point out that one of the reasons why these

794
00:45:11,000 --> 00:45:13,280
Speaker 1: these fees are so high, that you know, West Western

795
00:45:13,360 --> 00:45:16,600
Speaker 1: Union for example, charges high fees is that they have

796
00:45:16,800 --> 00:45:20,520
Speaker 1: to use the banking infrastructure, and which, as we've seen,

797
00:45:20,719 --> 00:45:25,480
Speaker 1: is really complicated, and so they need to kind of

798
00:45:25,520 --> 00:45:29,719
Speaker 1: you know, they need to take time. It takes time money. Yeah,

799
00:45:29,800 --> 00:45:31,279
Speaker 1: And as we're going to see in a moment when

800
00:45:31,280 --> 00:45:35,960
Speaker 1: we talk about unbanked people, banking infrastructure is is pretty involved.

801
00:45:36,680 --> 00:45:39,960
Speaker 1: Um So Western Union kind of I'm sure would probably

802
00:45:40,040 --> 00:45:42,680
Speaker 1: like to charge lower fees, but in order to cover

803
00:45:42,719 --> 00:45:48,520
Speaker 1: their costs because of the clunky nature of of international banking,

804
00:45:49,040 --> 00:45:51,879
Speaker 1: they kind of have to charge these fees because it's

805
00:45:51,880 --> 00:45:54,759
Speaker 1: not a it's not an easy thing to do. Um

806
00:45:54,800 --> 00:45:58,440
Speaker 1: And as we've seen even even moving money between different

807
00:45:58,440 --> 00:46:02,200
Speaker 1: banks in the same come treat is is clunky, It

808
00:46:02,239 --> 00:46:04,560
Speaker 1: is complicated and involves a lot of involves a lot

809
00:46:04,600 --> 00:46:08,280
Speaker 1: of work. So yeah, and then moving between different banks

810
00:46:08,400 --> 00:46:13,120
Speaker 1: in different countries, in different currencies, the system just gets

811
00:46:13,200 --> 00:46:15,520
Speaker 1: more and more complicated. And when it gets complicated, it

812
00:46:15,520 --> 00:46:20,880
Speaker 1: gets expensive. And unfortunately, these costs are covered by customers.

813
00:46:20,920 --> 00:46:23,560
Speaker 1: They're covered by us, they're covered by anyone using these services,

814
00:46:23,640 --> 00:46:26,439
Speaker 1: and in the former in the turn, in the case

815
00:46:26,480 --> 00:46:30,160
Speaker 1: of remittances, it's being covered by and large by very

816
00:46:30,200 --> 00:46:35,480
Speaker 1: poor people, which which is not ideal. Um. And yes,

817
00:46:35,560 --> 00:46:38,399
Speaker 1: so these these m t o s, they are and

818
00:46:38,600 --> 00:46:41,600
Speaker 1: yet another centralized entity that people have to use in

819
00:46:41,719 --> 00:46:45,759
Speaker 1: order to exchange money with each other. So it's clear

820
00:46:45,800 --> 00:46:48,400
Speaker 1: that however we choose to move this money around, there

821
00:46:48,400 --> 00:46:51,080
Speaker 1: are loads of just I guess you'd say, moving parts,

822
00:46:51,280 --> 00:46:56,319
Speaker 1: a lot of a lot of cogs exactly that you've

823
00:46:56,320 --> 00:46:58,920
Speaker 1: got to spray with w defaulty and all this sort

824
00:46:58,920 --> 00:47:02,440
Speaker 1: of stuff. So yeah, these moving parts, these third parties,

825
00:47:02,480 --> 00:47:05,480
Speaker 1: they have to be paid for their services, and so

826
00:47:05,560 --> 00:47:10,759
Speaker 1: their profits come from us. On that note, should we

827
00:47:10,800 --> 00:47:23,960
Speaker 1: take another break to digest all that? Okay, So parts

828
00:47:24,000 --> 00:47:27,160
Speaker 1: three card payments and e money. Most of us in

829
00:47:27,640 --> 00:47:30,399
Speaker 1: developed country we use credit or debit cards to pay

830
00:47:30,440 --> 00:47:32,879
Speaker 1: for things on a daily basis, don't we. I mean,

831
00:47:33,000 --> 00:47:34,920
Speaker 1: lots of lots of people now use their phones to

832
00:47:34,920 --> 00:47:37,840
Speaker 1: pay for things. This system is now, it's so fast

833
00:47:37,960 --> 00:47:41,360
Speaker 1: and supposedly seamless that we hardly think about what happens

834
00:47:41,360 --> 00:47:45,160
Speaker 1: behind the scenes. Now we've already seen what happens with

835
00:47:45,320 --> 00:47:49,239
Speaker 1: trying to transfer money between banks, but making payments on

836
00:47:49,400 --> 00:47:53,320
Speaker 1: card is equally, if not even more complicated. Now I

837
00:47:53,440 --> 00:47:56,640
Speaker 1: found a really useful diagram on the Bank of England's

838
00:47:56,640 --> 00:48:00,239
Speaker 1: website that explains card payments, and I'll try and even

839
00:48:00,239 --> 00:48:02,640
Speaker 1: in the show notes if I possibly can. But it's

840
00:48:02,719 --> 00:48:07,040
Speaker 1: a ten step process that illustrates. So let's just let's

841
00:48:07,040 --> 00:48:10,600
Speaker 1: just talk everyone through this. So Step one is the

842
00:48:10,640 --> 00:48:15,720
Speaker 1: person paying using a card. Step two, the shop sends

843
00:48:15,840 --> 00:48:20,680
Speaker 1: data to the provider of the card reader. Okay, okay,

844
00:48:20,680 --> 00:48:23,960
Speaker 1: so that's an individual. There's a few different providers of

845
00:48:24,000 --> 00:48:27,799
Speaker 1: the card reader exactly. So here's already. So already we've

846
00:48:27,840 --> 00:48:30,439
Speaker 1: got three people involved in this transaction, the person doing

847
00:48:30,440 --> 00:48:35,279
Speaker 1: the paying, the shop, the merchant, and the provider of

848
00:48:35,280 --> 00:48:38,960
Speaker 1: the card reader. Okay, So step three provider of card

849
00:48:39,000 --> 00:48:42,279
Speaker 1: reader sends request to Visa. Okay, so this is a

850
00:48:42,400 --> 00:48:44,440
Speaker 1: this is a Visa card obviously, so there's a fourth

851
00:48:44,480 --> 00:48:49,000
Speaker 1: person involved in the transaction. Step four, Visa sends authorization

852
00:48:49,000 --> 00:48:52,280
Speaker 1: request to person's bank. This is the person obviously paying

853
00:48:52,280 --> 00:48:56,839
Speaker 1: with the card. There's another person involved Step five, number five,

854
00:48:56,920 --> 00:49:00,000
Speaker 1: so step five. By this point we've got five people involved.

855
00:49:00,600 --> 00:49:06,080
Speaker 1: Person's bank authorizes the transaction. Okay, fairly straightforward. Visa sends

856
00:49:06,160 --> 00:49:12,640
Speaker 1: authorization to shop to the merchant. Shop receives authorization at

857
00:49:12,719 --> 00:49:16,759
Speaker 1: step seven. Step eight, provider of card reader sends list

858
00:49:16,840 --> 00:49:22,360
Speaker 1: of transactions to Visa. Step nine, Visa and banks settle

859
00:49:22,520 --> 00:49:25,520
Speaker 1: net transactions at Bank of England. Again, this this idea

860
00:49:25,520 --> 00:49:29,400
Speaker 1: of the central bank handling clearing clearing, yeah, exactly, acting

861
00:49:29,440 --> 00:49:32,120
Speaker 1: as the clearing bank. There's another person involved, the Bank

862
00:49:32,120 --> 00:49:34,160
Speaker 1: of England, with the central banks, and that's now six

863
00:49:34,640 --> 00:49:38,919
Speaker 1: people involved. And step ten, the final step, person's bank

864
00:49:38,960 --> 00:49:43,319
Speaker 1: statement shows the money has gone out. Now it's worth

865
00:49:43,360 --> 00:49:48,080
Speaker 1: bearing in mind that this whole ten step process takes seconds,

866
00:49:48,600 --> 00:49:54,760
Speaker 1: which is incredible given everything that's happening, or what often

867
00:49:54,840 --> 00:50:00,200
Speaker 1: happens is Visa at step four, this counts got no

868
00:50:00,320 --> 00:50:08,040
Speaker 1: money this guy's got no money, decline that ship. So

869
00:50:08,600 --> 00:50:11,600
Speaker 1: in that case, it's a fourth step process. Step one

870
00:50:11,600 --> 00:50:14,640
Speaker 1: person pays using cards. Step two shop sends data, providers

871
00:50:14,640 --> 00:50:17,799
Speaker 1: a card reader. Step three, provider of card reader sends data.

872
00:50:17,920 --> 00:50:23,360
Speaker 1: Chris sends request to Visa. Hilarity, laughter, laughter, laughter. Step

873
00:50:23,440 --> 00:50:29,160
Speaker 1: four Visa refuses to authorize the transaction. Step five person

874
00:50:29,239 --> 00:50:32,960
Speaker 1: exit shop sheepishly. Um yeah, I mean this is a

875
00:50:33,000 --> 00:50:35,680
Speaker 1: ten step process, assuming everything goes to plan and you

876
00:50:35,719 --> 00:50:38,480
Speaker 1: haven't maxed out your card, and as you say, Mike, yeah,

877
00:50:38,520 --> 00:50:43,799
Speaker 1: it happens in seconds, which is incredible. But um so,

878
00:50:43,880 --> 00:50:46,680
Speaker 1: this is obviously a well developed system that we've got.

