The Times’ financial editor, Patrick Hosking, writes on the advent of Glint and what it means for the future of cash
Customer enters bakery: A loaf of bread, please.
Shopkeeper: There you go, sir, that’ll be 37 milligrams.
Customer: I’m sorry?
Shopkeeper: 37 milligrams. Of gold. That’s £1.15 in old money. But we prefer to price and take payment in gold nowadays, if you don’t mind. Electronic gold, obvs. As available on all good debit cards.
Customer (huffily fishes out fistful of notes and coins): Well, I think I’ll settle in good old-fashioned pounds and pence, thank you very much.
Shopkeeper (sucks teeth doubtfully): Oh dear, sterling, eh? I’m afraid there’s a surcharge for cash payments, sir.
Glint, a London-based financial technology company, yesterday launched a new type of Mastercard that allows customers to buy, store, send and pay for goods and services using gold by weight. More than a century after the British stopped using the precious metal as a medium of exchange, Glint envisages a sort of digitised return to the gold standard.
According to Jason Cozens, its chief executive, Glint is reintroducing “gold as money”. The actual physical gold is stored in a Swiss vault. Cardholders buy electronic rights to it, which they can spend, by the gram or milligram, by sending it to other Glint users via a mobile phone app.
Gold, which for millennia has been seen as a safe store of value, could start to reclaim its additional role as a medium of exchange, and without the drawbacks of the past. In digitised form, there’s no risk of hijack by passing highwaymen and no need to bite notches out of a sovereign for smaller transactions.
This is not as nuts as it all sounds. Speculators are piling into cryptocurrencies such as Bitcoin, which is underpinned by nothing more than an algorithm that restricts supply. The currency stored on a Glint card is at least backed by a rare metal that has reassured investors for centuries.
Sound money is a powerful selling point. There is no shortage of people suspicious of governments that routinely debase their currencies. The Bank of England’s 2 per cent inflation target may be perfectly sensible for other reasons, but it institutionalises a halving of the purchasing power of the pound every 30 years.
Even so, it’s hard to see digital gold’s appeal as a means of exchange going much wider than a few gold bugs, along with ethnic minorities such as Indians and Chinese who love to give gold as presents. It would take a mighty inflationary shock for shops to start pricing in terms of the precious metal. The gold price, like the Bitcoin price, is far too volatile to suit most consumers or businesses.
Sterling and other conventional currencies aren’t about to be supplanted any time soon. Moreover, any serious threat to them would be resisted by governments, which, in order to borrow and collect taxes and to set monetary policy, like to have control of their currencies.
They can have good reason to. An earlier attempt at launching gold as a currency, E-Gold, was shut down by the US Department of Justice in 2008 with its owners pleading guilty to running an illegal money transmission business and money-laundering offences. Mr Cozens emphasises that Glint is regulated by the Financial Conduct Authority.
Glint’s idea, along with scores of recent innovations from fintech companies, do start to make you wonder how much cash we will use in future. Boku, which allows people to buy goods and have the cost added to their mobile phone bills, floated in London yesterday and went to a 27 per cent premium. Payments made using cash now account for fewer than half of all transactions by number in the UK and only 23 per cent by value — and the proportion is dropping fast. Swiping a contactless card or smartphone at a reader saves time, shortens queues and allows people to keep perfect track of their spending.
This is a technology in the sweet spot of exponential growth. The young are on board. The time-poor love it. More cautious shoppers are gaining confidence as they discover that their worst fears about fraud are unfounded. Retailers and other merchants are discovering how contactless can produce significant savings at the checkout, whether it’s manned or unmanned.
Ross Clark, author of the polemical The War Against Cash, makes the opposite case, arguing that one day we will regret surrendering the right to pay by cash. Loss of privacy and choice, the risk of fraud or a disuptive IT blow-up and the danger of allowing ourselves to be intruded on and manipulated are all advanced as arguments. I suspect that for most people the sheer convenience will win out and cash use will continue to dwindle fast. No one is proposing to scrap it altogether. Like cheques, reprieved in 2011 after a plan to abolish them in 2018 was greeted with public fury, cash will live on for as long as people want to use it.
However, it will become a minority sport, and one with a stigma. Why would anyone have large chunks of the folding stuff, or demand to be paid in cash, unless they were dodging tax or laundering ill-gotten revenues or trying to remain anonymous in some way? As businesses take in less and less of the stuff, they will have to make difficult decisions about how they treat cash customers, whose coin habit becomes ever more costly to indulge as their numbers fall. A few trendy cafés catering to millennials already refuse to accept cash.
Paying with digitised gold may not catch on, but other payment methods will. It won’t be too long before retailers demand a surcharge from customers proffering those quaint artefacts, notes and coins.
You can download the Glint app now here
This article was originally published by The Times