What if the way we understand the world is wrong?
What if it's not politicians and world events that shape our lives
but business deals?
It's natural for people to fight against change.
But change is coming.
And we need to adapt to it.
Deals made in secret,
high up in a boardroom or over a drink in a car in the dead of night.
It is over, dude.
It is gone. If you can't do it, artificial intelligence can.
Our every waking hour has been transformed by these deals,
reprogramming us to think and behave in a different way.
We were trying protect people from excess medicine.
You couldn't? Yeah, we failed.
This is the story of those deals.
These ideas were ahead of their time.
Online payments can change the world.
Who made them? Why?
And what do they mean for our future?
In this series, I'm going to look at three key aspects of our lives
and how they've been revolutionised by these deals.
How did work go from something we do to who we are?
It's not a person, it's a performer, right?
I'm sorry, not a person?
It is a person! I am a person sitting in front of you.
Why do we medicate every aspect of our lives?
This notion of the pursuit of happiness, it's not realistic!
It gets all of us to be on drugs!
But in this film, I want to look at money...
Our vision is to have a cashless society.
..and the deals that could one day kill off cash.
We're competing with these large,
monolithic banks that are very bureaucratic.
We could run circles around them all day.
Is it to make us spend more?
In terms of the overall transaction time, it had to be, that tap,
500 milliseconds.
Who will ultimately control money in the future?
Tech companies really see data as the new oil.
And payment data is probably the best quality oil in the business.
What they can do with it is endless.
Deep in this secret vault in London
is something very few of us ever get to see for real -
£1 billion in cash.
MACHINE: Identification completed.
In this building, money arrives from shops all over the country
at the end of each day.
The next morning, it heads out to be deposited into cash machines.
Some believe in just ten years' time this place won't exist.
In 2015, we crossed a line of no return,
card and contactless payments overtook cash
for the first time in history.
If I pay you this dollar bill,
that's a straightforward transaction between you and me.
No-one makes money from that transaction.
But if that transaction is digital, someone has to manage it.
There's a space between you and me,
and that space is where the money is made.
The amount spent by shoppers using contactless cards and devices
soared by 164% last year.
There's a huge industry emerging
that wants you to stop spending cash.
So let's start with our connected car.
I'll have you go in the driver's seat. OK, great.
That sounds good to me. And I'll sit on the other side.
So let's go through ordering food. Yeah.
Visa, who process the transactions you make
on your debit or credit card,
make money when you don't use cash.
Add some bruschetta, garlic bread. Garlic bread, nice. Good.
They don't make money if you do.
So think about your payment credentials being connected to your
biometrics. That's insane, isn't it?
Just put this on.
96% of UK debit cards use Visa's services.
I can see the seats all around me.
Have you buy some merchandise! Do I want to buy a T-shirt? Of course!
They see a cashless world as slick and futuristic,
whereas cash is slow and dirty.
Our vision is to have a cashless society.
Because we believe that card payments are the best way to pay,
and the best way to be paid.
When I'm in the queue at the supermarket
and someone in front of me is using cash and coins,
I start to get irritated.
It's also important to consider the physical dirtiness of the cash.
You know, when it moves around the system,
multiple people touch it throughout the day as it circulates
from your wallet to your taxi driver, to the retailer,
back to you when you get change.
You don't know where it's been.
Smriti, this is all well and good,
you know, pushing the cashless economy.
But what's in it for Visa?
Yeah. So, you know, Visa is a for-profit company.
We... We do make money when people use their cards.
That is definitely part of our business model.
But I'll tell you, the money comes only if we've done our job properly,
and that's by creating convenience, security and trust.
It's that service that people value.
And that's what's worth paying for.
If we didn't provide value, we wouldn't be making any money.
This brave new cashless world is slowly becoming a reality.
A new app allows you to give buskers money
who no longer want to be paid in cash.
In Holland, homeless people can be paid by swiping a sleeve
on their coat.
South Korea has already gone coinless,
whereas Sweden is predicted to be the first country to scrap cash
completely by 2025.
This fundamental change in our thinking around money
didn't happen by accident.
To understand how we got to this point,
we need to go back almost 20 years.
It's 1998.
Two strangers meet in an empty lecture theatre
at Stanford University in California.
Peter Thiel, a tech entrepreneur
with a passion for investing in small digital start-ups,
is giving a talk on how to sell currency in foreign markets.
There are just six people in the audience.
One of them is Max Levchin, a 23-year-old computer programmer.
He's not there to listen,
he's there to pitch Thiel a business proposition.
The lecture finishes and Levchin walks up to the podium
and introduces himself.
They talk for less than ten minutes,
but it's enough to make a deal that will change the nature of money
and how we spend it.
At that time, sending money person-to-person
was a clunky process.
We could wire money - too expensive and slow.
We could send a cheque - too slow.
Or send cash in the post - too risky.
But Thiel and Levchin's plan
was to allow people to beam money instantly to each other
through electronic devices.
No cash and no cheques.
It was the first real challenge to the banks' monopoly on moving money.
Jack Selby was the man Thiel and Levchin hired to make it a reality.
He was the company's senior vice president
of corporate development for three years.
Our first concept with PayPal was actually beaming money
between PalmPilots, if you remember those, back in the day.
