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From globalization to fragmentation: pixelating payments

by Viktoria Dijakovic | Jan 31, 2018

Pixelated_smallFast returns for zero effort is what drives a lot of modern investors, a rush that has now grabbed the attention of the public. Indeed, everybody wants a piece of the crypto-craze as stories of bitcoin-owners-turned-millionaires are making headlines across the globe.

The digital gold rush is stronger than reason pushing many to ignore the risks related to Initial Coin Offerings (ICO). Of course, there is no such thing as an investment without risk, but in the case of ICOs the risk factor is pushed to the extreme. The potential losses linked to ICOs should outweigh the anticipated benefits – which are, literally, only as tangible as the investor’s expectations. But quite the opposite is happening: the greater the risk, the more hopeful souls are joining in on the ride.

ICOs are regulated by no one and offer no dividends:  the hopes and expectations of investors are, for now, enough to nurture their appeal. What many seem to forget, especially newbies to the world of traders, is that by investing in an ICO, you are fundamentally giving a donation (also known as crowdsale) to someone you don’t know; no strings attached. If the ICO fails, as many have already, your savings will too.

But if you’re ready to take the risk in hopes of making it big, than there’s a new kid in town: Premier Football League team Arsenal signed a deal with gaming company CashBet to launch a new cryptocurrency, the CashBet Coin. After Kodak, Telegram and Venezuela’s dubious petro, football leagues also want a shot at the virtual payments-scape.

What is most alarming is not necessarily who’s rushing for a shrinking piece of the pie, but how many are joining the frenzy. I quickly checked Coinlauncher to see how many ICOs are currently looking for funding, and the numbers are startling. Experts used to predict the death of checks, then of cash and some have been speculating on the dusk of credit cards with the arrival of mobile payments. Yet, far from disappearing (though arguably checks’ popularity has been plummeting) these payment tools have been increasingly cohabitating.

Is the multiplication of cryptocurrencies contributing to a generalized fragmentation of payments? In the case of Arsenal’s CashBet, the virtual token is strictly meant for online betting. KodakCoin is a cryptocurrency for photographers. And if Starbucks were to launch a FrappuccinoCoin, would it strictly be available to their pool of caffeine-addicts? Via their existing rewards program, they already have access to 14.2 million loyal members in the U.S., so the establishment of their own currency would no longer strike me as surprising.

If digitization was once synonym for globalization, it is increasingly becoming synonym for fragmentation, connecting smaller and smaller groups of people around specific interests. And if this has become a major topic of debate particularly around social media platforms, it seems to be expanding to the payments ecosystem: we’re zooming into such detail, that we no longer see the bigger picture but a collection of pixels, for better or for worse.


* As I was preparing to publish this blog, completely by accident did I come across an article about Starbucks' CEO Howard Schultz's interest in digital currencies, which only reinforces my argument about fragmentation of payments.

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