The Future Of Digital Banking And Cashless Payments
In recent years, money has been visualised as a technological utopia. It is considered a world where all financial transactions are done by reverse means, called a genuine and authentic cashless society. At the same time, the world is witnessing that all the conventional banks, along with physical cash, are losing their worth to a digitised utopia, and fintech is having large crises mainly after the emergence of the pandemic – technologically advancing the basic changes in the handling and regulation of money. Since the arrival of the Internet, digital banking has been unavoidable. After the origination of Banker`s Automated Clearing System, the digitised payment system is gaining popularity; meanwhile, cash usage has declined simultaneously.
Moreover, in the last few years, digital payments have been used widely, making it a more standard method to practice. Still, people are finding ways to make faster, more secure and better payments and are still determining whether they should use digital payments. These transformations in the financial landscape have significant effects on the government, business and society. There is a decline in access to cash because the number of ATMs and bank branch are reducing. Digital payments have become ordinary in these times, and various wallets have combined with these digital payment modes dominated by Google, PayPal and Apple. In addition, despite being heavily used and limited cash access, online platforms still inflict a penalty on several vulnerable societies. The volumes of cashless payments are anticipated to grow with a rapid change of 80% in 2025, and the pandemic was an ambitious force which revved the adoption of digitised transactions, yet these rapid advancements in the technologies have helped individuals by providing them with more ways by which payments can be made digitally.
Digital platforms must make their customers feel trusted by understanding that their concern for data privacy is addressed. This will enable them to play in the field and attract those who were unbanked. These platforms will guarantee system security while working to enhance the acceptance of the platforms by businesses who might mistrust these and are not ready to bear the extra cost of implementation. Moreover, compatibility is also one of the challenges the payment system faces in the global economy. Different nations exist with various structures of banking systems and legislation, which brings hurdles with them for making some types of cashless payments while several nations come up with their national system of payments like Brazil’s PIX. Several digitised payment systems, such as Bitcoin, are difficult to manage and regulate, and they also bring risk to the country, which may further respond by establishing and working on legislative complexities for the adoption of the payment system.
Pros and Cons of a Cashless Society
The enhanced existence of a digitised system of payments, such as digital coins, mobile wallets, peer-to-peer payments and mobile point-of-sale devices, presents plenty of options for customers and business owners by making the payment system more convenient, transparent and efficient. Making cashless payments also helps stimulate the country’s economic growth by making it easier for people to pay securely and conveniently, ultimately expediting consumption. These also help businesses provide time and opportunities for cost savings by minimising manual rectification, handling and counting cash and lowering the governmental cost for the issuance of hard cash.
Significantly, making the process of payments digitised is more advantageous. This is so because anyone who owns a smartphone is liable to make payments cross-border and can buy products efficiently and cheaply. From the macroeconomics perspective, digital currencies help avoid currency volatility and exchange rate risk if they depend on various currency ranges and are controlled by the central bank. Similarly, if backed centrally, digitised currencies are also utilised as economic advantages like traditional currencies are considered. These digital currencies exceed the cost savings as they do not have to produce notes and coins.
On the other side, despite having several benefits, different types of options for digital payments present several challenges which exist in their integrity and interoperability by the business. In the coming years, it may be significant for users to use various services with excess effects like minimisation in using these payments, as digital payments are becoming widely popular and increasingly utilised.
Because of their digital nature, these payment systems also help enable opportunities for data mining, which might make the users concerned about their privacy rights and enhance the chances of cyber crimes and attacks, ultimately leading to data exploitation and leakagedata. Sometimes, when there is immature and insufficient data, regulations cannot be followed, which will result in abuse and misbehaviour by the providers of the service, and these are not considered transparent depending on how the data is monetised, which passes through their payment system. Additionally, The emergence of technological giants has affected largely and this has increased concerns by the evidence of the intention of Facebook to develop their own platform for making digital payments. Likewise, when the digital currency is not managed and issued by the central bank, the supply will also not be controlled efficiently, ultimately resulting in uncontrolled inflation and devaluation. The recent fluctuation in the bitcoin, which was an investment of Elon Musk, is considered a good instance of volatility.
Digital Payments And The Pandemic
The advent of the Novel Coronavirus significantly increased and agitated the payment methods through which money was transferred securely and conveniently. From the viewpoint of most individuals and board members in different nations, the coronavirus epidemic is considered to be an inflexion point which motivates the world to adopt technologies for making digital payments. According to the payment industry, the epidemic and its implications have propelled consumers to overcome their laziness and develop an unparalleled appetite for the world to make changes in the payment system. As per the reports of a survey in 2021, it was revealed that after the emergence of coronavirus, almost 78% of the consumers in the world have changed their method of making payments for nearly all the activities for which they have to pay in their daily lives in the whole world.
Like online shopping and videoconferencing have emerged similarly, online payments have evolved technologically as a tipping point of the novel coronavirus, making society reluctant to make online payments using digital systems. With this advancement and enhancement of the usage of digital systems, most businesses have started working on cashless modes of payment. Relatively, this is in response to the increased cost of cash in the banking sector, which also becomes a matter of concern from the viewpoint of safety and health issues while managing and controlling money in COVID-19. Almost all bank branches continued to be closed at that time, and post offices were the last ones closed in most cities. However, there were several challenges related to the mean capacity of the other community critical services that were performed by them being cut down.
Moreover, it was also clear that the health crisis showed the significance of making digital payments and fostering the place of digital payment in the world after the pandemic. The United Kingdom has encountered an increase in the limit of being contactless at the time of the epidemic twice and making individuals utilise digital methods of payments. However, some people choose something other than digital payments as their alternative. According to them, all they know and understand is cash, as they have access to cash easily. Individuals living in a society who earn lower salaries or older adults are mainly not influenced by switching towards a cashless society.
