The next leap in innovation was e-transfers and online banking services. In the 1990s, debit cards were the new big hit. In the 1970s, credit cards were leading edge - around the same time that Pink Floyd and Led Zeppelin dominated the music scene. They’ve been driven by technology and consumer demand for efficient ways to pay for things. Since we started issuing bank notes, there has been a parade of non-cash options introduced to our payments system. We also target inflation, which means that the internal value of money is predictable. It is accepted almost everywhere, there’s very little counterfeiting, and the issuer - the central bank - won’t go bankrupt. 1 The cash you have in your wallets perfectly meets the three criteria of money. The Bank of Canada has been issuing bank notes since 1935. These privately-issued bank notes ultimately failed to provide what the economy needed and so central banks were given this responsibility. They were issued primarily by commercial banks in Canada and the United States before those countries created central banks in the early 20 th century. The form of money we know best is bank notes. When you work during the summer you need to be confident that every dollar you earn is still going to be worth a dollar when it comes time to pay your tuition.įinally, money must serve as a unit of account, which you need in order to compare prices - like comparing the value of the new BlackBerry with other mobile devices on the market. Second, money must serve as a store of value. The alternative is bartering, but that is complicated and inefficient. For this to happen, money must do three things.įirst, money must serve as a medium of exchange: you pay tuition you receive an education in exchange. They are money because people accept them as money. None of these objects, except for the gold and cocoa beans, has any meaningful inherent value. At one time, playing cards served as money, as well as cowrie shells, cocoa beans, gold and, eventually, bank notes and coins. The reason I’m showing it to you is because it illustrates how money has changed throughout history. It hangs in one of the Bank of Canada’s meeting rooms. The image you see above, is a painting by Canadian artist Blair Ferguson. When you look at history, money and payment systems reflect the societies they serve - and like societies, they have been transformed by technology. It matters to the Bank because of the potential over time for e-money to alter the fundamental payments architecture in Canada and around the world.

It’s also about the financial risks you face if you use it. This matters to you because e-money is not just about how you pay for things.

Finally, I’ll talk about the benefits and risks of these innovations. Second, to get a sense of proportion, I’ll talk about how e-money is currently being used relative to other payment options like cash or debit. Money and associated means of payment have changed over the years, but it seems never as fast as they are changing today. First, I’ll start with a brief historical perspective. The Bank of Canada is paying close attention to e-money, given that our job is to issue currency, promote financial stability and oversee Canada’s payment systems. It’s fascinating the way technology and consumer preferences are pushing the boundaries of how we define and use money. What has changed, though, is how we pay for things. Many things haven’t changed much since then - many of you must pick up a coffee on the way to class or catch up with friends at Wilf’s. And I picked up extra cash working as a waitress at Wilf’s. That’s when coffee cost less than a dollar and long before I had a credit card. When I was a student at Wilfrid Laurier in the 1980s, I started every day with a coffee, and I bought that coffee with cash. I am also honoured to be your first economist-in-residence for a day. I am happy to be back here in Waterloo to speak with you today about money in a digital world.

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