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Will Cash Survive?

Already credit cards introduced in the 50’s, debit cards in the 60’s and more recently mobile payments have threatened the survival of cash. Still a report in 2018 showed that cash is still used for 30% of payments made in the US. Older people, lower-income people, those less technically minded and those making low-value transactions are more likely to rely on cash. Younger, middle-to-upper income and technically adept people look for the more convenient and faster use of emoney. Mainstream financial systems holding physical cash may have an advantage over emoney by being able to offer attractive services and financial products. These financial institutions need to be aware of the threat emoney poses and be prepared for the disruption virtual banking may cause to the traditional banking world. The new players, disrupters and challenges could one day replace traditional banks. To survive banks will have to alter their business model as digital monies increasingly threaten to replace them.

 

When and How will eMoney Dominate Finance?

eMoney is a little like a private investment fund where you’re guaranteed to get your deposited funds back at face value in the future. This comes with some risk as you rely on the issuer to be able to pay out the required sum when you want to redeem your funds. Before we can do away with paper money and coins there are social issues that need to change.  There are many benefits and disadvantages to going cashless. For the unbankable and bankless, low-income and older generation it will be extremely difficult. How do you give a beggar on the street a few pennies with emoney, or pocket money to a young child or buy from a pop-up country market? Although there will be lower crime involving stealing cash let’s not forget cybercrime and the possibility of theft of digital “cash.” Money-laundering will probably find a way to continue without physical cash.

Pros and Cons of eMoney Replacing Cash

Pros:

  1. More convenient in many ways than cash
  2. Storing and depositing funds becomes less time consuming
  3. Handling of emoney is more cost effective than managing hard cash – less man power is needed, less time and less effort.
  4. When traveling currency exchange becomes effortless in a digital emoney world
  5. Criminal tax evasion will be near to impossible if all funds are digital and trackable.
  6. Transactions anytime, anywhere.
  7. Reduced transaction costs.

 

Cons:

  1. People still doubt the long-term stability of digital money.
  2. Personal data can be exposed and breached.
  3. Hackers could drain your digital bank account.
  4. Technical problems could shut down access to accounts.
  5. Low-income, bankless, unbankable and elder customers will find it difficult, if not impossible to manage with emoney digital accounts and payments.
  6. Low-value transactions are more convenient with cash for most people.
  7. Controlling spending may be harder if you don’t see the physical cash slipping through your fingers.
  8. Banks may dramatically increase the cost of their services to compensate for loss of clientele.

 

Cash and eMoney Solutions

eMoney providers could be given access to central bank reserves, or partner with emoney providers to provide central bank digital currency – a digital version of cash. This would have to be done under strict conditions as it would involve risks. In the future we may see Stablecoin, social messaging app payments and digital tokens backed by a safe asset like US Treasury bills become common payment methods. We may not be quite ready for a cashless society and for digital funds to completely replace cash but we seem to be moving in that direction. As innovations continue we can already see the writing on the wall that emoney, in some form will one day replace paper money. We still may see a cash-less society in the future but probably not for a while. Emoney and cash will most likely share the financial arena for quite some time.

 

Today cash and emoney are the two most common means of payment although there are competitors that might one day become an even more common currency. The value of electronically stored emoney is dependent on the value of physical currency like Euro or USD and cash is dependent on remaining relevant in an ever changing, more technical and virtual environment.

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