879
00:50:46,719 --> 00:50:48,920
Speaker 1: But as we've seen, I mean, I think the final

880
00:50:49,000 --> 00:50:53,279
Speaker 1: total there were six people involved in the transaction. That's

881
00:50:53,320 --> 00:50:55,759
Speaker 1: all people who've got to get get the little they

882
00:50:55,840 --> 00:50:59,200
Speaker 1: get their palms greased, exactly exactly, And that really leads us,

883
00:50:59,239 --> 00:51:01,120
Speaker 1: really nicely on to the next point that I wanted

884
00:51:01,160 --> 00:51:05,640
Speaker 1: to make. Because this system is so streamlined, it's so

885
00:51:05,880 --> 00:51:09,120
Speaker 1: convenient on the face of it, that we often assume

886
00:51:09,239 --> 00:51:12,400
Speaker 1: that card payments are free because we don't get a

887
00:51:12,680 --> 00:51:14,520
Speaker 1: we never get a statement, we never get a bill

888
00:51:14,800 --> 00:51:18,240
Speaker 1: for these card payments. You've used your card three times

889
00:51:18,239 --> 00:51:21,560
Speaker 1: this month? Is here's a three pound bill or whatever

890
00:51:21,560 --> 00:51:23,480
Speaker 1: it is for that convenient we never get that is

891
00:51:23,480 --> 00:51:28,960
Speaker 1: that the MERCHENDI gets. Yeah. So basically, payment networks like

892
00:51:29,239 --> 00:51:32,719
Speaker 1: Visa and master Card and others, they levy charges on

893
00:51:33,040 --> 00:51:36,319
Speaker 1: merchants who accept card payments. Okay, so in this case

894
00:51:36,400 --> 00:51:38,680
Speaker 1: it's the shop whoever's you know, whoever selling the goods

895
00:51:38,719 --> 00:51:42,160
Speaker 1: to us. They are having to eat up the charge. Now,

896
00:51:42,200 --> 00:51:45,719
Speaker 1: these charges they there's arranged. It depends on quite a

897
00:51:45,800 --> 00:51:48,359
Speaker 1: few factors, but they range from about one point three

898
00:51:48,360 --> 00:51:54,160
Speaker 1: percent to three point five percent of every single transaction.

899
00:51:55,440 --> 00:51:59,480
Speaker 1: So and in actual fact, the merchants pay, they pay

900
00:51:59,520 --> 00:52:02,879
Speaker 1: three types of fees to accept credit cards in order

901
00:52:02,920 --> 00:52:05,360
Speaker 1: to provide us with that convenience. Because let's face it,

902
00:52:05,440 --> 00:52:09,280
Speaker 1: especially somewhere here like London, Um, if if a shop

903
00:52:09,320 --> 00:52:12,920
Speaker 1: didn't take card, they would they would struggle. There's I

904
00:52:13,120 --> 00:52:16,960
Speaker 1: was out and about and I was a place called

905
00:52:17,000 --> 00:52:21,400
Speaker 1: Vaulty Towers, Vaulty Tower, Vaulty Towers, which is a pub

906
00:52:22,960 --> 00:52:26,759
Speaker 1: linked to the to the vaults of in Waterloo and

907
00:52:26,800 --> 00:52:31,439
Speaker 1: their card only. Yeah, the places don't take cash anymore. Yeah,

908
00:52:31,880 --> 00:52:34,719
Speaker 1: it's becoming more and more common and I think you're

909
00:52:35,239 --> 00:52:36,880
Speaker 1: I think it's I think it's a bit of a

910
00:52:36,880 --> 00:52:38,960
Speaker 1: gray area, it seems. But I think you're supposed to

911
00:52:39,200 --> 00:52:42,040
Speaker 1: You're supposed to still accept cash. But then bus shop

912
00:52:42,080 --> 00:52:44,719
Speaker 1: bus is done, do they not? You can't pay for

913
00:52:45,280 --> 00:52:48,399
Speaker 1: bus fare. I mean it's all right for you, Mr,

914
00:52:48,920 --> 00:52:54,200
Speaker 1: Mr Guy com Bureau. I have my shopping delivered. Mr.

915
00:52:54,280 --> 00:52:57,560
Speaker 1: I take ubers everywhere. Mr. I don't get on with

916
00:52:57,600 --> 00:52:59,440
Speaker 1: the riff raff, but mad Mike moves as a man

917
00:52:59,440 --> 00:53:03,000
Speaker 1: of the people. You're you're on the buzz every day. Yeah,

918
00:53:03,040 --> 00:53:05,440
Speaker 1: I can. I can well appreciate that. That makes me

919
00:53:05,480 --> 00:53:08,719
Speaker 1: look horribly out of touch among But no, I mean, yeah,

920
00:53:08,760 --> 00:53:14,200
Speaker 1: I guess are not like that. They're to be avoided. Well,

921
00:53:14,280 --> 00:53:17,000
Speaker 1: I don't. I don't mind it. I prefer walking. Yeah,

922
00:53:17,040 --> 00:53:20,279
Speaker 1: that's true. That's true. It is good to walk, but

923
00:53:20,400 --> 00:53:24,840
Speaker 1: yeah to a taxi. It is good to walk to

924
00:53:24,880 --> 00:53:27,200
Speaker 1: the helipad at any rate rather than get the gold.

925
00:53:29,000 --> 00:53:32,200
Speaker 1: Let's get back to so merchants, as I say, they

926
00:53:32,239 --> 00:53:35,160
Speaker 1: have to charge, they have to pay three types of

927
00:53:35,200 --> 00:53:37,839
Speaker 1: fees in order for this convenience, which, as we've seen,

928
00:53:37,920 --> 00:53:40,480
Speaker 1: you know, it's just becoming more and more common. So

929
00:53:40,520 --> 00:53:44,160
Speaker 1: the first is called an interchange fee. This is paid

930
00:53:44,280 --> 00:53:49,120
Speaker 1: to the bank that issues the card. Okay. The second

931
00:53:49,560 --> 00:53:52,000
Speaker 1: is called an assessment fee, and this is paid to

932
00:53:52,239 --> 00:53:54,759
Speaker 1: the payment network and that is your Visa or your

933
00:53:54,800 --> 00:53:59,120
Speaker 1: master Card or the other payment. Other payment networks are

934
00:53:59,160 --> 00:54:02,839
Speaker 1: available and they also have to pay processing fees. Now

935
00:54:03,000 --> 00:54:07,720
Speaker 1: these are paid to the payment processor. Now, the payment process,

936
00:54:07,760 --> 00:54:09,879
Speaker 1: this is where it gets so complicated, and I got

937
00:54:10,040 --> 00:54:13,359
Speaker 1: I got really kind of tied up and confused when

938
00:54:13,360 --> 00:54:15,920
Speaker 1: I was when I was looking into all this, because

939
00:54:16,320 --> 00:54:19,000
Speaker 1: it just it's very difficult to tell who all these

940
00:54:19,120 --> 00:54:23,120
Speaker 1: entities are sometimes. But to my understanding, the payment processor

941
00:54:23,320 --> 00:54:26,840
Speaker 1: is the company that acts as a middleman between the shop,

942
00:54:27,000 --> 00:54:31,320
Speaker 1: the merchant, and the banks. Um, so when I swiped

943
00:54:31,360 --> 00:54:35,840
Speaker 1: my card, say, the payment processor communicates with both my

944
00:54:36,000 --> 00:54:40,840
Speaker 1: bank and the merchants bank in order to rise the

945
00:54:40,880 --> 00:54:46,759
Speaker 1: transaction or World pay or square like these you see

946
00:54:46,800 --> 00:54:50,239
Speaker 1: all these like is that the card as I understand it,

947
00:54:50,560 --> 00:54:54,120
Speaker 1: as I understand it, yeah, um so yeah, it's it's

948
00:54:54,160 --> 00:54:57,080
Speaker 1: it's another another layer of person. And so this is

949
00:54:57,200 --> 00:55:01,000
Speaker 1: three different fees that shops that merchants are having to

950
00:55:01,239 --> 00:55:03,040
Speaker 1: and does this all come out of that one point

951
00:55:03,040 --> 00:55:06,120
Speaker 1: three to three I think that, yeah, I think that's

952
00:55:06,200 --> 00:55:09,040
Speaker 1: I think that's covered within that. But there are also

953
00:55:09,120 --> 00:55:13,080
Speaker 1: sometimes monthly subscription fees the merchants have to pay UM

954
00:55:13,440 --> 00:55:15,480
Speaker 1: and I think you know these can I think these

955
00:55:15,480 --> 00:55:17,640
Speaker 1: are generally quite low that you know, they're not too narniers.

956
00:55:17,719 --> 00:55:19,839
Speaker 1: It might be maybe twenty pounds twenty dollars a month

957
00:55:19,920 --> 00:55:22,840
Speaker 1: or something. But then they also have to get the equipment.

958
00:55:23,239 --> 00:55:25,440
Speaker 1: They also have to get card readers and all these

959
00:55:25,520 --> 00:55:28,720
Speaker 1: sorts of things, so that the cost for the merchants

960
00:55:28,880 --> 00:55:32,160
Speaker 1: is significant. They are having to they having having to

961
00:55:32,160 --> 00:55:34,520
Speaker 1: pay a lot of convenience so that your I can

962
00:55:34,560 --> 00:55:37,400
Speaker 1: walk in and just go boo and go away again

963
00:55:37,480 --> 00:55:38,960
Speaker 1: and be out of their be out of their hair.

964
00:55:39,480 --> 00:55:44,400
Speaker 1: But you know, you know what's coming. These costs that

965
00:55:44,440 --> 00:55:47,400
Speaker 1: the merchants have to pay, they are passed quite naturally

966
00:55:47,760 --> 00:55:51,880
Speaker 1: onto us UM and this is seen in the form

967
00:55:52,080 --> 00:55:55,640
Speaker 1: of higher prices across the board. So you know, we're

968
00:55:55,680 --> 00:55:58,920
Speaker 1: paying we're paying more to buy, for instance, a bottle

969
00:55:58,920 --> 00:56:01,520
Speaker 1: of water in a shop than we might otherwise pay.

