Money enables people to compare quickly and easily the value of different commodities, to easily exchange one thing for another, and to store wealth conveniently. Before coins and banknotes, different cultures chose objects or materials to represent value: shells, cattle, skins, salt, grain and cloth.
Possible Economic Consequences of Digital Cash
The on-going adoption of digital money has been driven by three factors. The first factor is that digital money is cheaper than cash to handle, cash costs society as much as 1. Savings arise from: 1. Reduced costs from saving time or transportation.
E-money can be used for payment transactions, with or without bank accounts. The great advantage of course is a cashless payment system that makes money transfers of any size quick and easy.
The second factor is the ability for people and systems to connect digitally, enabled by the growth of mobile and fixed line networks, and underpinned by maturing technology standards and protocols e. Increased connectivity is also at the core of efforts to increase financial inclusion through digital money, where a lack of bank and cash infrastructure and ability of individuals to authenticate their credentials is traditionally cited as an underlying challenge.
The final factor driving adoption is mobility. People, devices and transaction locations are literally moving and consumers are seeking more convenient ways to pay.
- Apple Pay is a contactless payment system that can be used with an iPhone, Apple Watch, or iPad to make payments in a simple, secure, and private way.
- Electronic money refers to money that exists in banking computer systems that may be used to facilitate electronic transactions.
Consumers can and want to shop from their own home, send a payment from an app on their PDA, wave a contactless card to use mass transit or pay for their Uber ride automatically.
And as people have migrated, so too has boomed the digital money of International remittances.
- Currency can be exchanged electronically using debit cards and credit cards using electronic funds transfer at point of sale.
- Digital cash will bring us benefits as well as problems.
On a twin track to the three underlying drivers comes innovation and competition. As banks and payment schemes struggle to cope with legacy technology and stifling regulation, new entrants have arrived.
Electronic Money (e-money), Explained
In the case of Square, Paypal and Stripe, the competition is aiming to reduce the cost of accepting digital money or making digital payments. These new entrants in the main seek to digitise and substitute previous cash-based payment.
The most disruptive new entrants may prove to be the crypto-currencies, for example Bitcoin, and the associated underlying and de-centralised blockchain technology. Alongside the commercial innovation sits moves by both governments and central banks to accelerate the move towards digital money.
While reduced costs form part of the logic to do this, so too does the inherent ability of digital money to carry a negative interest rate, something which it is not possible to do with cash. In Denmark, the Government has gone further, announcing in that selected retailers will be able to refuse cash, paving the way for a truly cashless society.
Supporters say that not is it possible to make money on the exchange of electronic money will this enable banking systems to become more productive but that it will also ensure that taxes will be paid and only legal transactions will take place, putting pressure on both the informal and black economy. One downside of the shift to digital money has been the enormous growth in fraud.
Physical money has been with us for thousands of years for a reason. There is, arguably, simply no alternative system of payment that is as convenient, reliable and anonymous.
Electronic Money, or E-Money, and Digital Cash
Libertarians are at pains to point out the benefits of retaining economic privacy, not having digital money transactions surveilled or giving government the ability to block payments or central banks more power.
The result, as can be seen in the US, is that the absolute value and volume of applications to make money online in circulation has continued to grow.
Looking ahead will see the existing payments and banking chain spreading out and fragmenting, leading to further growth in non-traditional financial institutions seeking to control the payments interface and developing their own financial services e.
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Amazon Payments, Amazon Lending Programme and retail offers e. Alibaba, Google Shopping.
Yesterday I explored what money is. I said it was a promise to pay that is backed up by the government, which is in turn backed up by its ability to tax. That explanation did not, however, explain how electronic money is created, because it has to be. This recording does that.
To enable this, there is also likely to be further collaboration between organisations e. Google Wallet.
There will also be growth in alternative currencies and money networks, and the first state issued flat digital currencies.
Consumers will continue to adopt digital or contactless payment over cash and digital wallets will start to eclipse the physical wallet.
Checkouts will move from place to device as payments continue to shift from an active to a passive process e. To combat fraud, and keep transactions simple and safe, multi-factor authentication will become the norm e. More digital money will bring about increased socio-economic mobility, increase the ability for itinerant workers to live and work in a new country, and will enable 1Bn more people to be financially included within 10 years.