Then we realised very quickly that,
if we are at lunch and you forget your PalmPilot, what would we do?
I'd write in your e-mail address,
then I'd go back to my desk and I would sync up my PalmPilot
and we would send you a payment by e-mail.
And that was kind of one of our first big eureka moments,
is that we realised the world had many more e-mail addresses
than it did PalmPilots.
Eric Jackson joined the company at the beginning and became
their vice president of marketing at the age of 22.
These ideas were a little bit ahead of their time.
But there was something transformative going on.
This vision was that online payments can change the world.
And if we built something that would allow people to replace cash,
you actually would have this very powerful system
that people around the world - not just people in Palo Alto,
but people outside of Silicon Valley,
outside of the G-7, you know, in industrialised, poor countries -
could actually tap into.
Another reason why we were lucky enough
to be successful is that we were competing with these monolithic,
very bureaucratic,
enormous tankers, if you will, that take forever to tack.
The CityGroups of the world and the Bank of Americas and the Wells Fargos.
Cos they all were trying to come up with their own payment solution.
Whereas we're the little speedboat that was just kind of running around
and if it was a grey area, then we'd ask for forgiveness and maybe not
necessarily permission first. And no offence to these large banks,
but they're not necessarily the most innovative place when it comes to
developing new technology.
So, in many respects, they were the perfect competitors
cos we could run circles around them all day.
So we were growing at an outrageous rate.
We had a burn rate of something, I don't remember specifically,
but I think in excess of 20 million per month.
Oh, wow! Just let me just compute that!
Did you just say that? What on earth?!
And you were supposed to be in charge of the money.
What's going on? Yeah, it was a terrifying time in some respects.
Just a year after PayPal was launched,
the company had 1 million users.
But their monthly operating costs would have had them running out
of money in a matter of weeks.
They started charging a 3% transaction fee.
And two years later, they struck a lucrative deal
with an online auction site
that would accelerate their global growth.
With eBay, we found buyers and sellers that had a very real need
for a better payment solution.
So if I buy a Beanie Baby from you on eBay,
then I would send you a cheque in the mail,
and so maybe the cheque arrives,
maybe it doesn't, maybe my cheque bounces, maybe it doesn't.
And so I think the average duration of a transaction on eBay
was something like two weeks.
Then PayPal comes along and the buyer, you know,
wants to get his Beanie Baby and the seller wants to get his money,
so they both want a better payment solution.
So it just took off like wildfire.
I remember the first time it hit a million in a week,
it was very exciting.
And then before you know it,
it's a million every day, and then it's a million every hour.
And it just... It just kept growing at this exponential rate.
eBay transactions became a huge part of PayPal's business
and there were many attempts by the auction site to buy them out.
Finally, in 2002, they did the deal.
Now, looking back, on hindsight,
you didn't really need to sell to eBay.
It was growing, you could have just held on to the thing.
You could be Google! Well, people say that.
Do they? But they don't...
They don't understand necessarily what was going on behind the scenes.
So I'll give you a little colour there.
So PayPal was a payment system,
but you also could keep money in your PayPal account,
and we would pay you interest,
and so some people could make the argument, "Well, gee,
"PayPal looks like a bank,
"but it certainly isn't regulated like a bank. Why not?"
And so as that regulatory pressure began to build, we were feeling it.
And we were still a pretty young team.
And so far us to be faced, potentially, with having to shift
and register and be compliant as a bank or financial institution,
that's a completely different situation.
So there were a lot of pressures going on behind the scenes like that
that led us to accept the deal.
And the deal certainly was not a bad deal by any stretch.
I mean, I think they paid 1.5 billion or something like that.
So I guess, in today's terms, it seems like a paltry sum.
1.5 billion, it doesn't seem like a paltry sum to me, Jack!
Well...
When it came to paying person-to-person,
PayPal had turbo-charged money.
While the banks were still wedded to the real world use
of plastic payment cards,
PayPal had made the digital nanosecond transaction a reality.
The potential was much bigger than what PayPal became.
But it was a transformation for online commerce,
a transformation for payments.
I think it took an industry that had been somewhat stodgy.
The idea that you could actually sign up online and be able to start
moving money like that, that was a big game-changer.
But with the ink still wet on the eBay PayPal deal,
there was a far bigger game-changer in the business of moving money
being plotted by a mobile phone provider.
But it wasn't happening in the States.
It was happening 10,000 miles away, in Africa.
Nairobi, Kenya.
A city on the verge of becoming a cash-free society.
Here, people send money by mobile phone.
This is the home of M-Pesa.
The M is for mobile.
Pesa is the Swahili for money.
It allows people to send and receive money,
pay bills and top up their airtime.
Do you use M-Pesa?
Yes. Is it good?
Yeah, it's good. Do you know M-Pesa?
Do you use it? Everybody, everybody does.
Everybody. Just convenient. Is it better than cash?
Yeah, it's better than cash. Better than cash.
Why is it better than cash?
It's easier.
Easier.
Do you mind me seeing how you do this?
Cos I don't understand it. Is that OK? OK.
Yeah. And I will put in my PIN, which is secret.
So you have to close your eyes.
You don't have to tell me your PIN, that's all right.
You don't have to do that.
How many times a day would you use M-Pesa, do you think?
