The article deals with Power of Virtual Money, its problems and the need to regulate it.
Short link http://wp.me/p1ZsI2-Ku
Abraham Paul P
For over a decade now I had been propagating the idea of Universal Money Management using phones, in a paper I published in 2002, that nobody took it seriously then. wp.me/p1ZsI-4g
Now there are thousands of e-money business Companies using it world wide creating parallel economy of Virtual money that can be disruptive to Banking Industry as well as Governments economy unless it is well regulated. How Virtual money can be harnessed and used are explained in this presentation and the papers in it. Call it a simpler version of Crypto currency, BLOCKCHAIN or else. Concepts are important, nuts and bolts can be added by thousands out there.
Introduction. Management of money through phones, both Mobile and Fixed ones, and using Virtual Money as a commodity can greatly boost Nation’s economy, hugely enhance Revenue for Governments discarding most of current forms of direct Taxes, considerably reduce need to print currency, reduce the malice of corruption and Black Money, restrain Terrorism by controlling money flow into the hands of extremists. It is time the Governments world over mobilize, regulate and tap this great potential to revive their economy according to the need of the day.
Please see the paper I wrote on ‘Exclusively banked Universal Money management using phones’ for quicker Financial Inclusion in the link http://wp.me/p1ZsI2-4g which also explains in detail why Virtual Money shall be best handled by Virtual banks. It can be seen that the fast mushrooming e-commerce and e-retail businesses involving virtual money such as Alibaba, Amazon, Snapdeal, and recent ones like Justdial, Paytm etc., etc., and the #DBT ideas are just subsets of what I have proposed in this paper many years back. In fact I had tested out this when I implemented the IN based prepaid service in one of the first GSM systems in India in 1995. It is knowing its disruptive nature, I did not venture to implement it myself but was after #RBI and the Governments for over a decade to properly regulate it and use it for Country’s benefit.
A. POWER OF MONEY GOING VIRTUAL.
India has a Billion phones (Mobile plus Landlines) and growing.
With an average transaction of Rs.10,000 per month per phone, the monthly Virtual money transaction will be about Rs.10 L Cr (Rs. 10 Trillion). Assuming that virtual money transactions and re-transactions happen on an average of 30 times a month, it will be Rs.300 L Cr per month that amounts to Rs.3600 L Cr (Rs.3600 Trillion), annual.
2. How Governments can generate revenue from Virtual Money management?
Hypothetically, by levying a 1% transaction charge on the quantum of Virtual Money involved in every transaction, Government can fetch annual revenue of Rs. 36 L Cr (Rs. 36 Trillion) that is more than double of India’s annual budget expenditure outlay. The transaction charge can be partly a fixed charge and partly a variable charge according to amount of transaction involved. (The expenditure outlay of 2015-2016 India’s Central budget is only about Rs. 17.8 L Cr. that works out only about Rs.40/- per person per day which is less than current #BPLindex. What sort of development the country can achieve with it is anybody’s guess).
By going virtual, Money becomes a much higher dynamic resource and more so when almost every money transaction being done virtually and with more ease and comfort, number of transactions, amounts transacted and the revenue earned by it would grow multi-fold, taking the revenue to Rs. 250 L Cr up to Rs. 500 L Cr (Rs. 250 to 500 Trillion) or more, making it possible to realize much needed drastic increase in Government’s budget outlay and/or with reduced transaction charge from hypothetical 1% mentioned above to 0.5% or as low as 0.2% keeping balance between revenue and expenditure and revenue share with other key stake holders involved, variably as needed from time to time. And with that sort of revenue earnings, Government can easily ‘Make India a No Tax Regime.
3. Universal application. The idea contained herein can find universal application irrespective of mode of currency involved. In spite of the odds, I am sure Virtual money will take over most part of money transactions within and inter-Countries across the world in near future.
The challenge is for the global companies to come up with unified Technology and Applications for downloading of Virtual Money as Data (MAD) Packets as on-line inter-actable dynamic digital Wallets in Mobile phones and other user devices from Reserve banks through its Payment Gateways. The system is comparatively safer as finally Money as Data (MAD) reside only in millions of User’s devices, hacking of it is almost impossible and also of no use.
4. Why Virtual systems, not regular banks.
Most banks, both Public and Private have its limitations to take care of the needs of the huge un-banked population, especially in the lower social and economic strata across the country. Naturally, handling of such enormously high volume of low value accounts would eventually lead most banks to collapse due to severe HR constraints and gross customer dissatisfaction, for no fault of the banks. Of course, it will not be possible neither to bring everyone into this system nor make every phone user use virtual money route for quite some time. However, a good majority population are already using it and more could be covered as explained in my blog http://wp.me/p1ZsI2-4g Others can continue the service of regular banking system or both and brought-in, in a phased manner and then to a total no currency mode of working in due course.