970
00:56:01,560 --> 00:56:03,560
Speaker 1: But we're paying for that convenience. We're paying to be

971
00:56:03,560 --> 00:56:07,120
Speaker 1: able to tap and go UM. So this is meant,

972
00:56:07,160 --> 00:56:09,759
Speaker 1: this is meant that prices have gone up. Now, if

973
00:56:09,760 --> 00:56:13,760
Speaker 1: you ask me, there should perhaps be a discount for

974
00:56:13,880 --> 00:56:16,759
Speaker 1: paying with cash. I mean you could you could reasonably

975
00:56:16,840 --> 00:56:18,919
Speaker 1: argue that, I mean, you look like an absolute nutter

976
00:56:19,520 --> 00:56:21,480
Speaker 1: um and you'd get you get told where to go

977
00:56:21,520 --> 00:56:25,040
Speaker 1: pretty quickly. But you could argue that we don't accept cash.

978
00:56:25,080 --> 00:56:28,960
Speaker 1: I want a discount, we can't take it. I want

979
00:56:29,000 --> 00:56:33,799
Speaker 1: to pay with cash, and I want to do I

980
00:56:33,880 --> 00:56:37,240
Speaker 1: will give you twenty Kenyan shillings to get to Hybrid

981
00:56:37,280 --> 00:56:41,880
Speaker 1: in Islington's um. Yeah, so obviously we're paying for this. Um.

982
00:56:42,800 --> 00:56:45,840
Speaker 1: You might say that it's a price worth paying. I

983
00:56:46,000 --> 00:56:50,160
Speaker 1: for one, am not in any rush to go back.

984
00:56:50,480 --> 00:56:52,279
Speaker 1: This is again, let's go back to our time at

985
00:56:52,320 --> 00:56:54,399
Speaker 1: university together. I am in no rush to go back

986
00:56:54,400 --> 00:56:57,279
Speaker 1: to those days, to the days of having to go

987
00:56:57,320 --> 00:57:00,480
Speaker 1: into a bank and pay in a check like you know,

988
00:57:00,560 --> 00:57:03,960
Speaker 1: can I just say here and now that checks can

989
00:57:04,080 --> 00:57:07,960
Speaker 1: fuck off exactly. Checks are one of the worst things ever.

990
00:57:09,120 --> 00:57:11,279
Speaker 1: And I'm sure when you're when you're a little boy

991
00:57:11,400 --> 00:57:14,120
Speaker 1: grows up, when you're a little boy starts to use

992
00:57:14,200 --> 00:57:17,480
Speaker 1: money and understand what it's all about, um, and spend

993
00:57:17,520 --> 00:57:20,280
Speaker 1: it on stupid things like his old man did. I

994
00:57:20,320 --> 00:57:23,000
Speaker 1: am sure that you will. At some point he will

995
00:57:23,040 --> 00:57:25,600
Speaker 1: hear about checks. He will hear about the fact that

996
00:57:25,680 --> 00:57:29,160
Speaker 1: sometimes we used to pay each other. And yeah, by

997
00:57:29,200 --> 00:57:31,960
Speaker 1: basically writing an iou by basically writing down on a

998
00:57:31,960 --> 00:57:35,320
Speaker 1: piece of paper and signing it the amount of money,

999
00:57:35,360 --> 00:57:37,160
Speaker 1: and then you would take that piece of paper along

1000
00:57:37,200 --> 00:57:40,600
Speaker 1: to a bank. You'd stand in line for someone to

1001
00:57:40,760 --> 00:57:44,120
Speaker 1: then process it. Then he doesn't have the money. And

1002
00:57:45,520 --> 00:57:48,880
Speaker 1: and even if the money went through, even if you

1003
00:57:48,920 --> 00:57:50,760
Speaker 1: didn't get fined because the person has given you a

1004
00:57:50,840 --> 00:57:53,760
Speaker 1: check was a total crook, you'd still have to wait,

1005
00:57:54,200 --> 00:57:57,600
Speaker 1: sometimes for five days for it to clear. I mean

1006
00:57:57,640 --> 00:58:01,280
Speaker 1: that is yeah, and I, for one in no rush

1007
00:58:01,320 --> 00:58:04,080
Speaker 1: to go back to those days at Fortune. I think

1008
00:58:03,680 --> 00:58:06,720
Speaker 1: you can't imagine what sort of societal collapse we'd have

1009
00:58:06,760 --> 00:58:08,560
Speaker 1: to go through in order to get back to that.

1010
00:58:08,560 --> 00:58:13,000
Speaker 1: I suppose if the Internet went down, Yeah, I'd rather

1011
00:58:13,040 --> 00:58:20,280
Speaker 1: go back to battering Yeah, just with salt lumps of metal. Yeah,

1012
00:58:20,480 --> 00:58:23,960
Speaker 1: And I'd quite happily I'd sacrifice a lot not to

1013
00:58:23,960 --> 00:58:27,200
Speaker 1: have to go back to checks. But also this whole

1014
00:58:27,240 --> 00:58:30,360
Speaker 1: idea of of of having to walk into a bank

1015
00:58:30,400 --> 00:58:33,320
Speaker 1: branch and having to get cash out. Now, let's just

1016
00:58:33,440 --> 00:58:36,360
Speaker 1: quickly have a look before we move on to the

1017
00:58:36,360 --> 00:58:39,720
Speaker 1: sort of people who can't can't use any of these services,

1018
00:58:40,120 --> 00:58:43,280
Speaker 1: before we show ourselves up exactly well, yes, before we

1019
00:58:43,320 --> 00:58:46,720
Speaker 1: show ourselves up for the coseted, pathetic Westerners that we

1020
00:58:46,760 --> 00:58:50,600
Speaker 1: are we are. Let's just quickly talk about the recent

1021
00:58:50,720 --> 00:58:52,400
Speaker 1: rise in the last few years that we've seen of

1022
00:58:52,440 --> 00:58:56,240
Speaker 1: what I call the money wallets. Um. So these include

1023
00:58:56,560 --> 00:59:00,080
Speaker 1: things like papal so again sort of third party the

1024
00:59:00,160 --> 00:59:04,360
Speaker 1: payment providers. Um, do you know how many active users

1025
00:59:04,360 --> 00:59:11,280
Speaker 1: PayPal has ballpark figure a sort of late just thirty five.

1026
00:59:11,840 --> 00:59:18,120
Speaker 1: I don't know what, just thirty five people? You're talking millions. Sure,

1027
00:59:20,240 --> 00:59:26,760
Speaker 1: I've got one, and I've got that's too. Joe's got one. Yeah,

1028
00:59:27,160 --> 00:59:30,520
Speaker 1: I don't know. Papal has four hundred million active users.

1029
00:59:31,000 --> 00:59:34,120
Speaker 1: I was closed with no. No, you wouldn't know. You're

1030
00:59:34,120 --> 00:59:36,200
Speaker 1: not close by. Even if you were going to tach

1031
00:59:36,240 --> 00:59:41,000
Speaker 1: million on it's like you were still of the all

1032
00:59:41,320 --> 00:59:45,680
Speaker 1: four million active PayPal users. Again, that numbers only only growing.

1033
00:59:45,800 --> 00:59:49,360
Speaker 1: I got paper had an eBay addiction. Yeah you did,

1034
00:59:49,360 --> 00:59:54,240
Speaker 1: didn't you? Yeah? Yeah? What what were you buying anything? Anything?

1035
00:59:54,320 --> 00:59:59,280
Speaker 1: Because with the excitement was the rush, Yeah, snipe bid

1036
01:00:00,520 --> 01:00:03,280
Speaker 1: now I'm I'm the owner of this record, which I

1037
01:00:03,360 --> 01:00:07,440
Speaker 1: already have, which I don't need to I need doubles

1038
01:00:07,440 --> 01:00:11,040
Speaker 1: of it, Yeah, Bill DJ mad Mike, I, Um, yeah,

1039
01:00:11,080 --> 01:00:14,320
Speaker 1: I remember discovering internet shopping in this, you know, in

1040
01:00:14,400 --> 01:00:16,920
Speaker 1: kind of early two thousand's. That's that's one. That's one

1041
01:00:16,920 --> 01:00:19,160
Speaker 1: of the few places I consider myself something of an

1042
01:00:19,160 --> 01:00:23,360
Speaker 1: earlier adopter. I kind of got internet shopping quite quickly. Um.

1043
01:00:23,440 --> 01:00:25,760
Speaker 1: But yeah, I remember having to sign up to PayPal.

