Paypal has led the way by opening up its platform but there will be lots of startups focused on digital money in its many forms in 2011.

Making payments easier and secure is a very bid deal. If you look into the history of the world, there were many times when innovation around money resulted in massive economic growth, and conversely, when there was a lack of payment options the result was economic depression.

For example, look at these innovations around money: International banking and insurance originated with the Medici families in Florence and was responsible for an explosion in international trade; the invention of bonds in Renaissance Italy led to massive creation of wealth and the financing of public works (and wars); the invention of the joint stock company in Amsterdam and Paris led to the financing of railroads, vast economic expansion, and much more; and moving off of the gold standard unleashed a ton of economic growth.

Yes, there are many instances of abuse and bubbles galore but that is vastly outweighed by the explosion of industry and creativity that these innovations in money produced. And we are just at the beginning of further innovations that will unleash new waves of productivity and commerce.

[A very good introduction into the subject of money in its historical context is Niall Ferguson’s book and TV series: The Ascent of Money: A Financial History of the World.]

Coming up…

In February 2011, Brian Zisk and his team are hosting the Future of Money Technology Summit in San Francisco. This promises to be an excellent conference – more details are here: http://futureofmoney.com/moneyconference/.

Startups worth watching…

One of the startups in this space worth watching is Jumio, founded by Jajah co-founder Daniel Mattes (above). Jumio will be launching its payment service in early 2011.

I met with Mr Mattes earlier this the year and I was impressed by what I heard — if he can deliver on his presentation then this will become one of the hottest startups of 2011.

Mr Mattes says he has figured out a way to make secure payments that cannot be hacked. He said he discovered a patent filed by two engineers based in Israel and bought it for several hundred thousand dollars. This technology will make it possible to provide payments services at a far lower rate than the credit card companies because the risk of fraud has been removed.

Jumio is currently working on the infrastructure for the payments system but it will also license its technology to large retailers such as Amazon to run on their platform. He won’t yet say how he can guarantee that his payments systems cannot be defrauded — but I’m looking forward to finding out.

Jumio from Jumio Inc. on Vimeo.

[Cross-posted at Silicon Valley Watcher]