I use it in everything. Really?
School fees... Amazing.
Electricity, water, everything.
So it's like the bedrock of the whole economy, isn't it?
It seems like everyone here in this market uses it.
M-Pesa. Yeah. Well, look at all these guys behind you. Johann.
How many of you guys, can I just ask you,
how many of you guys use M-Pesa?
Do you use M-Pesa?
ALL: Yes. Yeah?
And is it good or bad?
Would you say good or bad?
Good. Good - well, there you go.
That's a poll for you!
In 2003, the UK's Department for International Development,
the foreign aid arm of the British government,
noticed that locals were passing on unused airtime to friends and family
who would either use it or sell it on to others.
Few Kenyans had bank accounts.
Banks were too bureaucratic and rural people didn't live
close enough to one. So, Safari Com, a subsidiary of Vodafone,
and the Department for International Development
did a deal that would make it safe and simple
for Kenyans to transfer money.
Nick Hughes was the man who developed the technology.
So, Nick, what was the deal that you at Vodafone struck with DFID?
We entered the competition focused on a topic which was quite "sexy"
at the time, which was financial inclusion,
which is all about, how can we bring people who are excluded from
the financial sector services, by the banks, effectively,
how can we bring them into the formal sector?
We said, "Well, look, let's build a product to offer somebody
"with a phone a loan and to get payments back from that loan."
This was a basic phone.
So you're not talking about an iPhone or Android or anything.
You're just talking literally about a text message.
Yeah, it was a good old-fashioned 15 phone,
often a second-hand phone that had been sold out of Europe.
And the mechanism we used to send that transaction was designed
to work on those very basic phones,
allowing customers to do very simple
but secure and safe encrypted transactions,
which really allowed the transfer of funds
between wallets across the phones.
With just a mobile number and a pin code
you can send M-Pesa credit to anyone.
Although it can be converted into cash,
many don't need to because M-Pesa
has become the default method of payment.
These people don't need to transact with anyone
other than the mobile money supplier,
and that is a complete transformation.
It gets rid of the banks and governments.
You don't need them.
Kenya had beaten the world in mobile money.
But its reach and influence is thanks largely
to the monopoly of a single phone company. That shiny,
positive vision of empowering the un-banked of Africa
is only half the story.
What happened in Kenya is a very good example of how a monopoly
can emerge below the radar of the regulatory system.
Essentially, you have a situation
where the real unit that is travelling through the economy
is the Vodafone unit, it's not the underlying shilling,
which is very much how a conventional bank works,
but Vodafone was not a bank.
That's the big difference.
So how did a non-bank suddenly become
the biggest issuer of money in Kenya
when the conventional banking system was asleep at the wheel?
But, Nick, isn't it kind of outrageous
that a government department is giving Vodafone £1 million
to develop a product that basically they will
then make a huge amount of money out of?
That's a reasonable argument on the face of it, but actually,
the problems that M-Pesa solves in Africa
are much more real problems
than you or me being able to pay for our coffee using mobile payments
in, you know, one of the high streets here.
So, I think the need, as well as the scale, the need is much more acute.
These people really had very little opportunity to
move money around before M-Pesa, and that's why we saw the growth we saw.
There was a huge need, and a problem that needed fixing.
In its launch year, M-Pesa took on 1.2 million users.
It now has 19 million subscribers in Kenya alone.
One third of the economy goes through it.
When they supply anything to me,
like potatoes, bananas, everything, tomatoes,
they send me their payment, and then I pay through M-Pesa.
OK. That's much easier.
If you had to have that in cash,
would you be concerned about security?
Yeah, because I can't hold all that money -
almost 10,000 Kenyan shillings.
So you've basically got your bank here,
you've got your bank vault right here.
Yeah, yeah. That's brilliant. That's brilliant.
As Kenya showed the way in the mobile money revolution,
back in the UK we were still beholden to the banks
and slowly getting to grips
with the newly launched chip-and-pin technology.
Punching in our PIN numbers was to be the single biggest change
in the way we pay in the UK since decimalisation in the '70s.
But the landscape was changing rapidly, and a deal made
by the world's biggest bank would make it possible to imagine
life without cash completely.
It's 2007.
The Royal Bank of Scotland has recently opened
their vast new headquarters at Gogarburn, near Edinburgh.
They were the world's richest bank,
with a balance sheet supposedly larger than the entire UK economy.
They do a deal with engineering company Gemalto,
who have the technology to make a new kind of payment possible -
contactless.
RBS saw the potential and hired them to conduct a trial of the technology
in their staff canteen.
For those working on the trial, the ultimate aim was clear.
The banks want contactless to work because it helps in the war on cash.
If the banks can turn the small
transactions from cash to card,
then they increase the number of transactions that they do.
And you have to bear in mind that the banks actually make money
on every transaction which they carry.
So the more transactions which are moved from cash to card
is a benefit for the banks.
After a very short period of time,
the amount of cash they were counting up had halved.
But the volume of transactions very quickly increased.
So it was very obvious from the Gogarburn trial
that contactless was a successful way
of increasing payment transactions.
But what it also meant was that, instead of just buying
your cup of coffee, you'd buy your cup of coffee and you might have
a blueberry muffin with it.
And so you increase the amount of spend.