1044
01:00:25,840 --> 01:00:29,080
Speaker 1: I said, what's this? But actually imagine imagine trying to

1045
01:00:29,160 --> 01:00:33,439
Speaker 1: use eBay or any of these other sites now paper. Yeah,

1046
01:00:33,480 --> 01:00:36,640
Speaker 1: if there's a PayPal symbol there, I click on that,

1047
01:00:38,120 --> 01:00:41,320
Speaker 1: although I probably shouldn't because even if you're paying with

1048
01:00:41,320 --> 01:00:43,080
Speaker 1: your credit card, if you pay with your credit card

1049
01:00:43,120 --> 01:00:49,320
Speaker 1: via papal, it doesn't have the same guarantees that the

1050
01:00:49,400 --> 01:00:53,080
Speaker 1: credit card companies have. Is that right? I didn't know that. Okay,

1051
01:00:53,120 --> 01:00:54,960
Speaker 1: So you know, if you if you buy something and

1052
01:00:55,000 --> 01:00:59,480
Speaker 1: it's it's shoddy or they go under, you can charge

1053
01:00:59,520 --> 01:01:02,520
Speaker 1: back from your credit card. Yeah, it doesn't happen if

1054
01:01:02,560 --> 01:01:04,560
Speaker 1: it goes through PayPal. It's got different set of terms

1055
01:01:04,600 --> 01:01:08,560
Speaker 1: and stuff. Right, that's interesting. I'm sure you can get

1056
01:01:08,680 --> 01:01:11,440
Speaker 1: chargebacks on paper. But yeah, no, but it's but you know,

1057
01:01:11,560 --> 01:01:13,280
Speaker 1: if you buy something on a credit so if you

1058
01:01:13,400 --> 01:01:17,240
Speaker 1: I bought festival tickets and this festival went under and

1059
01:01:17,320 --> 01:01:20,480
Speaker 1: I was able to get the money back, so okay,

1060
01:01:20,520 --> 01:01:23,720
Speaker 1: so it's it's it's like a kind of built in insurance. Yeah. Yeah,

1061
01:01:23,720 --> 01:01:26,840
Speaker 1: but it wouldn't have happened. I don't think it wouldn't

1062
01:01:26,880 --> 01:01:28,520
Speaker 1: have been as easy, or it might be a different

1063
01:01:28,520 --> 01:01:34,040
Speaker 1: process via paper, Okay. So yeah, I mean papal papal

1064
01:01:34,120 --> 01:01:36,960
Speaker 1: works really well, and I didn't. E Commerce, I think,

1065
01:01:37,040 --> 01:01:40,600
Speaker 1: especially things like eBay, which actually bought PayPal, was one

1066
01:01:40,640 --> 01:01:42,520
Speaker 1: of the things that made Elon musk as rich, as

1067
01:01:42,600 --> 01:01:46,120
Speaker 1: very very rich rich of the world he is, yeah,

1068
01:01:46,640 --> 01:01:50,680
Speaker 1: which is saying something considering how rich Jeff Bezos is. Um.

1069
01:01:50,720 --> 01:01:53,960
Speaker 1: So yeah. So PayPal has four million active users as

1070
01:01:54,000 --> 01:01:57,640
Speaker 1: of late one. We chat pay, on the other hand,

1071
01:01:58,160 --> 01:02:03,240
Speaker 1: has one point to five billion. Now, we chat pay

1072
01:02:04,640 --> 01:02:07,120
Speaker 1: is the sort of big rival of alie pay. So

1073
01:02:07,160 --> 01:02:10,440
Speaker 1: there are two, and they they operate mostly in mainland China,

1074
01:02:11,200 --> 01:02:13,520
Speaker 1: And from what I've heard, I've never actually been to China,

1075
01:02:13,600 --> 01:02:18,200
Speaker 1: but from what I've heard, pretty much everyone, certainly the

1076
01:02:18,280 --> 01:02:22,440
Speaker 1: urban population of China, pretty much everyone uses either or

1077
01:02:22,520 --> 01:02:25,240
Speaker 1: both we Chat pay and Allie pay, so they're paying

1078
01:02:25,240 --> 01:02:30,040
Speaker 1: with their phones um. And yeah, we Chat pay one

1079
01:02:30,080 --> 01:02:32,400
Speaker 1: and a quarter billion users, Alie pay six d and

1080
01:02:32,400 --> 01:02:35,320
Speaker 1: seventy six million UM. And there's also the likes of

1081
01:02:35,760 --> 01:02:38,080
Speaker 1: Paytm or Patom I'm not quite sure how you pronounce it,

1082
01:02:38,120 --> 01:02:40,680
Speaker 1: which is popular in India and that has three hundred

1083
01:02:40,680 --> 01:02:45,320
Speaker 1: and thirty million users UM. Now, although these services in

1084
01:02:45,400 --> 01:02:48,880
Speaker 1: many cases have made payments even more convenient, um, you know,

1085
01:02:49,160 --> 01:02:51,680
Speaker 1: and again think about using PayPal on eBay and all that.

1086
01:02:52,280 --> 01:02:54,160
Speaker 1: But what they do is they make use of the

1087
01:02:54,200 --> 01:02:58,080
Speaker 1: existing payment rails that are in place. So obviously PayPal

1088
01:02:58,240 --> 01:03:02,680
Speaker 1: is linked to your bank account. So although you know,

1089
01:03:02,720 --> 01:03:04,360
Speaker 1: on the face of it, they seem to be kind

1090
01:03:04,400 --> 01:03:06,360
Speaker 1: of game changing, and they do. They do make things

1091
01:03:06,400 --> 01:03:10,720
Speaker 1: a lot more convenient, they're still using that clunky, very

1092
01:03:10,800 --> 01:03:16,240
Speaker 1: centralized systems, those clunky centralized systems behind the scenes, so

1093
01:03:16,360 --> 01:03:19,440
Speaker 1: they're using the Even though the process of paying by

1094
01:03:19,480 --> 01:03:22,360
Speaker 1: card may be ultra convenient for us, it does it

1095
01:03:22,520 --> 01:03:25,000
Speaker 1: was still requires whether we're using a card or whether

1096
01:03:25,040 --> 01:03:27,800
Speaker 1: we're using PayPal or we chat pay or whatever. That

1097
01:03:28,040 --> 01:03:31,080
Speaker 1: loads of infrastructure and middlemen to make sure the system

1098
01:03:31,200 --> 01:03:37,040
Speaker 1: run smoothly. Um. It's a huge, huge machine. Um. And

1099
01:03:37,120 --> 01:03:39,840
Speaker 1: this in turn pushes up prices, and the person who

1100
01:03:39,840 --> 01:03:43,240
Speaker 1: pays those prices is always public exactly, is always us

1101
01:03:43,320 --> 01:03:49,200
Speaker 1: the consumer. Okay. So having talked about all that, and

1102
01:03:49,240 --> 01:03:52,040
Speaker 1: having pointed out that, okay, this this system may be

1103
01:03:52,360 --> 01:03:56,480
Speaker 1: huge and have all these moving parts, it is pretty convenient.

1104
01:03:56,680 --> 01:03:59,680
Speaker 1: We'd be we'd be kind of stuffed without it. But

1105
01:04:00,200 --> 01:04:03,640
Speaker 1: there are people out there who have none of these things,

1106
01:04:03,840 --> 01:04:06,400
Speaker 1: who don't have access to these sorts of services. And

1107
01:04:06,520 --> 01:04:10,480
Speaker 1: these people were going to call the unbanked. Now, in

1108
01:04:10,880 --> 01:04:13,640
Speaker 1: when you get when we get deeper into crypto, you're

1109
01:04:13,640 --> 01:04:17,320
Speaker 1: going to hear the phrase the unbanked a lot and

1110
01:04:17,360 --> 01:04:20,080
Speaker 1: a lot of crypto projects do things like talking about

1111
01:04:20,120 --> 01:04:23,440
Speaker 1: banking the unbanked. M to the extent that it can

1112
01:04:23,480 --> 01:04:26,320
Speaker 1: sometimes be almost a kind of buzzword that just kind

1113
01:04:26,320 --> 01:04:30,440
Speaker 1: of trotted out, Oh yeah, and bank the unbanked, etcetera, etcetera. Um.

1114
01:04:30,480 --> 01:04:33,240
Speaker 1: But again for us, for us in in places like

1115
01:04:33,280 --> 01:04:36,400
Speaker 1: the UK, it's it's hard to imagine not having access

1116
01:04:36,440 --> 01:04:40,480
Speaker 1: to to banking services, um, because we take them for granted.

1117
01:04:41,040 --> 01:04:45,480
Speaker 1: We're so we're so caustive We're so lucky, really, um,

1118
01:04:45,520 --> 01:04:48,360
Speaker 1: but they're again, like, estimates vary about this, but it's

1119
01:04:48,480 --> 01:04:53,400
Speaker 1: thought that around thirty one percent of the world's population,

1120
01:04:53,440 --> 01:04:59,040
Speaker 1: which is roughly two billion people, are unbanked. And let

1121
01:04:59,040 --> 01:05:03,120
Speaker 1: that sink in. That's crazy. That is I find that

1122
01:05:03,240 --> 01:05:06,680
Speaker 1: absolutely mind boggling. Now, Um, I did a bit of

1123
01:05:06,720 --> 01:05:11,000
Speaker 1: digging and I found a list of the world's most

1124
01:05:11,160 --> 01:05:17,280
Speaker 1: unbanked countries, um and it's it makes for pretty fascinating reading.

