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.
Which of the following items were NOT once used as currency?
Guesses Remaining: 2
Emerging Payment Trends
Mobile P2P Payments
Thanks to P2P payment apps, “I don’t have cash” is no longer an excuse among friends. Mobile peer-to-peer (P2P) apps reduce the friction of lending money and splitting bills.
Unlike traditional person-to-person payments, you only need the recipient’s email, phone number or username to transfer money. Using P2P payments, you can split everything from cab fare to your monthly rent with a few taps on your phone.
Considering the ubiquity of smartphones and simplicity of these payments, it’s no surprise that P2P payments have quickly gained momentum. 9.1% of Internet users reported using P2P payments on a regular basis (Figure 1). This rapid growth has created a crowded marketplace. In addition to standalone apps, banks are increasingly creating their own P2P services, and social networks have rushed to introduce the functionality into their own platforms.
As with most digital technologies, the added convenience means an “electronic” paper trail — a deterrent to some. P2P services may have access to a wealth of information about your transaction history and personal finances.
And while it only takes a few seconds to make a P2P payment, unlike cash and traditional money transfers, transactions can take a few days to reach a bank account — which may be why 58% of its biggest user group, millennials, still prefer to be paid back in cash§.
If all the money in the world was divided equally, how much money would each person have?
Guesses Remaining: 2
Smartphones can hail cabs, take pictures, play music — even make a phone call. With the advent of mobile wallet technology, they can also enable contactless payments.
Like a digitized version of the wallet you carry today, mobile wallets allow you to make payments using your smartphone instead of cash.
Unlike plastic cards, which send the same numbers to every retailer, most mobile wallets generate a unique code for every transaction. As a fraud prevention measure, some also require fingerprint or pin verification.
Despite these improvements, only 3.5% of U.S. Internet users pay with a mobile wallet on a monthly basis (Figure 1). Traditional payments are already easy, familiar and accepted everywhere—providing little motivation for consumers to make the switch to mobile wallets. In turn, merchants aren’t quick to invest in the new terminals required to accept mobile wallet payments.
Mobile wallet adoption may see an uptick as more retailers accept contactless payments and mobile wallets integrate loyalty rewards programs.
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.
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?
§: 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
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