Smartphones, crypto tokens and internet giants.

Money rules the world, or: The winner takes it all
From smartphones, crypto tokens and internet giants: challenges for the banking world

Burkhard Balz, long-time spokesman for the EPP Group in the European Parliament, has been back in Germany for a year. As a member of the board of the Deutsche Bundesbank, he spoke at the Entrepreneurial School® about how money will change our lives in the future - or rather how money is handled.
Austrians, like their German neighbors, are passionate users of cash: 75% prefer to pay with cash wherever possible. However, the smartphone is also omnipresent: on average, every mobile phone owner wipes the display 88 times a day in order to stay connected to everything that seems important to them. This is where a substantial change in payment behavior develops: Simply loading an app such as Googlepay, Applepay or Bluecode onto your mobile phone makes payment at the supermarket quick and uncomplicated. The high level of availability and simplicity are decisive for the fact that this service is gladly used and has enormous growth potential for the future. From the perspective of financial service providers and traders, the potential lies primarily in real-time processing. Just seconds after the purchase, the money is already in the merchant's account.

When it comes to Bitcoin & Co, Balz avoids the term "cryptocurrency". Instead, he speaks of "crypto tokens", i.e. a virtual payment unit. “A currency fulfills several functions, not only that of the means of payment, but also security and value retention. The only legal currency in the euro zone is currently the euro.“ From a consumer perspective, the biggest problem is the enormous instability. Bitcoin has experienced a price development from 250 euros to more than 17,000 euros in the past five years and back to more than 7,000 euros recently. In order to get this problem under control, so-called “stable coins”, such as the Libra announced by Facebook, are linked to stable currencies and bonds. However, this is currently a niche topic, the further development is not yet foreseeable.

With regard to future regulation of virtual means of payment, Balz demands the principle of "regulating the same business and the same risk in the same way". In any case, this is the task of politics.

Another phenomenon has long since arrived in everyday life: Internet giants, so-called “big techs” such as Apple, Amazon, Google, Facebook, Tencent or Alibaba, which are increasingly pushing into payment transactions. These big techs are characterized by having an immense amount of customers or a big database, highly specialized technical know-how and high financial resources that enable the development and market launch of new services. Another characteristic: They are all located in the United States or in China. Their success is ultimately based on concentration: they act globally and achieve economies of scale and scope, according to the motto "The winner takes it all".

As a solution, Burkhard Balz proposes the development of a European brand in the payment system. It was important to avoid a situation in which one could only choose between payment options for US or Chinese big techs. An independent European solution would stimulate competition and ultimately strengthen European players: "There is enough know-how in European central banks and large banking houses to develop alternative payment systems." Balz sees the complex European data protection system as an advantage: “We have to stop seeing the high level of our data protection as an obstacle. Rather, it is an opportunity: We could use it to ensure that customers' payment data would be protected with a European payment system.”

Burkhard Balz:
Banker from scratch, lawyer and trained banker, many years of career with a renowned banking institution. Also a politician: as CDU member, last 9 years member of the European Parliament, from 2014 spokesman for the EPP Group's financial policy. Since September 2019 board member of the Deutsche Bundesbank with responsibility for payment transactions and settlement systems.