A commonly asked question is whether cash is under threat of going extinct and being completely substituted by e-money
A commonly asked question is whether cash is under threat of going extinct and being completely substituted by e-money electronically stored monetary value. Both cash and e-money have advantages and disadvantages. eMoney is convenient but is its value stable and will it ever be accessible to everyone across the globe? eMoney is similar to a private investment fund where you can redeem the original value at some time in the future. Although traditional banks feel the threat of e-money they have the advantage of legacy trust and being able to offer services and products that e-money institutions may not be able to do.
The fact that there will come a time when the banking landscape will be disrupted is a given. Challengers and new players in the financial world have the potential to one day become banks. This would mean that the traditional banking model would not change completely and that central banks will play a role in the future. Central banks still have influence and can exert pressure on commercial banks. One option is for central banks to offer new eMoney providers access to central bank reserves under restricted conditions. This would involve risks but also increasable advantages. In the future, we can imagine some central banks partnering with eMoney providers to provide a central bank digital currency (CBDC). This would be an alternative monitory value that challenges both cash and conventional eMoney.
Will eMoney Become the Cash of the Future?
At present we use either cash or card to pay for purchases and even the swipe of a phone to pay for the simplest things like a cup of coffee. A few years ago this would have been unimaginable. Behind the simple action of waving your phone across a reader are many hidden steps in the payment process; a complex procedure involving the exchange of information, verification, regulatory structures, back-end processes and the settlement of funds. As advanced as we like to think we are there are still more magical ways to settle payments waiting to be implemented in the future. Not too far in the future we could buy the same cup of coffee using stablecoin, a social messaging app or digital tokens backed by gold or liquid assets. We try to make sense of these futuristic payment methods by associating them with financial terms we are familiar with. It is worth staying updated and being aware of current and future payment possibilities – keep an open mind, anything is possible!
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