Digital Payments And Other Technologies
There are several other technologies as well which help society in becoming cashless. These technologies, such as Amazon One and smartwatches, can make payments without cash. Amazon One is a contactless and free service that uses the user’s palm to make payments and enter and recognise themselves by using the exceptional features on and below the palms of the users to verify their identity. This alliance of technology with science has developed a form of digital payment which will make a replica with time, and this form of making digital payments will appear in the market. Moreover, Amazon is leading the way in making contactless digital payments. If anyone has visited the Amazon Go Store, they will feel like a thief by just going and coming out with the items of their needs without making payments. Because of advanced technologies, the money will later be deducted from the user’s Amazon account. Amazon also uses computer vision, deep learning and technology of sensor fusion to make this work easier for people. It keeps track of the products picked by the customers, which are put back, and the items the customers will buy. Adopting this technological advancement on a broader scale is not easy for other organisations in the near period as it takes a large number of reasons like the implementation cost of the technology and the security. However, the existence of these technologies shapes digital payments, making it into a cashless society.
BNPL, known as Buy Now, Pay Later, has appeared as a solid installation in the digital payment market. For large products like furniture, plans for making payments are there.
However, firms offering BNPL assistance help their customers with an easier and quicker product buying method. It is becoming increasingly popular in recent times because most business owners are using this payment type. It also offers an affordability sense to its consumers by helping them split the price of the products at different points in their journey of purchasing products. A survey report reveals that the Gen Z generation is considered the biggest fan of BNPL, with 59%, while the millennial generation, with 53%, is anticipated to make payments through BNPL by 2026. After the pandemic, more than 200 businesses have provided BNPL services to their customers, including Apple Pay Later, Afterpay and Klarna.
The market adopting BNPL services is mainly made from diverse businesses, including big tech, card networks, fintech and banks. The requirement for BNPL services for customers is increasingly high, making it easy for everyone to understand the market, and business owners can also offer their customers a variety of options. Cash usage is reducing, but as per the reports of global payments, it is revealed that cash will still portray its role in economies. The reports also suggest that in the year 2022, almost $7.6 billion in cash payments were made by customers globally. Yet, it also suggested that the mode of cash payments is slowly diminishing, and the reason behind this is that the country’s governments are taking steps to promote digital payments and are boosting the endorsement of mobile payments.
Digital vs Traditional
Increasing digital transformational procedures is considered an intimidating possibility for traditional or conventional banks involving legacy systems, payment solutions of FinTech, like means of FIs, and the rising number of digitised currencies must reanalyse the way by which they can make their services consistent in this rapidly growing digitised environment. FinTech solutions and digital currencies are responsible for reacting and exist within the central bank and not with single financial institutions. There exists a risk in holding digitised currencies, which are state-backed, and the mean deposits are confined directly to the central bank. Moreover, it might be possible that decentralised chances would also open. Also, the visa has revealed a collection of APIs, also known as application programme interfaces, which transform conventional banks into cryptocurrency dealings. If banks feel this goes along with their strategy, they focus on persuading their deep pockets.
Moreover, it is also inefficient for banks to keep providing money in cash and other transactional services continually until disaggregation comes and starts haunting them. Most FinTechs like Revolut, Cashplus and Monzo initiated utilising alternatives for the transaction process, but now they have transformed into banks. These financial institutions are considered feasible for consumers with a secondary account to devote to profitable goods such as unsecured lending.
Conclusion
In summary, it is clear and easily understandable that a cashless society is the world’s future, making cashless transactions normal in the daily lives of individuals. The security, simplicity and speed offered by cashless transactions are expanding rapidly and are attracting individuals; as there is a development in digital technology, the attitude of the customer also changes. Because of contactless payments, platforms for cutting-edge payment and mobile wallets have completely transformed and revolutionised how individuals make payments, complete transactions and trade money. To resolve these hurdles, like safeguarding security and privacy, closing the digitised division and assuring inclusivity, it is significant to encounter the concern of the shift. Individuals can help establish a better tomorrow where everyone accepts cashless transactions universally, which will result in better financial empowerment, improved efficiency and accessibility for organisations, and individuals taking considerations carefully and continual developments in infrastructure and technology.
References
- Fabris, N., 2019. Cashless society–the future of money or a utopia. Journal of Central Banking Theory and Practice, 8(1), pp.53-66.
- Rahadi, R., Nainggolan, Y., Afgani, K., Yusliza, M., Faezah, J., Ramayah, T., Saputra, J., Muhammad, Z., Farooq, K. and Angelina, C., 2022. Towards a cashless society: Use of electronic payment devices among generation Z. International Journal of Data and Network Science, 6(1), pp.137-146.
- Mohd Thas Thaker, H., Subramaniam, N.R., Qoyum, A. and Iqbal Hussain, H., 2023. Cashless society, e‐wallets and continuous adoption. International Journal of Finance & Economics, 28(3), pp.3349-3369.
Author Bio: Mark Edmonds, a recognized finance expert at Academic Assignments, leads in conveying first rate finance assignment help to students. With broad information and experience, he guarantees extraordinary quality and accuracy in academic assignments. Mark’s obligation to excellence and energy for finance education drive his commitment to helping students prevail in their examinations. With a significant comprehension of digital banking and cashless payments, he bestows important bits of knowledge into the future of financial transactions. As a significant individual from Academic Assignments, Mark Edmonds flourishes in helping students across different disciplines, guaranteeing they accomplish academic excellence.