There's a slight psychological thing
because you're not handing over more cash, you're just tapping your card.
Once again, the way we spend our money had been reimagined.
But just as RBS were due to roll contactless out, something happened.
NEWSCASTERS: Sorry to interrupt, some breaking news. Matt?
Around the world... The market fell down a well, over 700 points.
With the financial crisis, the world's biggest bank
produced the biggest losses in British history
and plans to roll out contactless ground to a halt.
But the deal between RBS and Gemalto
had shown the way for the whole industry.
In the end, it was Barclays Bank who launched the first contactless card
in the UK.
# There's a reason for the sunshine sky
# And there's a reason... #
They cleverly ushered us into a brave new world
of effortless, cashless spending.
James McDonald was the man behind the plan.
In terms of the overall transaction time,
we wanted it to be half a second.
That tap is half a second. 500 milliseconds.
Not 600 or 700, it had to be 500.
I'll tell you a story. I went to get a sandwich the other day,
and basically all of the machines had stopped working.
Really? And the queues were out the door and the staff were saying,
"We're taking cash. There's a cash machine outside, just get the cash,"
and no-one was using it.
People were just leaving rather than actually,
"You can get the cash out."
And I thought, "Wow, cash is over."
JAMES LAUGHS I was staggered.
I think there's probably the expectation
that it's probably so ubiquitous
and it is everywhere where people expect it.
A lot of work went in to make sure that the speed was there.
We had to change the way we produce the cards,
so the card production was different.
So a huge amount of work and testing went on to make sure
those transactions were really fast and secure and reliable.
But how quickly we scan our card at the checkout
in our local supermarket
is just one part of a much bigger picture.
The RBS trial showed that people spent more using contactless cards.
It's a finding that had unwittingly tapped into the work
of one scientist
at the Massachusetts Institute of Technology,
who subjects the way we spend to intense scrutiny.
The participant will see on a screen in front of them
a sequence of images, leading to a decision
about whether to purchase or not purchase a product.
Professor Drazen Prelec has spent nearly 20 years
researching what's going on in our heads
when we make a decision to pay with cash or card.
First she sees chocolates, Godiva chocolates.
Then she sees a price.
And then she has four seconds to make a decision
whether to purchase this product. Wow.
So you're literally measuring,
at the very moment where they're deciding to buy something,
what goes on in their brain.
Yes.
The MRI detects spikes of activity in the region of the brain
known as the insular.
The insular is the region associated with unpleasant feelings...
Right. ..like pain, rejection, disgust.
The dark, negative part of the brain.
So, this is our indication that there's pain of payment
associated with spending money.
But when you pay without cash, the pain of payment has been reduced
and the person buys more.
When you are spending cash, that is painful,
but if you simply anaesthetise a person with credit cards... Right.
..we eliminate the pain of paying. Wow.
It's insane. Yes, yes.
I don't think it's pain in a physical sense,
but it is an anxiety
and an aversiveness,
and it may not be conscious.
But it's there.
Quite a frightening idea, in a way.
Yes.
It's frightening, like any large social experiment.
If I was a bank, I would be happy to see the end of cash,
cos when you think about it,
it's not just messing around with ATMs and having tellers
counting money and all this sort of...
It's everything that goes behind that.
It's security guards and vans driving money all over the place
and spending hours at the end of the day accounting for the cash
and all this sort of thing. The costs of cash are huge,
but of course they are diffuse,
so we don't see them particularly,
and a lot of them are under the surface.
So, if I was a bank, I would definitely want to get rid of cash.
Since the economic crash of 2007,
the argument that cash could be a barrier to economic growth
is also one gaining currency amongst the great and good of banking.
Jackson Hole, Wyoming.
Every year, an important summit is held in this ski resort.
Headed by Janet Yellen, the head of the US Federal Reserve,
it's where central bankers,
policy experts and academics come to discuss emerging issues and trends.
Since the last financial crisis, they've been desperately trying
to come up with a strategy to deal with the next one.
What they discussed was a plan that would result in hard cash
becoming less valuable than electronic money.
When the last financial crisis hit,
central banks across the world reacted by lowering interest rates
to near zero.
It made it easier to borrow,
but less profitable to save.
The plan was to make us spend more
and to reboot the economy.
SIREN BLARES
Next time there's a crisis,
they want to go further and reduce interest rates to below zero -
negative interest rates.
In this topsy-turvy world, envisioned by the banking elite,
we will all be paid to borrow and any savings in the bank,
rather than earning interest, would be gradually eaten away.
What does this mean for the future of cash?
I'm hoping one of the world's leading economists has the answer.
He's worked for the Federal Reserve,
he's worked for the International Monetary Fund,
he's a professor at Harvard and a chess grandmaster.
Let's think about a situation where the economy is collapsing,
it's a once in 60- or 70-year crisis.
The demand has collapsed.
And you're trying to get people back to work,
you're trying to get businesses moving again.
You're dealing with a calamity.
OK, so let's have some perspective.
We're not just in an everyday situation.
And when you are in a situation like that,
you want to think outside the box.
Negative interest rates basically push people to consume,
they push people to invest,
and it's also a way of chasing money out of the banking system,
into the economy.
Little people, by the way, will get excluded from this.