1125
01:05:17,400 --> 01:05:19,880
Speaker 1: So at the top of the list, um, and this

1126
01:05:20,040 --> 01:05:22,200
Speaker 1: I believe is pretty up to date. I think this

1127
01:05:22,280 --> 01:05:25,360
Speaker 1: is a dated one, this list. At the top of

1128
01:05:25,360 --> 01:05:29,000
Speaker 1: this list you have Morocco seventy. Yeah. I was surprised

1129
01:05:29,000 --> 01:05:35,080
Speaker 1: about that of Moroccans are unbanked. They don't have access

1130
01:05:35,160 --> 01:05:38,320
Speaker 1: to bank accounts, to PayPal, to anything like that. It

1131
01:05:38,440 --> 01:05:41,480
Speaker 1: might in a way be a cultural thing. Um. It

1132
01:05:41,560 --> 01:05:45,280
Speaker 1: may be that people are particularly mistrustful of banks. We're

1133
01:05:45,280 --> 01:05:46,680
Speaker 1: going to look in a minute at some of the

1134
01:05:46,680 --> 01:05:50,920
Speaker 1: reasons why why banking, why so many people are unbanked,

1135
01:05:50,960 --> 01:05:53,120
Speaker 1: because there are there are a few, but it is

1136
01:05:53,160 --> 01:05:55,800
Speaker 1: worth pointing out that, yeah, a lot of people don't

1137
01:05:55,800 --> 01:06:00,600
Speaker 1: trust banks, um and have always have always dealt with

1138
01:06:00,640 --> 01:06:03,440
Speaker 1: cash are used to dealing with cash, are used to

1139
01:06:03,480 --> 01:06:07,480
Speaker 1: perhaps keeping cash under the mattress quite literally, um, and

1140
01:06:07,600 --> 01:06:09,680
Speaker 1: don't want to do it another way. So we shouldn't

1141
01:06:09,760 --> 01:06:11,200
Speaker 1: rule that out. I think that's I think that's a

1142
01:06:11,200 --> 01:06:12,800
Speaker 1: good point that you make. We shouldn't rule out the

1143
01:06:12,800 --> 01:06:16,600
Speaker 1: fact that, you know, some people may may not want

1144
01:06:16,640 --> 01:06:20,480
Speaker 1: to participate in the system. UM. But I think it's

1145
01:06:20,600 --> 01:06:23,120
Speaker 1: it's safe to say that the majority of the unbanked

1146
01:06:23,440 --> 01:06:28,520
Speaker 1: are unbanked through no choice or fauld of their own. Um.

1147
01:06:28,560 --> 01:06:30,240
Speaker 1: And it's interesting to look at that list and the

1148
01:06:30,360 --> 01:06:33,480
Speaker 1: next on the list after Morocco is Vietnam, with six

1149
01:06:34,240 --> 01:06:38,440
Speaker 1: of its population unbanked, and coincidentally or well, no coincidence

1150
01:06:38,480 --> 01:06:41,720
Speaker 1: at all, I think Vietnam is was recently, i think,

1151
01:06:41,840 --> 01:06:45,000
Speaker 1: named top of the list of countries that are adopting

1152
01:06:45,040 --> 01:06:48,800
Speaker 1: crypto UM. And you see this a lot countries that

1153
01:06:48,920 --> 01:06:52,080
Speaker 1: have where there isn't great banking access for most people

1154
01:06:52,200 --> 01:06:56,720
Speaker 1: are the ones that are really picking up exactly. Yeah um.

1155
01:06:56,800 --> 01:06:58,800
Speaker 1: And yeah, just looking down that list, you've got the

1156
01:06:58,840 --> 01:07:04,640
Speaker 1: likes of Egypt, the Philippines, Mexico, Nigeria, Peru, Colombia, Indonesia, Argentina,

1157
01:07:05,040 --> 01:07:09,920
Speaker 1: so fairly spread out Kenya. Kenya. Kenya is there and

1158
01:07:09,960 --> 01:07:11,560
Speaker 1: we're gonna, as I said, we're going to talk about

1159
01:07:11,640 --> 01:07:15,600
Speaker 1: Kenya a little later on. But yeah, so there are

1160
01:07:15,720 --> 01:07:18,360
Speaker 1: right across the world there are people unbanked. And actually

1161
01:07:18,400 --> 01:07:21,160
Speaker 1: I looked up and these are big percentages here. I mean,

1162
01:07:21,160 --> 01:07:23,720
Speaker 1: we started off with Morocco at seventy one, but if

1163
01:07:23,760 --> 01:07:28,240
Speaker 1: you go down to Argentina, one half the country, half

1164
01:07:28,280 --> 01:07:31,600
Speaker 1: the people a little bit overt. Yeah, Argentina is an

1165
01:07:31,600 --> 01:07:35,600
Speaker 1: interesting case because we mentioned that it suffered hyper inflation,

1166
01:07:36,800 --> 01:07:39,560
Speaker 1: would explain I think, I think for a lot of

1167
01:07:39,640 --> 01:07:42,240
Speaker 1: for a lot of there's a hyperinflation not just affect

1168
01:07:42,440 --> 01:07:45,520
Speaker 1: you even if you've got cash, Yeah, yeah, I mean

1169
01:07:45,560 --> 01:07:49,600
Speaker 1: not being not being banked would have a similar you know,

1170
01:07:49,800 --> 01:07:52,080
Speaker 1: you wouldn't be safe. You wouldn't be safe from hyper inflation,

1171
01:07:52,080 --> 01:07:54,000
Speaker 1: just as you because you didn't use a bank. But

1172
01:07:54,040 --> 01:07:56,919
Speaker 1: I think the point about Argentina is that it's it's

1173
01:07:57,080 --> 01:08:01,400
Speaker 1: lurched from economic crisis to economic crist this over the years. UM.

1174
01:08:01,440 --> 01:08:06,400
Speaker 1: It's a real economically, it's a bit of a basket case. UM.

1175
01:08:06,440 --> 01:08:08,840
Speaker 1: And I think it's fair to say that a lot

1176
01:08:08,880 --> 01:08:13,600
Speaker 1: of Argentine's basically lost any faith in UM. In the

1177
01:08:13,920 --> 01:08:17,280
Speaker 1: in the current financial system a long time ago. Um.

1178
01:08:17,320 --> 01:08:20,200
Speaker 1: And again crypto is is taking off in Argentina as

1179
01:08:20,200 --> 01:08:23,200
Speaker 1: it is across lots of Latin America. But yeah, historically

1180
01:08:23,560 --> 01:08:28,360
Speaker 1: Argentine's I think, have a pretty strained relationship with with

1181
01:08:28,640 --> 01:08:33,559
Speaker 1: banks and economists in general. So yeah, it's it's pretty

1182
01:08:33,560 --> 01:08:35,840
Speaker 1: sobering to look at this list because I mean that

1183
01:08:35,840 --> 01:08:39,800
Speaker 1: that's those percentages are in the millions of people who

1184
01:08:39,920 --> 01:08:42,599
Speaker 1: don't have who don't have access to banking. And so

1185
01:08:42,640 --> 01:08:46,439
Speaker 1: what does it mean to be unbanked? Well, um, it

1186
01:08:46,560 --> 01:08:50,240
Speaker 1: sucks really because it means that you're unable to fully

1187
01:08:50,360 --> 01:08:55,080
Speaker 1: participate in the economy. So it's harder. It's harder to

1188
01:08:55,160 --> 01:08:58,880
Speaker 1: save because you know, you have to keep cash under

1189
01:08:58,920 --> 01:09:02,639
Speaker 1: the mattress or or hidden somewhere. Um. And there's obviously

1190
01:09:02,800 --> 01:09:05,760
Speaker 1: there's obviously a whole load of risks associated with that.

1191
01:09:06,560 --> 01:09:09,240
Speaker 1: So it's hard to save. You have to use cash,

1192
01:09:09,280 --> 01:09:11,559
Speaker 1: and there's plenty of risks with just using cash in general.

1193
01:09:11,960 --> 01:09:15,720
Speaker 1: You can't get credit, Um, you can't get loans, you know,

1194
01:09:15,760 --> 01:09:17,639
Speaker 1: all these sorts of things. If you want to start

1195
01:09:17,680 --> 01:09:19,880
Speaker 1: up a business, you can't get a loan to start

1196
01:09:19,880 --> 01:09:22,320
Speaker 1: that business up. If you don't have a bank account. Um,

1197
01:09:23,040 --> 01:09:25,000
Speaker 1: no one's going to give you a loan, you know. Um,

1198
01:09:25,760 --> 01:09:28,360
Speaker 1: So again, we take these sort of things for granted,

1199
01:09:28,400 --> 01:09:30,160
Speaker 1: we're so used to having these, and here we are

1200
01:09:30,200 --> 01:09:32,799
Speaker 1: moaning about the difficulty of paying a check in twenty

1201
01:09:32,880 --> 01:09:37,680
Speaker 1: years ago. Um and yeah, when you consider that, I

1202
01:09:37,760 --> 01:09:40,160
Speaker 1: just think how much crappier our lives would be if

1203
01:09:40,280 --> 01:09:43,440
Speaker 1: we had to go back to always using cash, um,

1204
01:09:43,479 --> 01:09:45,320
Speaker 1: not most of us having bank accounts. And you know,

1205
01:09:45,400 --> 01:09:48,559
Speaker 1: actually it's I looked this up before we started. You know,

1206
01:09:48,720 --> 01:09:50,880
Speaker 1: do you know how many people in the UK are

1207
01:09:50,960 --> 01:09:58,080
Speaker 1: unbanked forty You look like you're un safer ground with

1208
01:09:58,120 --> 01:10:01,080
Speaker 1: that that it's actually a from what I could find out,

1209
01:10:01,120 --> 01:10:05,400
Speaker 1: one point three million that I mean, that is staggering.