5. How to go about. ‘Exclusive special purpose Digital Online Virtual Banks’
The way to go is to bring in place ‘Exclusive special purpose Digital Online Virtual Banks’ under the control of Reserve bank that will take care of all forms of money management using phones, both Mobile as well as Fixed, functioning with minimum human interface, across the country deploying modern technology systems and network. I had been persuading this with Government / RBI for over a decade. (It is good to see Government has finally understood this and gone ahead giving permission to implement payment banks. However, too many of them are also problem as can be seen in detailed in my paper.)
6. How the Money moves – Physical and Virtual.
i) As explained in the schematic below, the physical money collected by mTm-Bank of mTm Service provider systems (Payment Gateways) is passed on to Reserve bank as ‘Real money’ ( in physical form or through banks) which remains with Reserve bank.
ii) Reserve bank creates equal amount of Virtual money in it’s own internal MAD Wallet ( a close cousin but much simpler and safer than the #Blockchain concept) and simultaneously create or modify user’s MAD Wallet that contain money as a bundle (not in any particular denominations) converted in the user’s chosen mode of currency according to exchange value at that instant and passed on to the users as MAD Wallet via the payment gateway. Thus the Virtual Money resides in the MAD Wallet in the user’s device and Reserve Bank servers keep the virtual copy of all MAD Wallet issued by it for statistics and other legal needs.
Reserve bank call and rewrite to alter the data in the Wallet only when user do any transaction or at the time of refilling their account, through the Payment Gateway. The system is envisaged to have safeguards such as the MAD Wallet once issued cannot be hacked or altered by anyone even by Reserve Bank without receiving request from the user end via Payment Gateway with due validation processes.
iii) The physical Money received originally from the user via the payment gateways and reach the Reserve bank remain the Reserve bank and only the Virtual Money in its MAD Wallets issued in lieu of it change hands between the Users and various POSs.
iv) The Virtual money in MAD wallets in Users devices and with POSs go on circulating in virtual form with the intervention of Reserve bank and reach the Banks and back in the Reserve bank through Banks, for conversion back to real money as and when needed.
v) The Virtual money reaches back in Reserve bank thus goes into MAD Wallet store of Reserve Bank completing the money cycle and quantum of Physical money plus Virtual Money remains constant. This way accumulating Physical Money in Payment gateways or hoarding of it at any other middle way systems is prevented while the money created by Reserve bank in Virtual form continues to circulate that can boost the liquidity and push nation’s overall economy and prevent Black Money. Users money is safe guarded if any payment gateway or middle way systems involved go bankrupt.
7. Revenue share with other stake holders.
Telcos and other stake holders involved in the system also can prosper with appropriate revenue share by Government with them. Currently Telcos are burdened with high CAPEX & OPEX costs plus un-justified license & spectrum costs. Over and above Telecom is at cross roads being stuck up between fast changing new technologies and inability to cater such high volume of users and their diverse service demands with heavily invested legacy systems and network on one side and loss of revenue due to poaching of Telephony related Value added services revenue by various OTT services using their systems, network and customer base on the other side. Money through Mobile mTm in the link mentioned above, is a non telephony based Value added service than can rescue Telcos at this juncture with appropriate revenue share understanding with the Government/Reserve bank.
Similarly Payment Gateways can collect a fixed charge on all POSs registered with it and also get a portion of revenue share from Government for the services rendered based on number of transactions with Reserve bank server.
B. THE PERILS OF MONEY GOING VIRTUAL.
Of late, there had been fast mushrooming of many forms of Virtual Money businesses, both banked as well as unbanked. Over and above most retailers will implement their own payment applications keeping the Banks and Middle way systems out. The hidden danger in this is that unless well regulated all such Virtual Money businesses can gobble up real money will drain banks and also disrupt Nation’s economy. The heat is already on. Hundreds of seminars going on discussing about disruptive technologies of sorts but no one seem to point fingers on the problems and the dangers caused by the parallel economy happening everywhere in Virtual form without any regulation or controls of the State.
To safeguard against this, as suggested in this paper, Reserve banks be the originator and custodian of all forms of virtual money, as encoded and encrypted ‘MONEY as Data’ (MAD) Packets’ with unique identification UR codes for every packet of virtual money as digital wallets, that will need on-line authentication of RBI in its every transaction via Payment Gateways.