So if you're holding, you know, 2,000 in a bank account,
you won't get a negative interest rate.
It's what they're doing
to big corporations, pensions, insurance companies.
Could you tell me about Jackson Hole?
What happened, what was the plan?
It's a little head-spinning,
the connection between cash and central banking,
but one of the reasons that, during the financial crisis,
central banks couldn't move quicker, faster and harder
was they were blocked because they knew that once interest rates got to
zero or near zero, if they tried to go further,
it would start a run into cash.
What do I mean? Well, cash pays zero interest.
Now, normally we hate that.
We'd rather have something interest-bearing.
But if they are driving rates below zero,
instead of getting a negative return,
what if we get a tonne of cash,
stick in a vault, you know, hide it, protect it.
People are going to bail out into cash.
They don't want to set that in motion.
And there are different ways to approach it,
but the most elegant way is just to make it more expensive
to store large quantities of cash.
Banknotes are a constraint on central banks' power.
Abolishing paper money
and forcing people to use electronic ways of spending
could free central banks to lower interest rates
as much as they feel necessary.
Janet Yellen, the chair of the Federal Reserve,
gave a presentation saying negative interest rates
basically push people to consume, they push people to invest.
House prices come back faster, pensions come back faster.
It would have been pretty good overall.
And the one thing that is preventing that from happening is cash.
Cash is the obstacle to negative interest rates.
Yeah. But I think that if we have another financial crisis,
it'll be a shame if we haven't figured this out.
Especially since, in this age of electronic money,
it's really not very hard to do.
Negative interest rates sound crazy, but there's a logic to it.
Now, bear with me.
When you have interest rates floating just above zero,
like we do now,
banks don't have to lend money.
They can sit on it.
But when interest rates go below zero,
they have to pay to sit on that money. They are forced to lend.
So negative interest rates become a way of governments prising money
out of the hands of banks and into the economy.
They stimulate growth through spending.
In the same year that the financial crisis
plunged the world economy into recession,
a fledgling digital economy
was opening its virtual doors for business.
# Here we come, drivin' down... #
It was an economy that would go on to be worth more than 140 billion,
and it started with the launch of the iPhone.
APPLAUSE
Today, Apple is going to reinvent the phone.
This is one device...
And we are calling it...iPhone.
When the iPhone was launched in 2007,
the device would only allow people to install apps made by Apple.
But within a few months, all that would change
and a multibillion-dollar app economy was born.
That app economy that we now take for granted
might never have been created without the actions of this man.
Jay Freeman hacked the iPhone
and installed the first non-Apple software.
So there's two stories going on here.
There's the official story, and then there's the real story, right?
And the official story is they launched the iPhone,
they don't have third-party apps,
and then somebody within Apple
decides to persuade Steve Jobs that they should have an App Store.
That's the official story.
So, what's the real story?
The real story is you hackers are doing all this stuff to the phone,
and then they decide to respond to what the hackers are doing.
Yeah. What actually we are doing as a community
is modifying all of the existing software to provide a mechanism
for third-party apps to be on the device.
We were taking up where Apple left off
in the construction of the phone itself.
So, Jay, what was the response of Apple to all this hacking?
Once they saw all of the third-party applications that were available,
they announced an App Store, suddenly.
It was like a complete 180 shift.
And I can only begin to imagine that internally they had this, like,
"Oh, no!" moment of, "What's going to end up happening
"if we don't figure out a response to this?"
And so this kind of uncohesive group of hackers
who were working on jail-breaking this phone
managed to change the course and direction
of this massive corporation in order to change...just everything.
Did they take on some of the jail-breaking community into Apple?
Absolutely. They've actually hired
a number of people from the community.
Did Apple ever offer you a job?
Yes. And I actually didn't realise it was Apple asking me for the job
when it happened. I received this e-mail,
and the question was worded really interestingly.
"Don't you feel like you could have more impact on the iPhone if you
"worked for Apple than if you were doing what you are currently doing?"
And not even knowing it was somebody from Apple, I responded,
"No, actually, because I'm kind of morally bothered when I hear that
"people are now working for Apple." I'm like, "Wait a second, that's...
"That was the enemy.
"Why are we helping the enemy?"
But what you did,
you inadvertently enabled the iPhone
to become this extraordinary device for selling,
which it wasn't until you did what you did.
And in the process possibly empowered one party
in order to take control of that ecosystem,
whereas maybe in a different world it would have been more egalitarian.
The App Store spurred a gold rush among developers
attracted by the easy access it granted them
to the hundreds of millions of credit cards
linked to iTunes accounts.
Soon after it was developed, Google followed suit.
Today, those two companies wield extraordinary power.
It's a hierarchical system
that is exceptionally reminiscent of feudal times.
So you have your king, which is Apple,
and underneath them,
you've got Uber that prevails over the transport,
Airbnb that prevails over accommodation,
or Snapchat that prevails over, like, selfies.
And all of them pay allegiance to the ultimate king,
which is either the Apple or the Google at the top of the pyramid.
But we are just the serfs.
We're the ones that are subject to all of these different lords.
Apple takes a cut of around 30% of every app downloaded
from its App Store.
But their ultimate aim is to sell smartphones and hardware,
and to tie in every aspect of your life into their indispensable brand.
