Skip to main content
Part of complete coverage on

Why your new bank will be Starbucks or Nike

By Paul Kemp-Robertson, Contagious Communications, Special to CNN
updated 6:57 AM EDT, Tue August 5, 2014
STORY HIGHLIGHTS
  • The definition of money is starting to change, says Paul Kemp-Robertson
  • He believes brands will have their own shadow economies, endorsed by consumers
  • 'Is there a reason for traditional institutions to be in charge of money anymore?' he asks

Editor's note: Paul Kemp-Robertson is co-founder and editorial director of marketing innovation consultancy Contagious Communications. He has written for publications including Business 2.0 and The Guardian, and his talk on alternative currencies has been viewed more than 837,000 times at TED.com. The opinions expressed in this article are solely his.

London (CNN) -- I work in marketing. I don't claim to be an economist or a financial expert, but from my observation of consumer behavior I can see that people's definition of money is starting to change and fragment.

The disruptive effect of digital and mobile technology lies at the heart of this, as well as a general decline in the levels of trust being placed in traditional institutions. Annual surveys like the Edelman Trust Barometer suggest that the world shows greater faith in peers and corporations than governments and central banks. This decentralization of trust explains the rise of peer-to-peer consumption models such as Airbnb and Zipcar, as well as the growth of alternative, synthetic currencies such as Bitcoin, which are fast, anonymous and borderless.

For me, the greatest contributor to new forms of money is going to be brands.
Paul Kemp-Robertson, Contagious Communications

But, for me, the greatest contributor to new forms of money is going to be brands. Yes, you heard right. In the very near future, brands like Amazon, Nike and Starbucks are likely to be running shadow economies in some form or other.

Nike recently set up vending machines exclusively available to active users of their wearable fitness monitor, the Nike Fuelband. Purchases could only be made by redeeming points generated via physical activity.

At Starbucks cafes in the United States more than 30% of transactions are made with "Stars" -- the reward points accrued against purchases over time, and stored on a Starbucks Card. In other words, one in three interactions at the till don't involve traditional cash.

Paul Kemp-Robertson
Paul Kemp-Robertson

It's not hard to imagine Stars becoming a currency option inside the countries in which Starbucks operates. The same applies to Amazon. The online retailer recently launched Amazon Coins. Admittedly, this was initially designed to make app purchases on the Kindle platform, but many economic commentators have noted that the company -- whose global revenues of $74.4 billion are more than the GDP of many countries -- has the scale and power to turn its online market into a virtual payment system by creating a shadow economy.

Read: How to create your own money

Turning back time = good for business?
Businesses braced for cyber attack battle
Explainer: How do cryptocurrencies work?

To those who think this sounds far-fetched and fanciful, I would argue that it is simply a case of history repeating itself. In the United States 1860, there were 8,000 different kinds of banknotes in circulation, issued by 1,600 corporations. The government was responsible for a mere 4% of the money supply. The catalyst that reversed this scenario was the outbreak of the Civil War, after which the leaders in Washington demanded more control.

Boiled down to its core essence, money is simply an expression of an agreed value. With digital and mobile technology it is now possible to quantify value in multiple ways, which in turn makes it easier to create new, valid forms of currency. In today's hyper-connected, data-driven age, it's reasonable to assume that brands are likely to create synthetic, shadow economies -- entirely endorsed by the consumers who choose to trust and engage with them -- in exchange for useful rewards, information, services and lifestyle tools.

The digitally native younger generation is likely to lead this march into alternative currencies. Edward Castronova, a professor of telecommunications at Indiana University Bloomington notes that among Millennials, the mental accounting on different sorts of "money" is already very fuzzy. He suggests that 20-year-olds don't see any difference at all between dollars, gold coins in videogames and academic GPAs: "They're all just digital score sheets."

This shift in perception is backed up by some research that my company, Contagious, conducted last year with the polling company Opinium. We found that 36% of 25 to 34-year-olds in the United States would find it more useful to receive change in the form of mobile credit than the equivalent value in dollars and coins. And if people are starting to interrogate what money means, is there a reason for traditional institutions to be in charge of money anymore?

If people are starting to interrogate what money means, is there a reason for traditional institutions to be in charge of money anymore?
Paul Kemp-Robertson

The idea of corporations minting their own currencies in the future already seems to have gained some level of acceptance. In the same Contagious survey, 19% of people in the United Kingdom and 27% of people in the United States say they would be happy to use a currency issued by a private entity or brand. Tellingly, that figure rises to 45% amongst 24 to 35-year-olds in the United States -- and 36% of that demographic agree that they would be comfortable if sovereign currencies were replaced altogether. That's a significant proportion of consumers, which explains why brands are starting to muscle in on money.

The crucial factor in this behavioral shift is loyalty, which has now become a micro-economy in itself. The system of coupons and reward schemes has been around for decades (think Green Shield Stamps or Air Miles). But what's radically changed the loyalty game is the smartphone. An article in the Harvard Business Review last year pointed out that loyalty schemes are evolving into economic ecosystems of significant value -- partly thanks to mobile technology bringing the mechanics of payment and loyalty together.

The article states: "Retailers will need to think like bankers who mint their own currencies. Market leaders will be those who best help consumers manage and spend Branded Currency from their portfolios, offer the best exchange rates, create the most liquidity, and make the most efficient markets."

But no jokes about detergent brands laundering money, OK? That just wouldn't wash.

Read: How to create your own money

Read: Bitcoin your way to a double espresso

Read: Cyberattacks -- Why you're the weakest link

The opinions expressed in this commentary are solely those of Paul Kemp-Robertson.

ADVERTISEMENT
Part of complete coverage on
Future Finance
updated 12:34 PM EDT, Wed July 16, 2014
With cyberattacks on the rise, a modern-day challenge for financial institutions, businesses and people is to get smarter about prevention.
updated 12:55 PM EDT, Wed July 9, 2014
As the UK will soon switch some of its bills to plastic bank notes, find out why they are following Canada and Australia's lead.
updated 12:55 PM EDT, Wed July 9, 2014
The ease of contactless cards and mobile payments has led to a rise in cashless payments. But are we nearing a cashless society?
updated 5:53 AM EDT, Fri August 1, 2014
People across the world are using homegrown currencies to boost local economies -- and you can too.
updated 11:41 AM EDT, Fri September 5, 2014
Experts are tipping some unlikely places to become tomorrow's finance capitals.
updated 7:43 AM EDT, Mon August 11, 2014
Four experts give their advice for running a smash hit crowdfunding campaign.
updated 6:57 AM EDT, Tue August 5, 2014
In the near future, big brands could be running alternative forms of currency -- shadow economies endorsed by the consumer.
updated 12:47 PM EDT, Wed July 9, 2014
Find out why Hong Kong residents don't waste time foraging for change -- for transport, shopping, groceries and coffee.
updated 12:53 PM EDT, Wed July 9, 2014
Find out more about the UK's first Bitcoin ATM machine, which arrived in a trendy London cafe earlier this year.
updated 7:28 AM EDT, Wed July 9, 2014
Cryptocurrencies are digital money -- and they're on the rise. Fnd out why digital money is part of the future of finance.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT