The appeal of mobile e-wallets is evident in Asia and the past decade, Asia has had bold ambitions to make the cashless society a reality.
After all, e-money is more convenient than carrying cash, can adapt to change quickly and they’re often tied to loyalty benefits. They also save countries a lot of money as the costs of printing, storing and moving cash are not insignificant.
Pioneering this front was Hong Kong with the Octopus card. But as seen with the recent political demonstrations – where surveillance conscious protesters have made efforts to go digitally dark – the benefits of our hyperconnected financial lives can come at a cost.
Financial transparency without an individual’s consent is really, mass surveillance
For the past decade, Asia has been pioneering the movement towards cashless economic ecosystems by investing billions of dollars into mobile payments technology, with the hope of driving innovation and stimulating more activity in the region’s economy.
The past few years have seen the incredibly rapid rise of the use of mobile e-wallets, particularly in Asia, with eight of the top 10 markets in mobile payments from the region.
Countries like Thailand, Malaysia, Vietnam, Philippines and Singapore all are seeing double-digit growth rates in mobile payments with almost half of their populations using such services. In China, the global leader with an 86 per cent penetration, Wechat and Alipay have almost replaced cash entirely in some areas.
While mobile payments are solving many of the payment pain points for the region – which up until the past decade was largely dependent on cash – the implications of a cashless economy are slowly becoming known.
Cashless economies, where transactional data is digitally recorded and accessed by companies and governments unbeknown to the users, is becoming a serious infringement on our basic privacy rights.
Government surveillance on citizens continues to prove itself a threat to individual sovereignty, safety and livelihood.
China’s Social Credit Scoring System, a national reputation system that has been in development since 2007, has seen countless citizens blacklisted, in the system, for speaking out against government corruption.
In China, being blacklisted severely impacts a person’s livelihood by limiting what they have access to and where they can go.
What has been branded as financial transparency is, in reality, an act of mass societal surveillance that could expose citizens to bad actors if such data falls into the wrong hands.
Going digitally dark
Data sovereignty and data privacy should be seen as a human right. Especially in the case of sensitive financial data which can give technology companies access to the behavioural footprint of a specific individual, governments eyes on when donations are made to opposing parties, or when protestors receive financial aid.
To combat this, more individuals are making a choice to go digitally dark. The term refers to the act of making conscious decisions on the use of services or products that track your location or online interactions. It may also involve opting for privacy-focused platforms and choosing to ‘clean up’ or delete recorded data.
Protesters in Hong Kong, who are spearheading the movement, are doing so in order to protect their identities, and in turn, their safety, as they take action and protest an oppressive extradition agreement with China.
The anti-extradition protests in Hong Kong highlight just how necessary privacy-focused technology is for protecting basic human rights and sovereignty.
Young protesters are already going to great lengths to avoid location tracking and surveillance in order to avoid persecution for participating in the demonstrations or assisting other protesters.
It’s these young and technologically savvy users that will push demand for the development and integration of financially private products. Mobile payment companies that fail to recognise the desire for privacy features will miss out as society becomes more concerned with data use.
The future of finance is private
If financial privacy is the end goal, we must consider what this means for today’s payments system.
In practice, building a privacy-focused economy will be complicated as the current infrastructure is not built to support it. For now, if users want to maintain anonymous when using mobile payments, the process is clunky and difficult.
A big part of the mobile e-wallet business model with its fee-less transactions and cash-back incentives is to gain insights into its user’s spending habits, tied directly to a person’s identity.
While financial institutions and proven payment processors have had long experience in dealing with our financial data (and even then breaches still happen often), many of these wallet providers do not have the knowledge or experience to handle such data.
We have already seen a similar mistake once before with social media giant Facebook and the Cambridge Analytica illegally utilising people’s personal data for political advertising purposes.
Perhaps a larger concern is how such systems can give governments unrestricted access into how we spend our money or even cut us off from the financial system which is why countries such as Germany, despite being one of the world’s most advanced economies, is still heavy into cash.
With its experience of being under two harsh dictatorships, the right to use cash anonymously is seen as a fundamental right and an important check against government overreach. In this era of mobile e-wallets, protecting user financial data should be a priority.
Phasing in the use of privacy cryptocurrencies
Cryptocurrencies, especially privacy-focused ones offer a potential solution and can also leverage off the ubiquity of e-wallet solutions. They are decentralised, independent and also offers the promise of functioning much like a digital, portable version of cash.
However, its adoption has been hampered by several factors: price volatility, the need for education, the lack of liquidity and conversion options. But perhaps the most important thing is that people need to believe cryptocurrencies are real and usable.
The development of regulated cryptocurrency exchanges with fiat pairings, combined with the ubiquitous use of mobile phones for payments, have greatly reduced such obstacles and offer a more direct route.
For example, Zcoin’s integration with Thailand’s Promptpay system allowed Zcoin to be used at any of the 5 million merchants overnight. Via the Satang App transactions using Zcoin can be seamlessly converted into Thai baht and settled instantly with merchants.
The app is also designed to be user-friendly and utilises a familiar QR code system, to give users an on and off-ramp for their digital currencies. And while certain KYC (know-your-customer) and compliance measures are still needed within the process, it is still a major first step to introduce consumers and vendors to a payments system which otherwise be daunting or unapproachable.
There are other solutions out there as well. For instance, Flexa’s SPEDN uses cryptocurrencies as an intermediary while partnering with large merchants and their processors to make payments to a merchant’s bank directly.
While privacy is still a concern for traditional digital payment networks, these platforms are crucial if we are to introduce new user groups to cryptocurrencies. Not only do they help to educate users on the fundamentals of these digital assets but they also play a significant role in reinforcing the reality that cryptocurrencies are functional forms of money that can be used in their everyday.
The hidden costs of the digital payments economy are evident when we see what’s at stake: our financial privacy and the balance of power between the state and its citizens. Everyone should be entitled the protection of their financial data.
Cryptocurrencies that protect user privacy and offer anonymisation mechanisms will ensure everyone is granted these rights.
The onus now is on more projects to build solutions, which will not only support this new economy but also, help users become more comfortable with accepting digital assets in their native and private forms as an alternative to traditional or centralised forms of money.
The article was first published on e27, on Sep. 25, 2019.