Around 2003, the undersigned had come up with a solution named “Digital Value Imprinted Instrument System” (DVIIS). This was a “Brick and Click” solution to many of the problems of physical instruments which have a monetary value including “Currency”, “Stamps”, “Tickets” etc. (One of the representative solutions is available here). The system could not be commercialized by the undersigned since proper support could not be gathered. At least two major IT companies who were privy to the idea could not see the commercial prospect and failed to take it up for implementation.
One of the implementations of the DVIIS was in what was called “ZE-MO Cards/Coupons” (named as such because it was a Zero Memory smart instrument replacing the smart cards with larger memory).
It appears now that the idea was a little too early for the market at that time. But now when the country is struggling to find a solution to the currency shortage after demonetization, it appears that the Ze-Mo coupons are ideally suited to resolve many of the practical problems that we face today.
The essence of the Ze-Mo system was that there would be a Zero Value physical instrument which would carry its value on the digital server mapped to the instrument. The instrument would be used to transfer value from one to other and could be used for “Digital Stamps”, “Tickets” and also as a “Currency Substitute”. When this concept was being discussed, we did not have the concept of “Pre paid, refillable” cards as we have today.
The “Ze-Mo” cards were promoted as thick paper labels with almost zero material cost (compared to smart cards which were expensive ) which would be distributed free by sponsorers who will have advertisement space on the label (Like UNO cards?) and let people fill it up with money before being handed over to the next person. The value would be verifiable at the server with reference to some code imprinted on the instrument. (It was suggested that this could include an invisible hidden code in addition to a visible code.)
At that time I had also suggested Ze-Mo coupons as a “Verifiable Currency” particularly of high value and repeated the suggestion in 2014 in my article “Black Money Policy of Narendra Modi.. Here is My Idea”. This was also published in naavi.org. At that time nothing was known about the demonetization that occurred on November 8, 2016.
Presently, we are struggling to ensure that the shortage of cash that has resulted from the demonetization does not derail the economy more than what we can bear comfortably. The opposition parties are doing their bit to not only create panic in the minds of the public so that they will hoard available new currency notes but also encouraging all kinds of malpractices in converting black currency stocks to new currency stock with the help of Banks and political party donations etc.
There is therefore an urgent need to energize the system of “Digital Payment Infrastructure” and make it more efficient and secure.
It appears that the Ze-Mo system was well designed for this purpose and even now is well suited to quickly replace the withdrawn currency provided we pep up the earlier suggested instrument with
a) KYC back up
b) Slightly better security than what was envisaged.
One implementable solution is to permit all Banks to print of Ze-Mo slips/coupons like the Cheque leaves in all the security printers available which will look better than the simple labels that I had proposed earlier and sell/distribute it only to identified individuals who provide their Aadhaar number or their Bank number. (Cost of Ze-Mo coupons can be about 20-25% of the cost of printing of a cheque leaf even if similar security printing technology is used).
Banks can issue books of 100 such leaves to their customers which will be equivalent to any currency they wish to hold in any denomination as long as they have the funds in the back end account. (P.S: It may look similar to the Sodexo Coupons but the value would not be printed on the instrument and would only be available for online verification). Customers can use the 100 leaves as different denominations of currency in any mix as they like. Hence the question of shortage of any particular denomination does not arise at all.
The coupons will remain zero value until it is filled up by transfer from the account like charging a prepaid instrument. The difference between a Prepaid card and this coupon is that this would be handed over by the person making the payment to the person to whom the payment is being made.
Holders of these Ze-Mo Coupons would use either a mobile app or internet to transfer money from their existing bank account to the Ze-Mo coupons using the serial number as the mapping. Any person to whom it is handed over can simply check the same App or on the internet, what is the value of the coupon before he accepts it. The query could be made available both on smart phones and on USSD codes so that the recipient gets an SMS as soon as he sends the number of the coupon to the server.
The coupons can later be either used as such for further transfer or extinguished. It is one of the suggestions that the coupons will have a validity period for transfer which will be short (say one month) so that it cannot be used for hoarding cash but has to be in circulation or extinguished.
Compared to the current system such as the mobile wallets, the UPI and USSD, the Ze-Mo system has a significant advantage in the sense that it gives a “Feel of Currency”. Most people would be very comfortable holding the coupon that looks like a bank cheque than nothing at all as in the case of pure digital wallet transaction.
Ze-Mo coupons also reduces the transaction load on the server at the time of transaction since the process of transaction validation by the recipient has to just verify a static data on the server such as (the hash value of the input) instead of validating a payment instruction on the fly and transferring the money from one account to another.
The actual money transfers occurs at a time different from the time of the transaction both for loading and unloading the money to the coupon from a bank account (at the payer’s end )and from the coupon to a bank account at the recipient’s end. This would address the problem of “Transaction peaking” at different points of time during the day creating server crashes.
Additionally, Ze-Mo coupons would reduce the number of digital transactions by at least a factor of two or three if we presume that the coupon is used for payment by the first recipient to at least one other person before it is extinguished.
The only risk is that some may forget to credit the coupon to his bank account and allows it to expire.
In such cases, an exceptional system can be made for the holder to go over to a Bank, submit his identity and get the money credited to his account. Obviously he will be answerable to the tax authorities if required.
Thus the Ze-Mo coupon system if introduced can quickly address the issue of shortage of currency which will be a huge political issue after 31st December 2016.
Naavi
More information on how ZeMo system can be adopted to banks (ppt prepared in 2003)