1210
01:10:05,479 --> 01:10:09,760
Speaker 1: So we are I think the Yeah, so I mean

1211
01:10:09,840 --> 01:10:14,919
Speaker 1: that's that's a significant amount of people. Um and again, um,

1212
01:10:14,960 --> 01:10:17,640
Speaker 1: this is something I think a lot of this is

1213
01:10:17,680 --> 01:10:20,639
Speaker 1: perhaps a lot of those unbanked people are perhaps unbanked

1214
01:10:20,640 --> 01:10:23,040
Speaker 1: by choice because they don't trust the banks. But does

1215
01:10:23,080 --> 01:10:26,839
Speaker 1: that count like children? No? No, So so what we're

1216
01:10:26,880 --> 01:10:30,960
Speaker 1: we're these these percentages are all based these figures are

1217
01:10:31,040 --> 01:10:33,519
Speaker 1: all based on I don't think Yeah, people who are

1218
01:10:33,560 --> 01:10:36,280
Speaker 1: eligible for Yeah, but if you if you kind of

1219
01:10:36,320 --> 01:10:41,479
Speaker 1: extrapolated out, Let's say there are two parents who who

1220
01:10:41,479 --> 01:10:44,800
Speaker 1: don't have who don't have banking, who are unbanked. M

1221
01:10:45,080 --> 01:10:47,680
Speaker 1: that means by extension, their children are unbanked. Let's say

1222
01:10:47,680 --> 01:10:50,599
Speaker 1: they have three or four children. Those those children can't

1223
01:10:50,680 --> 01:10:53,559
Speaker 1: enjoy the benefits of their parents being banked. So in

1224
01:10:53,560 --> 01:10:58,320
Speaker 1: a way, that's kind of yet more people. Um. So

1225
01:10:58,479 --> 01:11:02,000
Speaker 1: I mean that, Yeah, these these millions of unbanked, billions

1226
01:11:02,000 --> 01:11:05,360
Speaker 1: of unbanked people across the world, and over a million

1227
01:11:05,400 --> 01:11:09,760
Speaker 1: here in the UK, which I think is crazy. But again, um,

1228
01:11:09,800 --> 01:11:12,160
Speaker 1: a lot of people don't trust banks, and after two

1229
01:11:12,160 --> 01:11:14,080
Speaker 1: thousand and eight, I think you can earn the financial

1230
01:11:14,080 --> 01:11:17,840
Speaker 1: crash you you can't. You can't blame them, um. And

1231
01:11:18,240 --> 01:11:20,320
Speaker 1: I think a lot of people, a lot of ex offenders,

1232
01:11:20,320 --> 01:11:22,719
Speaker 1: people coming out of prison and things like that, find

1233
01:11:22,720 --> 01:11:26,639
Speaker 1: it very difficult to get banking services. Um. There were

1234
01:11:26,720 --> 01:11:29,679
Speaker 1: kind of older and vulnerable people. I mean, I remember

1235
01:11:29,720 --> 01:11:34,120
Speaker 1: my my grandmother, who I mean, my grandmother died over

1236
01:11:34,160 --> 01:11:36,880
Speaker 1: twenty years ago, twenty five years ago, I think, But

1237
01:11:37,760 --> 01:11:40,360
Speaker 1: I mean she was very mistrustful. She she would never

1238
01:11:40,439 --> 01:11:43,719
Speaker 1: use a credit card. Um, she would only spend money

1239
01:11:43,720 --> 01:11:47,280
Speaker 1: that she actually had. My great aunt who's a hundred

1240
01:11:47,240 --> 01:11:49,840
Speaker 1: and two when she died, I mean she was the same. Yes,

1241
01:11:50,000 --> 01:11:54,160
Speaker 1: So they would never use they they they they were

1242
01:11:54,200 --> 01:11:57,479
Speaker 1: happy using cash. They stuck with what they knew. So

1243
01:11:57,720 --> 01:11:59,320
Speaker 1: I imagined there are plenty of people in the UK

1244
01:11:59,360 --> 01:12:01,640
Speaker 1: who are still that cash is what they know. They

1245
01:12:01,720 --> 01:12:05,200
Speaker 1: understand it, they can hold it in their hands. Um.

1246
01:12:05,240 --> 01:12:07,599
Speaker 1: You know, they may live from they may live from

1247
01:12:07,600 --> 01:12:10,320
Speaker 1: paycheck to paycheck. They don't want to spend more than

1248
01:12:10,960 --> 01:12:13,120
Speaker 1: they have, and and good for them, but you know,

1249
01:12:13,200 --> 01:12:15,960
Speaker 1: by by not having access to banking services, they're really

1250
01:12:15,960 --> 01:12:22,000
Speaker 1: losing out. Um. So the problem is that banking services

1251
01:12:22,080 --> 01:12:25,400
Speaker 1: require a lot of infrastructure, as we've seen. Um, you

1252
01:12:25,439 --> 01:12:27,479
Speaker 1: can't just say, well, why not get these people a

1253
01:12:27,520 --> 01:12:30,160
Speaker 1: bank account? Um. And this goes back to what you

1254
01:12:30,200 --> 01:12:32,280
Speaker 1: were saying, like why are so many people in say

1255
01:12:32,479 --> 01:12:36,479
Speaker 1: Morocco or Egypt, say why are so many people are banked? Well,

1256
01:12:36,479 --> 01:12:39,320
Speaker 1: it can be a number of factors. In order to

1257
01:12:39,360 --> 01:12:42,599
Speaker 1: bring banking to people, especially in rural areas, you need

1258
01:12:42,640 --> 01:12:45,439
Speaker 1: to set up that infrastructure. You need to build bank branches,

1259
01:12:46,960 --> 01:12:49,120
Speaker 1: you need to staff them, you need to have ways

1260
01:12:49,280 --> 01:12:53,799
Speaker 1: of getting cash to these bank branches. These bank branches

1261
01:12:53,840 --> 01:12:56,479
Speaker 1: need to be you know, I would say today, they

1262
01:12:56,520 --> 01:12:58,479
Speaker 1: need to be Internet ready. You know, they need to

1263
01:12:58,479 --> 01:13:00,040
Speaker 1: be linked up to the Internet, and you need to

1264
01:13:00,120 --> 01:13:02,840
Speaker 1: be linked into the whole system as it were. So

1265
01:13:03,560 --> 01:13:05,559
Speaker 1: if you're if you're living in the middle of nowhere,

1266
01:13:05,600 --> 01:13:09,280
Speaker 1: if you're if you're a cattle herder in Kenya, say um,

1267
01:13:09,600 --> 01:13:12,720
Speaker 1: in the middle of the Serengetti, it's not it's not

1268
01:13:12,800 --> 01:13:15,840
Speaker 1: easy to bring banking services to you. You've got a

1269
01:13:15,880 --> 01:13:18,559
Speaker 1: lot of the world's poorest countries have the highest levels

1270
01:13:18,560 --> 01:13:21,480
Speaker 1: of our bank people. They often have large, often rural populations,

1271
01:13:21,520 --> 01:13:25,200
Speaker 1: remote areas, so banks either don't have the resources or sometimes,

1272
01:13:25,280 --> 01:13:27,120
Speaker 1: let's face it, the banks just can't be bothered to

1273
01:13:27,160 --> 01:13:31,000
Speaker 1: spend the money to try and to bring banking services

1274
01:13:31,040 --> 01:13:35,320
Speaker 1: to these people because poor people don't don't have money. Yeah,

1275
01:13:35,560 --> 01:13:37,680
Speaker 1: and what's the point of giving them a service if

1276
01:13:37,680 --> 01:13:39,360
Speaker 1: they don't have any money to put in. I just

1277
01:13:39,800 --> 01:13:42,640
Speaker 1: I was just on my phone there because because you

1278
01:13:42,680 --> 01:13:44,960
Speaker 1: were drifting. No, no, no, I wanted to find out

1279
01:13:45,000 --> 01:13:48,000
Speaker 1: what what percentage of the world doesn't have access to

1280
01:13:48,040 --> 01:13:52,439
Speaker 1: the internet, Okay, and it's the world has access to

1281
01:13:52,439 --> 01:13:56,400
Speaker 1: the internet. It's amazing, isn't it. The country doesn't have

1282
01:13:56,439 --> 01:14:00,640
Speaker 1: a bank. Yeah, crazy, it's yeah, it's a crazy thing,

1283
01:14:00,680 --> 01:14:03,719
Speaker 1: but it's it's it's interesting that you draw that comparison, because,

1284
01:14:04,240 --> 01:14:07,240
Speaker 1: um yeah, access to the internet is still i mean

1285
01:14:07,280 --> 01:14:09,559
Speaker 1: six of the world is is great in a way,

1286
01:14:09,560 --> 01:14:13,200
Speaker 1: but it's still still yeah. Still who again don't have

1287
01:14:13,240 --> 01:14:16,760
Speaker 1: access to something that we utterly take for granted. I mean, yeah,

1288
01:14:16,880 --> 01:14:20,120
Speaker 1: we have our Central London office, Our internet keeps is

1289
01:14:20,240 --> 01:14:24,479
Speaker 1: very touch and go and we completely lose our marbles

1290
01:14:24,520 --> 01:14:27,479
Speaker 1: over it all the time. Eight percent of the world

1291
01:14:27,479 --> 01:14:30,080
Speaker 1: has a smartphone. Well, yeah, we're going to talk about

1292
01:14:30,080 --> 01:14:31,800
Speaker 1: this in just a moment because that is that is

1293
01:14:32,080 --> 01:14:35,120
Speaker 1: a very relevant statistic. But actually the um yeah, the

1294
01:14:35,600 --> 01:14:38,760
Speaker 1: business of internet connectivity across the world. It's much much

1295
01:14:38,800 --> 01:14:42,320
Speaker 1: easier to connect people to the Internet than it is

1296
01:14:42,400 --> 01:14:45,360
Speaker 1: to build banking and um and this is going to

1297
01:14:45,360 --> 01:14:47,559
Speaker 1: be crucial when we come to talk about cryptos, and

1298
01:14:47,600 --> 01:14:50,040
Speaker 1: this is one of the reasons another reason why crypto

1299
01:14:50,200 --> 01:14:52,880
Speaker 1: is becoming so popular, because it's much much easier to

1300
01:14:52,960 --> 01:14:55,960
Speaker 1: get someone online and again through their smartphone, which more

1301
01:14:56,000 --> 01:14:58,719
Speaker 1: and more people have of the world as a smartphone.

1302
01:14:58,760 --> 01:15:03,240
Speaker 1: That's crazy, yeah, yeah, it's it's it's amazing. So so

1303
01:15:03,320 --> 01:15:06,840
Speaker 1: those payment rails that that infrastructure is advancing much quicker

1304
01:15:06,840 --> 01:15:11,160
Speaker 1: than perhaps regular banking infrastructure ever can. Um. But yeah,

1305
01:15:11,200 --> 01:15:14,040
Speaker 1: as you say, poorer people they have they have less money,

1306
01:15:14,080 --> 01:15:16,760
Speaker 1: so banks can't make such big profits off them. There's

1307
01:15:16,760 --> 01:15:19,000
Speaker 1: no return of the investment of open up a branch there.