The app economy was launched on the smartphone,
and it changed everything.
Yes, it made spending effortless, but it was more than that.
This device knew who you were, where you were and what you wanted.
Marrying that to payments created extraordinary potential.
New York, 2014.
Marianne Lake, a banking executive for JP Morgan Chase,
steps onto a stage to make a presentation.
3,000 miles away, in Los Angeles,
Apple CEO Tim Cook is about to make the same announcement.
The moment Cook speaks in LA,
a small green apple is placed on the desk before Marianne Lake.
It's the signal she's been waiting for.
She can now make her speech.
"So," she says, "we are very excited."
Apple and JP Morgan have partnered to launch Apple Pay,
a mobile payment and digital wallet service built into your iPhone.
It lets users make payments at contactless terminals
using any Apple device.
Many of the major companies were involved in Apple's master plan,
but none knew about the full involvement of the others.
James Anderson represented MasterCard.
We had many codenames.
We had codenames for codenames, it felt like.
And individual companies would end up with different names.
"I will be Zygon." Yeah, exactly.
You got to be your own superhero, exactly.
So the way that Apple decided to structure it was that they
wanted to have a very big impact in the marketplace,
and so they actually had multiple networks participating.
So although I was responsible for, you know, the MasterCard piece,
there were...my peers in other organisations who were doing
similar for their organisations.
But that was really why it was so important to arrive on the day,
because if we didn't arrive on the day, then we knew there would
be other people showing up as well.
So it was very critical. Although it would have been great to be the only
one, I think, you know, the wisdom is that, in fact, if you're trying
to move a big industry,
sometimes it needs the whole industry to move forward.
You know, and I think obviously the team at MasterCard
were extremely excited to be working on something
that everybody knew was going to be, you know, a game-changer.
So that was the other thing that, you know,
kept everybody working hard
and also, you know, with maximum discretion.
By now, the smartphone had become a central point of commerce
for the average shopper,
with over half of all online sales being made through a mobile device.
Apple had the marketing power.
They just needed the mobile payment expertise,
which James Anderson has been developing for over ten years.
There's a few things that we felt very strongly about,
for example, card art.
So card art means, basically,
the physical card has a picture on it,
and there's visual associations that the consumers have with that.
We wanted to make sure that that showed up
on the digital experience as well. Because we saw that as
a way to transition the consumers' understanding from,
"Oh, I have a MasterCard in the physical world that's in my wallet.
"Oh, now I have my MasterCard on my phone."
It's the same account.
The bill is going to show up the same way,
they're going to have the same protections that they have,
but now it's just showing up on their phone.
So there was little tricks that we did along the way
with...working with our partners
to help consumers understand that the journey had changed.
And, you know, one of the things about the card art is that the issue
was the bank's brand is very visible in that card art,
which we thought was important
because that's where the consumer has their money
or that's where the consumer is getting credit.
Do you think that, I mean, you know, without dissing the tech companies,
there's a sense that inevitably they are looking to partner at the moment
with banks, but long-term...
..they don't really need them.
You know, people say, "Are banks relevant?"
It's one of those questions that people ponder.
And the tech companies may have aspirations,
but, you know, the future is the future.
Nobody really knows where that's all going to finish,
but I think we view the banks having an essential role in this ecosystem.
I think you know a lot more than you're letting on, James.
That's what I think. I'm supposed to!
That's what I'm getting from this interview!
THEY LAUGH
I can't share everything with you.
That wouldn't be ethical.
Apple Pay established the template, and with every tap of the phone,
they took some of the bank's cut from every payment.
But they made it their policy not to see what you've bought
or keep data on the transaction.
When rival Google followed up with a similar service
a year later, they weren't interested in the money.
They were interested in something else.
There's something really interesting going on here.
Take Apple Pay.
There's a small amount of money they make in each transaction.
But with Android Pay, which is run by Google, they don't take anything.
So what's going on?
The answer lies in the small print of the terms and conditions.
"We may collect information about this transaction,
"including date, time,
"the merchant's location, a description provided by the seller,
"any photo you choose to associate with the transaction,
"the names and e-mails of the seller and buyer,
"the type of payment method,
"your description of the reason for the transaction and the offer
"associated with the transaction, if any."
Remember that space in the transaction,
the space where business makes money?
Now that space is about data.
You have become the new currency.
So tech companies really see data as the new oil.
What they can do with it is endless.
Let's not forget that data funds the internet.
All those apps, everything you see,
most of it is paid for by advertisers.
And that's really the opportunity here for the tech companies.
Payment data is probably the best quality oil in the business.
Data comes in all shapes and forms,
but payment data is a comprehensive record
of how you spend and live your life.
There is no cheating it.
It explicitly tells advertisers when you're most likely to spend,
how much and how frequently.
This is the big data age,
with algorithms analysing every aspect of your behaviour,
going on 24/7,
that you don't even know about.
Imagine turning on your phone,
doing a Google search and not finding targeted,
personalised advertising on your screen.
This is now our reality.
Tech companies are the central nervous system.
They are the system.
And there is one company that's arguably exploited
big data more than any other.
This is the car park of Uber.
Uber.
The entire organisation
that is the fastest-growing business on the planet.
Every week in London,
30,000 people download the app
and order a private car for the first time.