Money through Mobile (mTm) envisages the idea of an exclusive virtual money management Bank integrated with a Payment Gateway that will handle all forms of money management using phones, mobile as well as fixed ones, taking care of all aspects mentioned above. Such payment gateways therefore, shall function under the ambience of the Government. Problems of having diverse systems and products in the field is explained in detail in my paper.
8. What Government / RBI need do.
Need of regulating virtual money businesses.
How Government can regulate Virtual money and earn revenue using Money as a commodity. In lieu of Money received from users in Physical form by such Payment Gateways, Reserve bank issue Money in Virtual form as dynamic Wallet to users. The virtual money continuously move from users Virtual Money wallets to POS and to Banks and finally reach Reserve bank for getting converted to physical Money. This way the quantum of physical money remains constant while Governments can make enough revenue for its needs using money as a commodity in its Virtual form. Meanwhile Governments can save lot of money spent on printing, distribution and up keep of Currency and also can restrict counterfeits.
9. How to minimize Impact of this on regular banks. As mentioned above un-regulated Virtual money businesses will siphon out money out of banks draining the bank and the banking industry as whole. To prevent Virtual money businesses and Payment Gateways cause negative impact on legacy Banks and banking Industry, the Banks by itself shall diversify doing the function forming a consortium if needed, functioning as middle way systems taking on the payment gateway functions between Users, POSs and the Reserve Bank systems, and deal with Physical Money transactions involved in the chain as described herein above.
Role of Post Offices. Also government should think seriously to make use of the countrywide Post Office network combined with BSNL giving access and technology support to take on this as part of Financial Inclusion scheme starting with places where already eco system needed readily available and in the remote areas using GPS access that can be currently made available by ISRO without waiting for digitization with OF cable links available everywhere. This can salvage over staffed BSNL and dwindling legacy postal systems.
It means that the Government, RBI, the newly born Payment Banks and existing Banks have to think how the huge Money transactions involved in Virtual Money businesses to be handled and regulated.
Please see a small presentation on this clicking on the caption below. VIRTUALBANKS_MN_IE(S) (1)
10. Universal working. The whole idea is unique and first of its sort. The system can be adapted universally in any country and also can interwork with the systems in other countries. Every system can handle any mode of Currency like Dollar, Pounds, Euro, Rupee etc., individually within the same system and between systems across the world. The System take care of conversion of currency according to user’s option and based on the rate applicable at the time of transaction. India can take lead on this, perhaps the architect of Aadhar can be entrusted the implementation of mTm as explained my blogs. Government can freely used the acronym mTm and the idea contained and I will be only too glad to offer help to implement it. Pease also see my blog on this topic in the link http://wp.me/p1ZsI2-M6
11. Virtual Money, sure way to eradicate terrorism.
Governments spend quite a lot of money for Printing Money, its safe keep, distribution, replacements and accounting of it and for preventing Black money and counterfeits. State, Banks and People make use of it in Physical form and also in Virtual form of sorts.
Everyone use it profitably and multiply it, drawing more into it. Government being the originator of Money it is only right that Government monitor who uses it and for what purpose. In this changing world it would wise to check whether money is used for buying bread or for buying guns and bombs.
Gone are the days of Wars, bombs, Tanks & guns. It only kill more innocents than rouges, make fugitives thus push more to terrorism. Moving over to Virtual Money universally, monitoring and controlling money flow and preventing it reach wrong hands is the most effective way to restrict terrorism. Once every money transaction done only in virtual form universally and under the watch and control of Governments across the world, it will be possible to prevent huge amount of money flow into the hands of extremist organizations and perhaps, is the one and the only way to rein in and control terrorism across the world.
12. Technology is the real challenge. This can be done, technology for that is readily available. The challenge is only in assuring fail proof and hack proof redundant systems and real time connectivity for instant service all time on 24/7/365 basis. The Servers in the chain at Reserve banks and Payment Gateways shall be fail proof and the connectivity shall be ensured via satellite links so that service is available instantaneously real time basis. INTERNET CLOUD and connectivity between Reserve Bank Server and Payment Gateways to ensure on-line authentication of every virtual money transaction. In order to manage this the redundant Technology systems with exclusive integrated bank, and Reserve Bank server shall reside in an exclusive CLOUD. Risk area is the non-availability or failure of connectivity while on the move and in POSs everywhere.
Pease see a detailed write up and presentation on this in the link. Exclusively banked Universal Money management using phones. http://wp.me/p1ZsI2-4g
By Abraham Paul. P. Owner FCOMNET. Ex. V.P. Technical Sales, SPCNL SIEMENS ICN Germany / Director Trg, TS & SC, SIEMENS ICN RHQ, UAE / G.M & SMT TBG, BPL Mobile India / TES (1) DOT India.
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