"Check this out, kids."
"What is it, Grandpa?"
"It's a twenty dollar bill. It's made out of plastic. It allegedly melts if you leave it in your car on a hot day, and it's said to shatter in cold Canadian weather. It's a wonder this little guy has survived this long. Back in my day, we used bills like these to pay for things."
"Grandpa, you're weird!"
"And you smell like sadness!"
If old people are to be believed through all of their wild incoherent rambling, then a good number of the things we're accustomed to today will be but a memory by the time we're elderly and gross. Canada Post recently announced they're phasing out home delivery, and now the Canadian Mint is experimenting with virtual currency with its nascent MintChip platform.
Developed in partnership with Ingenico, MintChip is a system in which users have a virtual wallet which, somewhat like public transit cards, can be loaded up by converting "real" currency (ie Canadian dollars) to magical mystery MintChip currency. Consumers will then be able to spend "money" from their virtual wallet housed on a smart phone (or perhaps a wristband), or transfer it to and from a cloud account.
On the flip side, merchants can either accept MintChip currency by beaming the transaction through a point-of-sale machine straight to the cloud, or "collect" the day's sales on a separate machine. The machine can then be brought to a transacting partner, like a bank, and the currency can be deposited at the end of the day. By this point, if you said to yourself "this sounds almost exactly like Interac," you'd be right.
One actual innovation that MintChip appears to offer is the ability to transfer currency on a peer-to-peer basis. Solutions like the Square card reader sound good on paper until you get them into a vacuous convention hall with spotty-to-non-existent (or criminally overpriced) Internet connectivity. MintChip, interestingly, permits offline transactions. Users still have to remember to transfer cash into and out of their MintChip wallets, but they'll be able to set automated processes to keep the total topped up.
Other virtual currencies like Bitcoin have come under fire for facilitating money laundering. Marc Brûlé, the Royal Canadian Mint's Chief Emerging Payments Officer, explained that a number of "risk mitigation factors" were being explored to prevent this, namely a spending cap. When someone holding cash is mugged, he may lose the $20 he had in his wallet; what happens when a MintChip's cell phone is swiped? Brûlé reiterates that a spending cap will hopefully protect MintChip users from losing too much money in that scenario. He expects that cap to be "in the hundreds, not thousands."
Aside from offline P2P transactions, it was a struggle to determine the specific advantages of MintChip over other virtual currencies, or why the world needs yet another payment method. Brûlé himself was hard-pressed to explain how MintChip afforded any compelling advantages beyond a service like PayPal, except perhaps that transaction fees will likely be charged to merchants instead of consumers. In fact, when asked whether MintChip wasn't essentially a state-sponsored PayPal, a distinct chill fell over the interview.
When asked how long it will take something like MintChip to roll out (after Interac and chip-enabled readers seemed to take an eternity), Brûlé implied that MintChip, and other technologies like it, are not yet ready for primetime. "It's a long game," he said, which is likely exacerbated by the fact that iPhone, a major player and influential bandleader in the smartphone market, does not yet support the near field communication technology that MintChip presently requires.
The Royal Canadian Mint with Ingenico are demoing the early-stage MintChip technology this week at the 2014 National Retail Federation convention, slightly over a year after abolishing the penny.