It uses data to influence what we spend
and can even predict what we might be prepared to pay.
Hi. Hi. Is that Didier? Yeah. Nice to meet you.
Nice to meet you. Thanks for your time. All right.
All right, let's go. Cheers.
Since its launch, this controversial company
has been fighting a host of regulatory and legal battles
around licensing and workers' rights.
But that hasn't stopped its growth.
Uber is now used in 400 cities around the world
and is worth more than 60 billion.
Didier, how important is data to Uber?
Data is absolutely critical.
I wouldn't even consider starting without data.
It's become a part of how you design these products.
Because without the data, you're pretty much flying blind.
We need to be able to look across these many millions of rides and...
..gain insights from that.
For instance, with the new app,
we're getting a lot more predictive in where people would want to go
and really at a personal level.
There might be patterns that start emerging where we
have a high degree of confidence
that you might want to go to this place after another place,
or you name it. There's countless scenarios that are possible.
We can predict where you'd want to go.
There is a kind of slightly scary element to that, isn't there?
I wouldn't necessarily say it's scary.
I think that, at the end of the day,
we want to fit in people's lives more naturally.
I'm personally excited to see how we make technology even more seamless.
Nowadays, if you talk to any company in...
..even in the world, I think
they will put data very high on their list.
But one tech giant has seen an opportunity that's not just about
leveraging the customer data of one particular company
but about capturing the data on the economy of a whole country,
and eventually two thirds of the world's population.
In January 2017,
a private Learjet touched down in the dead of night
at Kenya's Kenyatta Airport.
One of the world's most influential tech billionaires
had come on a fact-finding mission.
A single tweet stated his intentions clearly.
He had come to learn about mobile money,
and he started here, in a warehouse on the outskirts of Nairobi.
The initial communication was that
we were meeting with a regional director for Facebook in Africa.
So that was fine because we always like to share ideas.
When we showed up to the meeting,
then, you know, the scope changed and we were told,
"No, no, no, it's not just the regional director for Africa,
"you're actually going to meet with Mark Zuckerberg."
So that was exciting.
He'd come to see how start-ups like this food distribution company
relies on the country's mobile money system, M-Pesa,
to create a sustainable business model.
He walked in, he was in a grey T-shirt and blue jeans.
So very casually dressed.
So you didn't even know until you turned up at the meeting.
And what did you think then?
Oh, I was surprised, like I...
So the question that was coming into my mind was,
"Why would he want to have this meeting?"
And then he asked about how M-Pesa supports our business structure
in terms of how our customers pay
using the mobile money platform, which is M-Pesa.
So that way they don't have don't have to have the hard cash
out in the field, and that also helps,
even just from a security perspective.
His visit was timely.
At the time of his trip to Kenya,
Facebook's subsidiary WhatsApp
was about to trial person-to-person payments in India
with a view to rolling out money transfers
to its 200 million users there.
M-Pesa is the gold standard to follow.
With 19 million users in Kenya
and a third of the country's economy running through it,
it has allowed the un-banked of Africa
to enjoy what the money people like to call "financial inclusion".
It was flattering that Mark Zuckerberg requested to meet us,
and that was enormously honouring for us.
But I think what that also tells us is, you know,
I think even for businesses
operating in Europe and the United States and so on,
one of the big challenges is how do you crack this informal economy?
And if you think about Nairobi,
the people who buy their products out of, like, you know,
formal grocery stores,
they only form about 4% of all produce that is sold within Nairobi.
When you think about 96%, you're talking about...
That's, you know... The rest of Nairobi
is actually buying their produce from typical street vendors.
96%, they are operating kind of below the radar.
Exactly. So if you think about Nairobi,
what that tells us is the bottom of the pyramid is actually
where all the fortune lies.
Mark Zuckerberg recently hired an executive with strong ties
to India's e-commerce and telecom industries to run his Messenger app,
which has 1.2 billion global active users.
Was this visit the groundwork being laid for a much bigger plan?
So he comes here, he provides a version of M-Pesa on Facebook,
on Messenger, whatever it is,
but he's able to have... He's able to upscale. Yeah.
You won't have any transaction charges. Yeah, yeah.
They'll be able to do that,
and they'll be able to make a global service,
but the data will be the thing for them.
That's the point, isn't it?
Exactly. So eventually scale will win out, I think.
But it is...
Let's wait and see how it all plays out.
I think you're being very diplomatic there.
I think you know how this is panning out.
While the rest of Silicon Valley
was seeing the future in shiny new tech innovations,
Zuckerberg had spotted something far bigger
and potentially more important going on in Kenya.
In the tech space is a monopoly.
Peter Thiel has written a book where he basically opens...
..openly sort of encourages every start-up
to be trying to create a monopoly, from zero to one.
The objective is the octopus.
M-Pesa is an example of a very successful octopus,
one that effectively took over the money supply of Kenya
in a covert coup.
Nobody even noticed until it was too late.
For someone like Mark Zuckerberg, that's very interesting.
M-Pesa would give Mark Zuckerberg a glimpse of the biggest prize -
not just providing another mobile money service,
but becoming THE mobile money service.
A monopoly on money itself could be the future for all of us.
Why are Facebook gathering the data that they gather?
They are gathering it for better monetisation. Right?
