Digital Cash: What Is It And The Future of Money

Digital Cash? eMoney? Digital Money? Crypto? Bitcoin?

All of these terms are somehow creating a distortion. The funny thing is when you try searching “Digital Cash” sometimes you will find a machine that we always see on the cashier like this one:

We can just tell that “it is something that is not offline money” — WTF, of course it is!! HAHAHA

Forget about paper money, because now digital world needs digital money too.

According to Cambridge Dictionary

Digital Cash/Money is any money that can be stored in electronic form and used to buy goods and services, for example over the internet.

According to Tech Target

Digital cash is a system of purchasing cash credits in relatively small amounts, storing the credits in your computer, and then spending them when making electronic purchases over the Internet. Theoretically, digital cash could be spent in very small increments, such as tenths of a cent (U.S.) or less. Most merchants accepting digital cash so far, however, use it as an alternative to other forms of payment for somewhat higher price purchases. There are several commercial approaches to digital cash on the Web. Among these are eCash from DigiCash and Cybercash.

According to Investopedia

What Is Digital Money is any means of payment that exists purely in electronic form. Digital money is not tangible like a dollar bill or a coin. It is accounted for and transferred using computers. The most successful and widely-used form of digital money is the cryptocurrency Bitcoin. Digital money is exchanged using technologies such as smartphones, credit cards, and online cryptocurrency exchanges. In some cases, it can be transferred into physical cash, for example by withdrawing cash from an ATM.

What is This Money Actually?

The total amount of money (M2) in the world is about $60 trillion, of which c. 1/10th is held as a coin or bank note. The remaining 90% is held as digital money on computer servers; the vast majority of value transactions are carried out by transferring electronic data from one computer file to another without any exchange of physical cash.

The ongoing adoption of digital money has been driven by three factors. The first factor is that digital money is cheaper than cash to handle, and that cash costs society as much as 1.5 per cent of GDP. The savings come from: 1. Reduced administration costs (governments with electronic payment programs can save up to 75%). 2. Reduced security costs and loss of funds from theft (75–80 per cent of the $22 billion in benefits of shifting Indian government payments to electronics would come from reducing the leakage of funds in government transfer schemes that end up in the wrong hands). 3. Reduced costs for saving time or transport.

The second factor is the ability of people and systems to connect digitally, facilitate the growth of mobile and fixed-line networks and underpin mature technology standards and protocols (e.g. credit and debit card payment schemes; SEPA — Single Euro Payments Area). Increased connectivity is also at the heart of efforts to increase financial inclusion through digital money, where the lack of bank and cash infrastructure and the ability of individuals to authenticate their credentials is traditionally cited as a key challenge. Safaricom’s M-Pesa solution in Kenya demonstrates how connectivity can help to leverage traditional cash-based infrastructure.

Mobility is the final driving factor for adoption. People, devices and transaction locations are literally moving, and consumers are looking for more convenient ways to pay. Consumers can and want to shop from their own home, send an app payment to their PDA, wave a contactless card to use mass transit or pay for their Uber ride automatically. And as people have migrated, so has international remittances’ digital money boomed.

Innovation and competition are on the twin tracks of the three underlying drivers. As banks and payment schemes are struggling to cope with legacy technology and stifling regulation, new entrants have arrived. AliPay and ApplePay aim to provide consumers with more convenience while increasing the company’s share of the financial transaction. In the case of Square, Paypal and Stripe, the aim of the competition is to reduce the cost of accepting digital money or making digital payments. These new entrants in the main seek to digitize and replace the previous cash-based payment. The most disruptive new entrants may prove to be cryptocurrencies, such as Bitcoin, and associated underlying and decentralized blockchain technology.

Alongside commercial innovation, both governments and central banks are moving towards speeding up the move towards digital money. While reduced costs are part of the logic of doing so, so is the inherent ability of digital money to carry a negative interest rate, something that can not be done with cash. In Denmark, the Government has gone further, announcing in 2015 that selected retailers will be able to refuse cash, paving the way for a truly cashless company. Supporters say that not only will this make it possible for banking systems to become more productive, but that it will also ensure that taxes are paid and that only legal transactions take place, putting pressure on both the informal and the black economy.

One downside of the shift to digital money has been the huge increase in fraud. According to Nielsen, the cost of global payment card fraud amounted to $16 billion in 2014. The theft of $450 m from MT. Gox, the world’s leading bitcoin exchange, provided another example of the downside potential of digital money in 2013.

But, while many have hailed the “end of cash,” his death seems premature. Physical money has been with us for thousands of years. Cash is essentially untraceable, easy to carry, widely accepted and reliable, even if the power goes out. There is no alternative payment system, no doubt, that is as convenient, reliable and anonymous. Libertarians are struggling to point out the benefits of maintaining economic privacy, not having digital money transactions monitored or giving the government more power to block payments or central banks. The result, as can be seen in the US, is that absolute value and volume of cash in circulation have continued to grow.

Looking ahead, the existing payments and banking chain will spread and fragment, leading to further growth in non-traditional financial institutions seeking to control the payment interface and develop their own financial services (e.g. Amazon Payments, Amazon Lending Program) and retail offerings (e.g. Alibaba, Google Shopping). Further collaboration between organizations (e.g. device manufacturers, telecommunications players, associations, banks, e.g. Google Wallet) is also likely to make this possible. Alternative currencies and money networks will also grow, and the first state will issue flat digital currencies.

Consumers will continue to make digital or contactless payments through cash and digital wallets will begin to overshadow physical wallets. Checkouts will move from place to device as payments continue to shift from active to passive (e.g. as is currently the case when you exit your Uber ride). To combat fraud and keep transactions simple and secure, multi-factor authentication will become the norm (e.g. growth in real-time geo-tags, biometrics and tokenization) with more appropriately authenticated transactions taking place.

More digital money will lead to increased socio-economic mobility, increase the ability of itinerant workers to live and work in a new country, and allow 1 billion more people to be financed within 10 years.

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