The Digital Equivalent of Cash Online?

Can there ever be a digital equivalent of cash online Before you ask that question, perhaps it is interesting to understand one unique perspective of cash and what happens when the same amount of money is juxtaposed onto the card networks.

Ben Milne, CEO/Founder of Dwolla is the inspiration behind this short video. You can read his excellent blog item here.

Watch this short video to learn about fraud in the money transfer industry.


Hello. My name is Faisal Khan. I am a banking and a payment consultant and today I want to just give you a sense of perspective of what it means to do, what it means to talk about cash versus digital and how the two vary in a very specific manner.

If let’s say this is a 100 rupee note, I happened to be in Karachi, Pakistan right now, and this is what I have right now. So, if I have a 100 rupee note, I’m holding it, and if I give it to myself or to someone else they’re having a 100 rupee note. And if I have it, they have it, we have it. At any point in time whoever is holding it has the 100 rupee note, a 100 dollar note, a 100 pound note, euro note, whatever it is. The value does not diminish. And we can do this all day long and someone will still have a 100 rupee note.

It was an article that I read by Ben Milne, who is the CEO and founder of Dwolla. He wrote in one of his blog entries. It’s a fantastic article and that’s where this example comes from. All credit to Ben for this thing.

But, when we do the same transaction online using credit cards, so it’s 100. And when I pay someone a 100, they get 97 minus, 97 rupees or dollars or pounds plus 30 cents charge. And if I do another transaction it’s 97 minus three minus 3 percent and another 30 cents, another 30 cents and so forth. Money starts diminishing. We can do this only 79 times. Gone. It’s zero then. So if you trade money electronically on a card payment network 79 times and your money is gone.

But if you do it in the cash world, it stays with us. This is why I believe that institutions want us to go digital, so that they can make more money. I mean I’m not, I’m not trying to play an advocate for or against digital money. I’m just trying to tell you what it is. I’m not a conspiracy theorist. This is it. If you have cash, you retain the cash really. Yes there is inflation, yes it reduces the buying power and so forth what have you. But with digital trying to transact money in a let’s say card environment, the value diminishes and after 79 times, it’s a zero.

So maybe we need to look at what the cash equivalent online is. I hope you think about this problem and this perspective.

Till next time, have a good one.

This page was last updated on December 10, 2019.

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