1308
01:15:19,520 --> 01:15:22,960
Speaker 1: Good point. Yeah, you know they yeah, they might, they

1309
01:15:23,160 --> 01:15:25,479
Speaker 1: won't make much of a profit. And so the banks,

1310
01:15:25,560 --> 01:15:29,800
Speaker 1: the bank's view as as big bad capitalist entities is

1311
01:15:30,000 --> 01:15:34,200
Speaker 1: if there's no profit, then why bother. I mean, you've

1312
01:15:34,200 --> 01:15:36,720
Speaker 1: got to see their side of it. Um, But it

1313
01:15:36,760 --> 01:15:39,680
Speaker 1: does you know, it sucks for all these people. Um.

1314
01:15:39,720 --> 01:15:43,559
Speaker 1: And let's let's touch on something again that we that

1315
01:15:43,600 --> 01:15:46,240
Speaker 1: we mentioned earlier. But this is this idea of remissance

1316
01:15:46,360 --> 01:15:49,479
Speaker 1: is because many of the unbanked around the world are

1317
01:15:49,680 --> 01:15:52,880
Speaker 1: at the same time those people who also rely on

1318
01:15:53,000 --> 01:15:57,959
Speaker 1: remistance payments, so obviously that they might have we discussed

1319
01:15:57,960 --> 01:16:00,479
Speaker 1: it in detail a few minutes ago. But yeah, relatives

1320
01:16:00,520 --> 01:16:03,799
Speaker 1: working abroad sending money home to their families. Now, according

1321
01:16:03,840 --> 01:16:06,960
Speaker 1: to the World Bank, and this is a direct quote here,

1322
01:16:07,400 --> 01:16:11,719
Speaker 1: officially recorded remittance flows to low and middle income countries

1323
01:16:12,040 --> 01:16:17,640
Speaker 1: reached five hundred and forty billion dollars in Now, that

1324
01:16:17,760 --> 01:16:21,799
Speaker 1: was down slightly from but that was as a result

1325
01:16:21,840 --> 01:16:27,200
Speaker 1: of yeah, of COVID, of people perhaps you know, returning

1326
01:16:27,240 --> 01:16:31,559
Speaker 1: to their countries of origin not working abroad so much. Um. Yeah,

1327
01:16:31,600 --> 01:16:34,960
Speaker 1: that's a huge amount of money. Every single year. Billions,

1328
01:16:35,080 --> 01:16:38,240
Speaker 1: hundreds of billions of dollars every single year are sent

1329
01:16:38,360 --> 01:16:42,920
Speaker 1: back to to poorer and middle income countries in the

1330
01:16:42,920 --> 01:16:45,799
Speaker 1: form of remittances. And for many of these countries, actually

1331
01:16:45,960 --> 01:16:49,880
Speaker 1: remittance payments make up more of g d P gross

1332
01:16:49,880 --> 01:16:57,360
Speaker 1: domestic product than actual exports do, so they quite literally survive. Yeah. Yeah,

1333
01:16:58,040 --> 01:17:00,960
Speaker 1: so again, and here's the World Bank again another quote

1334
01:17:01,360 --> 01:17:07,000
Speaker 1: globally sending remittance remittances. Globally sending remittances costs an average

1335
01:17:07,040 --> 01:17:12,760
Speaker 1: of six point three eight percent of the amount sent. Yeah. Now,

1336
01:17:12,960 --> 01:17:16,040
Speaker 1: I got my calculators out here, I've got my brain

1337
01:17:16,120 --> 01:17:20,200
Speaker 1: whirring away, and that is around five billion, four point

1338
01:17:20,200 --> 01:17:27,040
Speaker 1: five billion. Yeah, that's that's impressive. Yeah, that's good tip

1339
01:17:27,040 --> 01:17:31,240
Speaker 1: of the capital user. Yeah, thirty four point five billion

1340
01:17:31,360 --> 01:17:34,479
Speaker 1: every year going into the pockets of remittance providers. And

1341
01:17:34,520 --> 01:17:38,200
Speaker 1: again that's your Western unions, your moneygrams, etcetera, which could

1342
01:17:38,200 --> 01:17:41,080
Speaker 1: otherwise be going into the pockets of the world's poorest people.

1343
01:17:41,360 --> 01:17:45,479
Speaker 1: Both the unbanked and the remittance market. They are both

1344
01:17:45,520 --> 01:17:50,040
Speaker 1: set to be massively disrupted by crypto, as we'll see episodes.

1345
01:17:50,080 --> 01:17:52,200
Speaker 1: But let's not get ahead of ourselves now to wrap

1346
01:17:52,320 --> 01:17:54,120
Speaker 1: Just before we wrap things up, I want to quickly

1347
01:17:54,160 --> 01:17:57,160
Speaker 1: take a look at an interesting kind of middle way

1348
01:17:57,280 --> 01:18:00,360
Speaker 1: solution to the problem of the unbanked. And and for

1349
01:18:00,400 --> 01:18:04,080
Speaker 1: this we're going back to Kenya, Um, the Kenyans and

1350
01:18:04,120 --> 01:18:07,920
Speaker 1: their shillings, and this is something called m Pessa. Have

1351
01:18:08,000 --> 01:18:12,479
Speaker 1: you heard of em PSA No? Okay, So this was

1352
01:18:12,520 --> 01:18:14,920
Speaker 1: a scheme that was launched in Kenya in two thousand

1353
01:18:15,000 --> 01:18:17,839
Speaker 1: and seven by Safari Colm. Now, Safari Com is Kenya's

1354
01:18:17,840 --> 01:18:20,360
Speaker 1: biggest telecom company and I think they've they've now been

1355
01:18:20,360 --> 01:18:23,479
Speaker 1: brought by Voda Phone. I think they're a subsidiary of Vodaphone. Now.

1356
01:18:25,080 --> 01:18:29,200
Speaker 1: The M is for mobile and Pezza is money in Swahili,

1357
01:18:30,280 --> 01:18:33,479
Speaker 1: quite literally mobile money. And it works like this. So

1358
01:18:33,760 --> 01:18:36,400
Speaker 1: MPSA customers they open an account and they get an

1359
01:18:36,400 --> 01:18:39,640
Speaker 1: e wallet on their phone. Now we talked about how

1360
01:18:39,640 --> 01:18:42,679
Speaker 1: many people have access to phones. They then use cash,

1361
01:18:42,760 --> 01:18:45,400
Speaker 1: so they get this cash that they've maybe been stashing

1362
01:18:45,400 --> 01:18:48,080
Speaker 1: away or that they've earned working however, you know, however

1363
01:18:48,280 --> 01:18:51,760
Speaker 1: they come across it, they then buy credits from an

1364
01:18:51,760 --> 01:18:55,639
Speaker 1: Empessa agent and these credits are then stored on their

1365
01:18:55,640 --> 01:18:58,839
Speaker 1: phone's wallet, so they hand over cash and their wallet

1366
01:18:58,840 --> 01:19:01,200
Speaker 1: balance on their phone gets updated as a result. And

1367
01:19:01,240 --> 01:19:05,519
Speaker 1: they can then send these credits others. Yeah kind of yeah, exactly.

1368
01:19:06,000 --> 01:19:08,200
Speaker 1: Um they can send these credits to others in order

1369
01:19:08,240 --> 01:19:10,640
Speaker 1: to transact, and all they do is they'd send it

1370
01:19:10,720 --> 01:19:15,479
Speaker 1: via their phones. Um. So, and this makes use of

1371
01:19:15,640 --> 01:19:18,920
Speaker 1: Safari Comms existing infrastructure so that you know, the mobile

1372
01:19:18,960 --> 01:19:22,519
Speaker 1: network that's obviously that the Safari Comms built up across Kenya.

1373
01:19:22,920 --> 01:19:25,759
Speaker 1: Um and it also obviously had agents Safari Colm agents

1374
01:19:25,800 --> 01:19:28,120
Speaker 1: working across the country. So these were all kind of

1375
01:19:28,120 --> 01:19:32,320
Speaker 1: co opted for the MPs and network. UM and EMPA

1376
01:19:32,400 --> 01:19:36,840
Speaker 1: now has fifty million customers, mostly across Africa. They did

1377
01:19:37,040 --> 01:19:40,200
Speaker 1: trial it I think in India, UM but I gather

1378
01:19:40,280 --> 01:19:42,760
Speaker 1: it wasn't such a success there, but it has been.

1379
01:19:42,920 --> 01:19:46,320
Speaker 1: It's the trial that they did in Kenya was apparently

1380
01:19:46,760 --> 01:19:50,759
Speaker 1: enormously successful. Um And they did it I think for

1381
01:19:51,000 --> 01:19:54,240
Speaker 1: about three months and way before the trial was due

1382
01:19:54,280 --> 01:19:56,400
Speaker 1: to expire they had, They had people coming back to

1383
01:19:56,400 --> 01:19:58,800
Speaker 1: them saying, this is amazing. You've got to keep this

1384
01:19:58,880 --> 01:20:01,160
Speaker 1: going you. I'm telling all my friends about it and

1385
01:20:01,240 --> 01:20:04,720
Speaker 1: all this sort of stuff. Um. And it's made life

1386
01:20:04,760 --> 01:20:07,479
Speaker 1: a lot easier for a lot of people in Africa.

