EPCA Speaks - James Turk, GoldMoney founder and chairman

What are your key points for discussion at the upcoming EPCA conference?

The essential nature of currency has evolved over the years from a tangible asset like gold or silver to a financial asset, specifically, a bookkeeping entry that is really nothing more than a promise to pay. The result is that many people today have lost sight of the risks inherent in payments that are made with financial assets, regardless of the technological advancements that have been achieved to make currency circulate more easily. At EPCA I will explain why this payment risk inherent in national currencies exists and identify the only possible way to eliminate it.

What made you decide to get into the online payments business? What kind of approach does GoldMoney offer to online payments?

In February 1993 I filed my first patent application for “digital gold currency”, which was granted in September 1997. So even before the commercial possibilities of the Internet became widely recognised, I saw the business opportunity to create a global currency that would enable instantaneous 24/7 non-repudiable payments made outside the banking system, which describes GoldMoney’s payment offering.

GoldMoney payments operate independently of the global banking system. What are the advantages and disadvantages inherent to such a business model?

In recent years we have again experienced what has been a repetitive feature of the global banking system throughout history – banks make bad loans and get into financial trouble, threatening the safety of currencies placed on deposit with them. But people always need a safe place to keep their money and understandably don’t want to worry about bank solvency, which highlights one of GoldMoney’s important advantages – our customers own gold and silver, which are tangible assets and not some bank’s ‘promise to pay’. Thus, GoldMoney eliminates counterparty risk, and consequently, also eliminates the time consuming and expensive ‘clearing & settlement’ process required in bank-based payments. This result means that payments in GoldMoney are instantaneous and 24/7. As people become familiar with GoldMoney’s offering, we are overcoming the disadvantage that there is a widespread misunderstanding about gold and its unique and inimitable advantages.

Some of the most interesting developments on the online-oriented payments front are …

There is growing recognition that bank-based payment systems are risky and not suited for global online commerce. Consequently, sites with large user bases are exploring alternatives to meet the needs of their ‘community’. Facebook credits is one example.

Many industry experts seem to hold the opinion that the end of cash is near. In your opinion, is this a sound approach or is this just another myth standing in the way of actual facts?

Cash is inefficient and costly, but it does have advantages. Consequently, I do not expect it to completely disappear, even though it will become a less important part of commerce, continuing a trend that is now well-established over many decades.

From your perspective, what are some of the consumer/merchant benefits from an online payment – centered approach?

Currency has always evolved over time, and I expect it to continue doing so. The reason of course is that currency plays the central role in commerce. So if we can make currency circulate more efficiently, the result will be more opportunities for commerce, which is a good thing. This interaction between individuals is the essential nature of free markets and the society in which we live, and the resulting commerce helps humankind raise our standard of living. Online payments is important to this process because it offers the lowest cost alternative to make payments. The high costs associated with outdated payment mechanisms are an impediment that hinders commerce.

The availability of a range of payment methods serves a variety of needs. Because of that, what we are likely to see in the near future is…

…gold returning to its rightful and traditional role in the centre of global commerce. After all, gold has been money for 5000 years and has lost none of its attributes that made it money in the first place. And modern technology in the form of “digital gold currency” enables gold to overcome those disadvantages that stopped gold from circulating as currency. Online commerce will be enhanced with the emergence of a single currency suited to the needs of global commerce, which describes gold’s historical role as international money.

In your opinion, what impact will the commercialization of Facebook Credits have on commerce/payment in the virtual and social space?

It’s an interesting development, and it is likely to have a significant competitive impact to companies making national currency payments. The weakness of course is that it is still a “credit” and not a tangible asset. So these credits are only as good as Facebook’s financial capacity to make good on those credits, which is the same weakness of national currencies.

How does GoldMoney contribute to the development of the online payments industry?

We are giving customers another choice in payments, with the unique advantages that GoldMoney offers, namely, payments that are instantaneous, 24/7, low-cost and are made without the various payment risks associated with payments made through the global banking system.

What are your expectations from EPCA?

The program indicates that there will be some interesting presentations, which I look forward to attending. And I look forward to meeting others in the payment industry.