and the possibilities for the financial industry

Raise of virtual currencies

NetFinance Conference, London

Harrie Vollaard, Innovation, November 19. 2013

The raise of alternative currencies (C2C)

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3

The raise of alternative currencies (B2B)

http://www.complementarycurrency.org/ccDatabase/maps/worldmap.php

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Why

1. Change within the financial industry:

a. The financial crisis has changed the playing field; banks seen as part of the problem; public seeking fair solutions.

b. Shift from financed by banks to financed by the capital market

2. Change within society: Raise of sharing economy

3. Change of technology: Technology means business models for financial services will change; financial institutions need innovations.

Money 1.0 = Past

Decentralised & Disconnected

When money was physical in the form of valuable objects such gold & silver coins, tokens, or the records of local networks of trust.

Money 2.0 = Present

Centralised & Connected

97%+ of money we use is electronically and facilitated by banks.

Money 3.0 = Future

Decentralised & Connected

Private currencies issued by companies, communities and, perhaps, local authorities.

1. Trade Exchange B2B - mutual credit Business 2 Business, unit = trade credits/dollars 2. Corporate Barter B2B- central credit Issuing, unit = trade credits/dollars

3. Corporate Trade Exchange B2B - hybrid Corporate/ Trade Exchange, unit = trade credits/dollars 4. Loyalty Exchange B2C - hybrid Trade Exchange business 2 citizen , unit = points

5. Air miles rewards - propriety, coalition operated by airlines unit = air miles 6. Loyalty programs - propriety, coalition consumer rewards, unit = points

7. Time bank - social exchange, unit = hours 8. Time bank - professional exchange, unit = (multiple) hours

9. Local Exchange Trading System C2C - mutual credit citizen 2 citizen, unit = LETS credits 10.Local paper currency - discount shopping, = paper currency/scrip

11.Local fiat currency - paper and digital 12.Social media currency - Facebook, QQ, unit =points

13.Games consoles currency - Wii, Xbox, play station etc, unit =points 14.Gamer currency - e.g. Second Life, unit = points

15.Charity exchange - mailing list exchange for fund raising, unit = points 16.Media exchange - discount shopping = paper currency/scrip/points

17.Incentive exchange - employee or citizen rewards program, unit = points 18.Metal based - gold, silver and copper coins or digital, Liberty Dollar etc.

19.Commodity based – baskets of commodies like Ven or energy-backed currencies 20.Cryptographic - encrypted files created by CPU power e.g Bitcoin, units = depends 21. Reputation – based upon social media reputation e.g. Flattr, Mobbr, units = points

Diversity of Currencies

Trade currency within Barter network

Barter network (Mutual Credit Systems)

• A group of businesses create a group credit for their goods & services

• Each business in the group is given an amount of credit that is backed by the commitment of the other businesses.

• Either electronic database, or even coupons act as a currency that is backed by excess capacity of the business community.

Worldwide, more than 400,000 companies are members of one or more of the hundreds of Trade (“Barter”) Exchanges. Various sources estimate the volume of non-monetary

trade worldwide to be between 15% to 25% of the total.

Examples of existing barter networks

Bartercard was founded in 1991 and has about 75,000 cardholders operates in 13 countries in the Asian Pacific Rim (including Australia), Middle East, and Europe.

ITEX was founded in 1982, ITEX is a publicly traded company and is one of the largest trade exchange networks in the United States, and has about 24,000 cardholders in the North American

market.

IMS was founded in 1985, IMS is a publicly traded company and is one of the largest trade exchange networks in the United States, and has about 23,000 cardholders in 51 North American

markets.

BBX was founded in 1993, BBX currently has about 8,000 cardholders in Australia, New Zealand, India, Costa Rica and China. BBX is the first barter exchange manager to list on the Australian

Stock Exchange (ASX)

WIR was founded in 1934 and has about 80,000 cardholders operates in Switzerland only among whom is traded approximately CHF 2.5 billion annually (over $2 billion US dollars)

All of the DEBT plus all the CREDIT

in the system will always equal ZERO

Credit + Debt = Zero

Barter network = Trade Exchange

Business Non Member

UNSOLD = Dead Capital Excess Capacity

Empty Hotel Rooms Idle Stock/Inventory Empty Appointments Lost Sales/Lost Profits

Vacant Restaurant Seats Under Performing Assets Downtime Idle inventory

Business Member

TRADE CREDIT INCOME = New Customers

New Additional Sales New Extra Income

Improved Cash flow Improved Cash Profits

Replacing Cash Expenses

Cash Income Trade

Credit Income

Cash Expenses Cash

Profit

Trade Credit

Expenses

Cash Income + Trade Credit Income

Cash Income UNSOLD

Dead Capital

Cash Expenses Cash Profit

Potential Cash Income

Businesses UNSOLD is Dead Capital

Trade Credit income REPLACES cash expenses which in return increases profits

Lost Income

Unlocking unsold capacity

Why Popular? Unsold Capacities

ADVERTISING

AIRLINE

HOTELS

LABOUR

MANUFACTURER

PRINTER

RETAILER

RESTAURANT

SERVICES

All Businesses Have UNSOLD Capacity Or Inventory

Advertising space and slots

Tickets empty seats

Rooms seasonal business

Jobs unbilled hours

Production and idle inventory

Down time on printing presses

Stock and end of line goods

Table seats quiet mid-week

Time unfilled appointments

UNSOLD

UNSOLD

UNSOLD

UNSOLD

UNSOLD

UNSOLD

UNSOLD

UNSOLD

UNSOLD

Advantages

1. Provide the productive sector with a reliable source of credit that is sufficient, interest-free, and community controlled.

2. Improved customer retention

3. Improved turnover, profit and liquidity ratio:

o Improved turnover between 5% - 20% (unlocking unsold capacity)

o Saves EURO’s by interest free supplier credit

o Improved cash position by €5K – € 200K

o Reduce dependence on banks and scarce currencies ($, €, ¥, etc.).

Time currency within WeHelpen

2-12-2013

2-12-2013

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6 principles

• Earn

• Spend

• Appreciate

• Donate

• Redeem

• Stimulate

22

Fu

nd

M

ark

etin

g

We H

elp

en o

rganis

atio

n

Nationwide reward organisations

Reward

neighboorhood B

Nationwide redeem options

Redeem option B Redeem option C

Demurrage CC Reward Exchange Redeem Donate Marketing

Reward Club C

Demurrage

• 1% per month

• < 50 credits: no interest

• > 50: 1 credit per month

• Being part of the system

• Accounting and credit clearing services

• Financial analysis and determination of creditworthiness

• Safe storage of various currencies and digital assets

• Payment systems

• Sales of financial products (cross sell), like insurance

• Revenues derived from:

o service fees (transaction fees, evaluation fees, brokerage fees)

o data analysis, advertising and sales of additional services

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Future of Banking Services?

Wellbeing

customer

Physical

Social Phychological

Economic Environment

Focus Financial industry

Focus Timecurrency & Barter network

Complementary systems

Summary; it is just the beginning

• There is potential from these innovations in terms of their wider effect on society.

• As a cooperative bank needs fair and sustainable innovations. The challenge is to find fair business models for the bank using complementary currencies.

• Learning by doing: be active in a number of ways where Rabobank enhances its co-operative approach to monetary innovation, and has horses in the race and shapes the rules of the game.