Currency at a Crossroads

Currency at a Crossroads

The world is going digital. Will your money follow?

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What’s the difference between U.S. Dollars and Monopoly money?

There’s nothing inherently valuable about either, but one is used in a game and the other we collectively agree to accept as currency. As Adam Smith once wrote, “All money is a matter of belief”. These words are as relevant today as they ever were.

Using digital currencies, we can exchange money at the tap of a button — all without ever seeing a cent.

But while modern payment methods offer unparalleled speed and convenience, cash still sets the bar for privacy and security. So is the slimming down of our wallets such a good thing? And is there still a place for cold, hard cash in our future?


The Internet has made payments more abstract. We exchange money at the tap of a button without ever seeing a cent.


How Did We Get Here?

Currency through the Ages

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Test Your Knowledge

Which of the following items were NOT once used as currency?

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If all the money in the world was divided equally, how much money would each person have?

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Where was the first mobile wallet developed?

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Bitcoin

Working in the shadows over the last decade, anonymous coders created a decentralized digital currency designed to revolutionize the world. It may sound like a sci-fi movie plot, but Bitcoin is real.

Bitcoin is a virtual currency that can be sent anywhere in the world through the Internet. Each Bitcoin is one of a finite amount in existence, and to avoid double spending, transactions are recorded on a public, communal ledger called the blockchain. Ironically, the industries that Bitcoin was designed to disrupt are increasingly viewing blockchain as the potential future of fintech.

One of many similar cryptocurrencies, Bitcoin is the most widely used—accepted by several major retailers including Microsoft and Overstock.com. Despite greater adoption, only 3.9% of Internet users said they use Bitcoin on a monthly basis (Figure 1).

Bitcoin has also had security road bumps. Several large, global cryptocurrency exchanges have lost tens of millions dollars from high-profile hacks.

Ultimately, Bitcoin is a difficult concept to grasp. Unlike fiat currencies backed by the government, its value lies in the eyes of its beholders. Bitcoin can’t be converted into dollars at most banks and only a handful of businesses accept it as a form of payment.

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Which of these is NOT a cryptocurrency?

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Despite reports of cash being on life support, it’s far from dead:

85% of all global transactions
are made in cash.


Cash has remained the gold standard in currency
since we were on the gold standard

How are Currency Trends Impacting Cash Usage?

GLOBAL CASH INDEX : Estimated Percentage of Payment
Transactions Done Using Cash Methods

0%

Africa

0%

Asia Pacific-
Developed
Countries

0%

Asia Pacific-
Emerging
Countries

0%

Europe

0%

North America

0%

Latin America

Test Your Knowledge

What is the most valuable currency in the world?

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U.S. Currency Survey

Western Union surveyed Internet users about their spending habits to find out how
the changing payment landscape is impacting currency usage in the U.S.

Currencies Coexist

Payments Used on a Monthly Basis
Cash
56.7%
DEBIT CARD
54.2%
CREDIT CARD
43.2%
p2p app
9.1%
BITCOIN
3.9%
MOBILE WALLET
3.5%
other
0.7%

Cash is Still King

Weekly Cash Users

24.2%

75.8%

Yes

No


Payment Tech Still Nascent

Technologies Used for Financial Transactions
Amazon Dash
3.1%
Bitcoin
3.5%
Mobile Wallet
13.7%
P2P Apps
31.8%
none of the above
57.3%

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Test Your Knowledge

What major event brought an end to the U.S. gold standard?

Guesses Remaining: 2

Technologies will continue to
emerge that change
the way we pay.

While cash is not exempt, the digitalization of currency doesn’t eliminate the need for paper money. Each form of payment has its own distinct advantages and disadvantages. Just as cash and credit cards co-exist today, so too will innovations in the payment landscape.

Bitcoin may not be the future, but we won’t be swapping sheep and cows for a new smartphone anytime soon either.

And while its reign may not last forever, we should ask ourselves: What would the world look like without cash?

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References

  • §: eMarketer, For Millennials, Cash is Still King, March 2016
  • †: PWC, Payments, a Landscape in Motion, June 2015
  • ‡: Survey: Results are based on a survey conducted on the Google Consumer Surveys publisher network on September 1-8, 2016, with a random sample of 2,243 Internet users, aged 18 and older, living in all 50 U.S. states and the District of Columbia.
  • Question 2: CIA, The World Fact Book, December 2014
  • Question 5: XE Currency, KWD Kuwaiti Dinar