They have their mission statement,
which is to try and make the world a better community,
and that's quite laudable,
but at the end of the day, it's for the profit motive.
Which is absolutely fine, cos that's how business works,
but do I want them to have the opportunity to control
something as fundamental as where I can spend my money?
No.
As in everything else, there are dangers of monoculture, right?
I mean, this kind of ecological perspective that we understand
in other businesses, other industries.
We don't want a situation where we are all reliant
on one kind of money, and if that goes wrong,
you know, we're all screwed.
So the hassle and pain of paying with cash
could be eliminated for ever.
But let's stop and ask ourselves,
is a post-cash economy what we really want?
It appears not.
There are ever more digital ways of paying
and yet demand for cash has never been higher.
The Bank of England estimate that
there are £62 billion of notes and coins in circulation.
And they don't even know where half of it is.
I used to be in the building trade.
I always used to get paid cash.
I never used to have bank accounts.
I don't like these apps on your phones
or don't really trust the contactless.
I'm just old school - I like to have cash.
They suspect one in six of us are now keeping cash at home.
In this age of electronic money and big data,
the reason behind this is surprisingly simple.
We want to be in control.
Since the credit crisis in 2008,
there has been a big spike in sales of safes.
We saw a 25% increase just in that year,
and then since then, it's been going up
12%, 15% every year.
And it continues to do so.
There's a definite increase.
Nowadays, it's hard to know
whether or not the banks are going to be around.
At least I know, if my money is with me,
then I can get to it any time I want.
Four, five years ago, I was a big advocate of e-money
and getting rid of cash.
But I've completely changed my mind because cash really is neutral.
Cash has this longevity aspect.
It's always there. There's hardly any sort of real-world act of God
that can eliminate the cash you hold in your hand,
and that is very satisfying
and it's, you know, very reassuring.
And given that money is ultimately a sort of security...
..identity, it's all about security,
I think that aspect of cash is one of its most appealing qualities.
Give yourself a monthly budget, and put your monthly budget on the table
and watch it disappear.
You know, 500 years ago,
you could carry your wealth in a little bag of coins.
Now we don't have access to that experience any more.
But even though storing and using cash is perfectly legal,
these days it's tainted with suspicion.
In America, 80% of the cash in circulation is in 100 bills.
They are popular on the black market
and are being used to enable tax evasion and other criminal activity.
But they're also being hoarded by people in developing countries,
where local currencies aren't as strong as the dollar.
If you look at the United States, for example,
the use of cash is going like this.
Issuance of cash is going like this.
And you have to wonder where it's going.
There is more than 4,000 for every man, woman and child.
There are something like 35 hundreds
floating around for every man, woman and child.
But nobody's carrying hundreds in their wallet.
95% of Americans say they don't have any, they never see them.
That's bizarre. It is, but I think if, you know,
suddenly you asked who was holding all this cash,
it wouldn't necessarily be the nice guys of the world.
Most of the people have something to hide.
They're laundering money,
they're avoiding taxes, human trafficking, drug trafficking,
other racketeering.
I don't think there's any question that cash is an important instrument
in these activities, and the Government should make it harder.
So that's another reason to get rid of cash.
Well, I don't think we should get rid of cash.
I think we should strike a different balance.
But I don't really aim to affect how ordinary people use cash.
I don't think we need to do anything there for decades and decades.
But criminals, large-scale tax evaders -
I'm not worried about petty stuff -
there, I think, it's way out of kilter.
So you have to stop and ask yourself,
"Where do you want to draw the line?"
But there's another agenda to getting rid of cash.
Governments have failed spectacularly to collect tax
from global corporations and the super-rich.
So they've turned their attention instead
to the estimated quarter of the global economy that runs on cash.
By getting rid of cash,
they bring this shadow economy under their control
and collect revenue from it.
In India, they've already got started.
Last year, the Government suddenly scrapped
the 500 and 1,000 rupee notes.
The thinking was that any criminals hoarding cash
would suddenly find themselves with valueless paper.
200 people died queuing at banks to take out their money.
The criminal economy, the target, remained untouched.
The thing that India did that was most remarkable,
they tried to do it in a couple of months.
But I propose going VERY slowly.
Five years, seven years, just in the first phase.
Another ten years in the next phase.
Central banks, tech firms and contactless technology
might not have managed to kill cash yet,
but thanks to them, the way we think about it has changed for ever.
Cash, in the shape of coins,
first began being used 600 years before the birth of Christ.
And it was an invention every bit as sophisticated as the iPhone.
Small metal objects exchanged as a token of trust.
That trust is now being handed to tech companies.
But as hard as these tech companies and governments
try to get rid of cash, they can't,
because there's something in the way of the plan - us, human beings,
and our continuing faith in this stuff,
the stuff that makes the world go round.
To explore further how digital technologies
are transforming societies,
go to the BBC web page on screen and follow the links
to the Open University.
Coming up next time...
How work went from something we do to who we are.
They saw it as brainwashing, they saw it as paternalistic.
They found it extremely offensive, intrusive.
The deals that make you work harder...
No free lunches any more.
Right? For anybody.
..and could ultimately replace you with a robot.
We weren't just building a game machine,
this was a machine that was taught how to process language
more effectively than any other machine before.