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Coins and paper will soon be a history replaced by cryptocurrency. The future with no banknotes and bank offices is predictable but how will it look like in actual life? And what is money after all? It is an exchange object, which has value today and will maintain or grow its value tomorrow.
Creating new value
First of all, transformation of money to digital form is logical evolution of currency in the digitalization era. When our lives turn to virtual internet dimension, more and more technology-driven ideas appear in virtual money sphere. Even though cryptocurrency is still a new and untamed monetary innovation, some advocate it’s prosperous future up to being the main global currency.
To start off with the obvious example of Bitcoin, which had its rises and falls, is still in game with $3.2 billion market cap. Obviously, comparing it to PayPal with $60 billion worth of transactions every quarter, Bitcoin is rather small. On the other hand, it is rather young. As Franco Daniel Amati, co-founder of Bitcoin Argentina and Espacio Bitcoin, mentioned: “The digital currency is characterized by its decentralized nature, independent of government and corporations, but also highly volatile compared to traditional currency.” Indeed, Bitcoin is not a bank and money transfers do not apply high bank transfer percentage. But the biggest achievement and innovation is Bitcoin’s blockchain technology. In January 2015, Cameron and Tyler predicted the growth of market cap up to $1 trillion based on rising number of corporation utilising Bitcoin’s blockchain. If the forecast is right, it makes Bitcoin price to reach $50,000 within decade.
Independent currency is not something governments approve, so they[nbsp]try to take cryptocurrency under control. For example, Canada attempted to produce own e-currency MintChip in 2012. The idea did turn out to be as good as Bitcoin. In fact, Canadian government created rather digital payment mechanism than new currency. Project did not gain expected results and is being sold to private sector. Bitcoin is independent and decentralized – that is its advantage.
Finally, in the future when Bitcoin makes the competition to the traditional banking systems there is one question left: how banks will survive. And the answer is obvious to adopt and cooperate with cryptocurrencies. According to McKinsey, new payment systems have also led to the emergence of virtual currencies. For instance, Bitcoin has it’s mobile wallet, but it is far not as convenient as Apple Pay.
Using Apple Pay to make a payment in the store, there is no need to open the application. Apple Pay activates itself, when you hold iPhone next to[nbsp]the contactless reader. The approval of the payment is done with Touch ID making the process completely secure. Moreover, app can contain dozens of different cards, so there is no need in thick wallet or limited cardholder. Apple makes its way turning the smartphone the base of our lives. It turns to be not as complicated as it seems – just to virtualize daily actions in the applications. But who centers whom: smartphones – people or vise versa? Find answer to this question here.
Plenty of banks have mobile applications, but usually in order to solve the problems or open an account you[nbsp]need to arrange a meeting in the bank. The traditional financial service concept, when you have to come to the bank office and stay in the line for hours has outlived itself. Welcome to the full mobile banking with no bank offices – everything in the mobile application. Financial services become more costumer-oriented and account for time and convenience. Obviously, USA has been adopting mobile technologies for a while now, but what about the rest of the world?
That’s where millennials found themselves. For instance, Ukrainian mobile banking start-up Moresise. Moresise Bank is the 1st mobile bank by “mobile-first” model. In mobile application you will be able to open and control accounts, order the card, check analytics. The official documents will be delivered to costumers in matter of hours after ordering them. The mobile banking is targeted for young generation 25 – 35 years old.
Lets not forget that there are 2,5 billion people with zero access to financial services. Nevertheless the smartphone penetration in the regions like Africa is growing incredibly. Combining those two facts together, it is clear that some countries cannot apply the traditional banking system as effectively as mobile banking. As stated by McKinsey Global Institute, Safaricom’s M-Pesa service in Kenya and Tanzania now allows more than 15 million users to transfer money through mobile phones, making mobile minutes interchangeable with money. Read more about mobile banking and digitalization of Africa in our article: Africa jumps to future: from charity to digitally.
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And meanwhile world adopts cashless society or creates it from the ground, several countries point the way in cashless economy. Sweden, the worlds most cashless economy is expected to reduce internal cash use 20-50% by 2020. No cash means that all transactions are turned to data. According to McKinsey, large banks already own up to 4 petabytes, but only one third of them uses Big Data possibilities. Already today there are organizations, which credit make decisions based not only on bank account information, but also on social media profiles. Advanced algorithm assist in decision making process on any geographical location. Implementation of Big Data opens new doors in burglary tracking and advanced client financial service. The biggest problem of online is cyber security and fear of changes. Once we pass these obstacles, humanity is ready to move forward.