Fintech Chapter 3: MONEY: A MEDIUM OF EXCHANGE, UNIT OF ACCOUNT AND STORE OF WEALTH

Money Wealth Income

Money Medium of Exchange Unit of Account Store of Value

Medium of Exchange Wide acceptance/network effects. Not subject to extreme volatility. Confidence Standardized. Right size/denominations Portable. Durable. Secure.

Unit of Account Have wide applicability Reduce transaction costs. Reduces information gathering costs.

Store of Value Store or “bank” purchasing power for later consumption. Provide transfer of capital to higher economic purposes. No hyperinflation.

Measuring Money

Trends in Noncash Payments Debit cards Credit cards Checks ACH

Financial System Plumbing: How credit cards work

Financial System Plumbing: the Automated Clearing House

Fintech Applications Cryptocurrencies ICOs Blockchain Payments

Cryptocurrencies Bitcoin Ethereum IOTA Litecoin Ripple Many, Many others

ICOs What are they SEC PBOC

Blockchain How does it work Disruptive implications Applications

Bitcoin benefits Its fast Its cheap Central government can’t take it away No chargebacks People can’t steal your information from merchants It isn’t inflationary It can be anonymous You own it.

Bitcoin minuses Not widely accepted Denominations Can be used for illegal purchases Can be used for money laundering Security Scale questions Investor protections

Payments Consumer to consumer Consumer to business-typically retail Business to business Point of Sale Card not present Tie in to Big Data Typically, front end systems, leveraging existing infrastructure.

Fintech companies PayPal Square Stripe Venmo mPesa