Over the past few years, much attention has been paid to the future of money. Money has value only as long as the value is guaranteed and as long as we consider it valuable and accept it as a payment method. However, today, trust in money and its value is under pressure. Technological progress, combined with rather dramatic economic and social changes, has created the growing popularity of payment apps, eCommerce, cryptocurrencies, and other fintech solutions. So, the main question is whether cash will disappear or not?
“Digital payments have long gone from a rare to standard practice. However, the transformation of the financial landscape involves profound changes and is a serious challenge for business, society, and government. Some countries have different laws and banking structures that create barriers to non-cash payments such as Bitcoin, which can be difficult to regulate” — Eugene Bazhan, Head of Business Development at Finscanner.
Financial digitalization: pros and cons
The growing availability of digital payment systems offers businesses and customers a wide range of options, all of which promise transparency, efficiency, and convenience. It also allows money and time-saving opportunity by reducing the manual reconciliation, counting, and processing of cash. Governments would no longer have expenses with money printing.
Essentially, the advantage of digitalizing the payments process is that any person with a mobile phone can make cross-border payments and purchases conveniently fast and cost-effectively. On the other hand, not all people around the world have access to the Internet and digital services, which calls into question the speedy transition away from the use of paper money.
The key issues of the digitalization process are interoperability, integration, and security. Since the digital nature opens up opportunities for data mining, it can compromise users' privacy rights, as well as increase the chance of cyberattacks, leading to data theft. If we consider the use of cryptocurrencies as an alternative, namely decentralization, it might solve some of the issues but still carries certain technical difficulties and risks. While data recovery with centralized storage is possible, there are difficulties with decentralized one. Legal risk is especially evident in public or anonymous systems, as well as in smart contracts. There are also risks such as blurred responsibility and confrontation in distributed ledger systems when individual participants try to verify fraudulent transactions.
The imperatives of economic and social change
One can speak of serious shifts in the monetary space only in close connection with socio-economic changes. There is a clear interdependence between socio-economic conditions and the success of specific forms of money and payment mechanisms. Three groups can be distinguished here: 1) technological advances that open up new opportunities for payment and settlement mechanisms; 2) transition to a global knowledge-intensive economy; 3) equal access in more diversified societies. The interdependence of these groups reveals the potential emergence of new payment systems and, possibly, forms of money.
While many technological developments are already on the market (often in a rather raw form), the issues of transitioning to a global knowledge-based economy and providing equal access are still open.
The future of money
In the near future, credit cards and cash will continue to dominate. However, the role of the latter will continue to decline over time as technology advances. It is expected that the market and world order will continue to drive the development of socio-economic conditions. Initially, issues of anti-fraud, storage, transfer costs, and processing times in complex payment systems, will be addressed. At the same time, the growing acceptance and use of blockchain technology should open the door to a ubiquitous range of adoptions and additional solutions. This will do nothing more than take advantage of improvements in existing technologies, namely, optimizing the costs of the payment system, reducing and redistributing risks, and attracting consumers with ease of use, security, and privacy.
Since this is an ongoing and not an overnight process, we suggest you keep up to date with the best financial services on the market. Finscanner marketplace is there at your service!