1387
01:20:08,200 --> 01:20:11,880
Speaker 1: But the problem is it's still relies on people depositing

1388
01:20:11,920 --> 01:20:15,160
Speaker 1: cash with agents. And then imagine you're an agent in

1389
01:20:15,160 --> 01:20:18,759
Speaker 1: a very remote part of Kenya somewhere, loads of people

1390
01:20:18,800 --> 01:20:20,840
Speaker 1: have been giving you cash, maybe over the month or

1391
01:20:20,840 --> 01:20:23,280
Speaker 1: something like that, in order to get their their ewalle

1392
01:20:23,280 --> 01:20:26,920
Speaker 1: it's topped up. You then have a pile of cash.

1393
01:20:26,960 --> 01:20:28,439
Speaker 1: If you're in the middle of nowhere, you've got to

1394
01:20:28,439 --> 01:20:32,559
Speaker 1: get that to a bank. Um. Again, transporting large amounts

1395
01:20:32,600 --> 01:20:35,879
Speaker 1: of cash is you know, it's going to make anyone nervous.

1396
01:20:36,640 --> 01:20:38,519
Speaker 1: And obviously you know if you're a sole trader, if

1397
01:20:38,520 --> 01:20:42,000
Speaker 1: you're the only agent, you can't trade whilst you're hiking

1398
01:20:42,040 --> 01:20:46,080
Speaker 1: all that cash to the bank. So, I mean, fifty

1399
01:20:46,120 --> 01:20:49,320
Speaker 1: millions limitations on. It's great, Yeah, but it's great, but

1400
01:20:49,360 --> 01:20:52,360
Speaker 1: it's still it's still has the same pitfalls that traditional

1401
01:20:52,360 --> 01:20:58,400
Speaker 1: banking does. It just it offloads them onto sol traders

1402
01:20:58,439 --> 01:21:01,840
Speaker 1: exactly exactly, So I think of it. I mean, fifty

1403
01:21:01,840 --> 01:21:04,400
Speaker 1: million customers is a lot, but actually in the grand

1404
01:21:04,400 --> 01:21:06,240
Speaker 1: scheme of things, I mean it's not one point six

1405
01:21:06,240 --> 01:21:09,519
Speaker 1: three billion. Yeah, it's certainly not. And I mean even

1406
01:21:09,600 --> 01:21:11,439
Speaker 1: you know, the likes of Papal and stuff as we've

1407
01:21:11,439 --> 01:21:14,240
Speaker 1: seen dwarf it. Yeah, one point to five billion for

1408
01:21:14,240 --> 01:21:17,479
Speaker 1: for we Chat pay, and I mean the African market

1409
01:21:17,560 --> 01:21:21,439
Speaker 1: is huge. Um So, Yeah, I think kind of fifty million,

1410
01:21:21,439 --> 01:21:23,559
Speaker 1: although it's on the face of it an impressive number,

1411
01:21:23,560 --> 01:21:25,760
Speaker 1: I think it shows that, you know, there is kind

1412
01:21:25,800 --> 01:21:28,439
Speaker 1: of limited scope for it, isn't it. Um So? But

1413
01:21:28,520 --> 01:21:30,479
Speaker 1: I like to see MPa as a kind of halfway

1414
01:21:30,479 --> 01:21:34,040
Speaker 1: house between the traditional banking system and an entirely new

1415
01:21:34,080 --> 01:21:36,200
Speaker 1: way of doing things. Like you know, it's it's made

1416
01:21:36,280 --> 01:21:39,360
Speaker 1: use of the fact that people are more mobile and

1417
01:21:39,479 --> 01:21:41,800
Speaker 1: you know, they have smartphones or whatever, so you know,

1418
01:21:41,880 --> 01:21:43,840
Speaker 1: that's great and they don't have to carry cash around,

1419
01:21:43,840 --> 01:21:47,200
Speaker 1: but still it's still kind of having to interact with

1420
01:21:47,320 --> 01:21:50,920
Speaker 1: the regular banking system outside. I remember when there were

1421
01:21:51,760 --> 01:21:56,200
Speaker 1: crypto cash machines where you'd feed cash in there still

1422
01:21:56,240 --> 01:21:59,680
Speaker 1: are yeah, yeah, still yeah, still Bitcoin a t m

1423
01:21:59,760 --> 01:22:01,960
Speaker 1: s I think you can get. I mean, it's mostly

1424
01:22:02,000 --> 01:22:04,120
Speaker 1: Bitcoin at MS, but you can also get you can

1425
01:22:04,120 --> 01:22:07,080
Speaker 1: get some other cryptos. Most of them, you know, I

1426
01:22:07,080 --> 01:22:08,400
Speaker 1: think a lot of them, you know, have to hand

1427
01:22:08,400 --> 01:22:09,920
Speaker 1: over k y C. You actually have to put in

1428
01:22:10,000 --> 01:22:17,280
Speaker 1: identity details, which it's not ideal, but yeah, the idea

1429
01:22:17,320 --> 01:22:21,920
Speaker 1: of exchange know your customer. Yeah, this is this is

1430
01:22:21,920 --> 01:22:25,479
Speaker 1: a big thing at the moment because crypto exchanges and

1431
01:22:25,840 --> 01:22:28,400
Speaker 1: banks and all this sort of stuff are you know,

1432
01:22:28,479 --> 01:22:33,000
Speaker 1: you're having to submit this this information basically identify yourself

1433
01:22:33,240 --> 01:22:35,840
Speaker 1: and prove who you are, proof of address, you know,

1434
01:22:36,240 --> 01:22:39,280
Speaker 1: photographs of I D documents and all this sort of stuff. Um.

1435
01:22:39,320 --> 01:22:42,479
Speaker 1: And it's all done in the name of anti money laundering, um,

1436
01:22:42,720 --> 01:22:46,080
Speaker 1: you know, anti crime, which is which is fair enough.

1437
01:22:46,120 --> 01:22:48,200
Speaker 1: But you know, again it comes back to this thing

1438
01:22:48,200 --> 01:22:51,240
Speaker 1: of privacy that we were talking about earlier. And yeah,

1439
01:22:51,240 --> 01:22:54,439
Speaker 1: there are there are tons of reasons why we might

1440
01:22:54,760 --> 01:22:58,799
Speaker 1: quite legitimately not want people to see what we're spending

1441
01:22:58,800 --> 01:23:01,280
Speaker 1: our money on. And I don't think you have to

1442
01:23:01,360 --> 01:23:04,559
Speaker 1: be a huge kind of privacy hawk to feel like that.

1443
01:23:04,680 --> 01:23:09,040
Speaker 1: I think I think everyone is should be guaranteed some

1444
01:23:09,120 --> 01:23:11,800
Speaker 1: degree of privacy. Everyone has a right. Privacy is a

1445
01:23:11,880 --> 01:23:15,920
Speaker 1: right and not a privilege or at least it should be. Um,

1446
01:23:16,040 --> 01:23:18,200
Speaker 1: I think that's a good a good point to kind

1447
01:23:18,240 --> 01:23:21,080
Speaker 1: of wrap things up a little bit. So let's go

1448
01:23:21,120 --> 01:23:23,400
Speaker 1: through the points I think that we've we've talked about today.

1449
01:23:23,439 --> 01:23:25,880
Speaker 1: So a lot more happens than we think when we

1450
01:23:25,960 --> 01:23:28,439
Speaker 1: make a payment, A lot of people involved, Yeah, a

1451
01:23:28,479 --> 01:23:32,040
Speaker 1: lot of moving parts. Cash is useful in some circumstances,

1452
01:23:32,080 --> 01:23:34,479
Speaker 1: but it's becoming less and lesser part of our lives,

1453
01:23:34,479 --> 01:23:39,200
Speaker 1: certainly in the developed world. I I haven't used cash

1454
01:23:39,360 --> 01:23:45,000
Speaker 1: in weeks, not getting a bush or buses. Um. Yeah,

1455
01:23:45,040 --> 01:23:49,800
Speaker 1: banking requires significant infrastructure and oversight. Way more people are

1456
01:23:49,800 --> 01:23:51,720
Speaker 1: on bank than you might think, and this locks them

1457
01:23:51,720 --> 01:23:54,519
Speaker 1: out of the world economy and it keeps them poor.

1458
01:23:55,400 --> 01:23:58,040
Speaker 1: So what this makes what this leads me to believe

1459
01:23:58,439 --> 01:24:02,640
Speaker 1: is if only there was away transfer, if only there

1460
01:24:02,720 --> 01:24:06,320
Speaker 1: was a way of transferring money between ourselves that didn't

1461
01:24:06,360 --> 01:24:11,280
Speaker 1: involve banks, third parties, costs, extensive infrastructure, and that was

1462
01:24:11,320 --> 01:24:16,360
Speaker 1: available to more people across the world. Not just what

1463
01:24:16,439 --> 01:24:21,800
Speaker 1: could it be? Mm hmm. Thanks for listening everyone, I

1464
01:24:21,800 --> 01:24:24,880
Speaker 1: hope that was useful. I will put some materials in

1465
01:24:24,920 --> 01:24:27,519
Speaker 1: the show notes so you can see where I got

1466
01:24:27,520 --> 01:24:30,680
Speaker 1: a lot of this information from. And stay tuned for

1467
01:24:30,680 --> 01:24:33,320
Speaker 1: our next episode. It's been a pleasure, Mike. Anything you'd

1468
01:24:33,320 --> 01:24:38,000
Speaker 1: like to say, no, just just keep keep getting busses,

1469
01:24:38,400 --> 01:24:48,799
Speaker 1: keep getting busses. There's a manage to live by. Goodbye everyone.

1470
01:24:49,600 --> 01:24:52,400
Speaker 1: For more podcasts from I Heart Radio, visit the I

1471
01:24:52,520 --> 01:24:56,000
Speaker 1: Heart Radio app, Apple Podcasts, or wherever you get to

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Speaker 1: the podcasts. The Coin Bureau of podcast is a production

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Speaker 1: of My heart Breaking