Do we need SMART MONEY?

Digital smart money could very well be the next disruption hitting the finance market. However restricted money has been in use for many years now. The food coupons that many companies give its employees is a good example of smart money. Currently, Sodexo, is a good example of that. They have different coupons for food, shopping, etc. The various gift cards from the retailers or flying miles that we get by flying a particular airline is also a kind of restricted or smart money.

                Given this, it is easier to see the circumstances where smart or restricted money can be useful. Any situation where the money is being given for a specific purpose is where smart money will be useful. This way the payee cannot make wrong use of the money given by the payer who decides how the money is to be used. Various examples can be given for this –

• Specific types of allowances given by a company to its employees
• Taxable/non-taxable money
•  Pocket money given to kids by their parents
•  Donations given to charity organizations for specific purposes
•  Money kept aside by corporations for certain specific activities like investment, debt fulfillment, expansion, etc.
• Food coupons given by the governments in some cases to the needy
• Any other government or other organization’s help provided for a specific purpose
• There could be many such examples and ways in which restricted money can be used

While there are various ways in which smart or restricted money can be used, there are a multitude of problems that it is likely to solve. They key aspect is guarantee of the money being used for the right purpose.

• There are various situations when we as individuals need to give money to another for a specific purpose, but there is no way for us to track if the money was used that purpose only. For e.g. giving money to kids for food at school or for books. Giving money to someone for medical expenses. With smart money, this problem of ensuring that the money is used for the right purpose is resolved.
• This problem of right purpose is there even for institutional or individual contribution to say a charity or social cause. If smart money is donated or loaned for a specific purpose, then it will bring a certainty in the use of that money for it.
• Corporations today put aside certain cash for specific purposes in their balance sheet. However, there is no guarantee that the money will be used for that purpose only. Such fraudulent behavior will be restricted if the money is kept aside as smart money for activities like investment, expansion etc. This way shareholders are certain that it won’t be misused and if any change in type of restriction is to be made, the shareholders can have a say in it.
• Government subsidies or social security scheme can also be done through smart money, thus avoiding possible misuse of the funds for other purposes

While there are many such examples and innovative ways in which smart money can be used, one thing that we should remember is that the core issues that smart money solves are –

• Transparency
• Non-anonymity
• Trust
• Guarantee of correct usage
• Fraud-free
• Trace-ability
• Organization of priorities

With various new disruptive ways of money management coming into picture it becomes more important for us to ensure that these disruptions are also supplemented with the correct and valid use of money rather than anonymity in such transactions making it safer for us to embrace the new technologies better.

What do you think?