With all the innovations of this century, anything seems possible. We turn dreams into reality and the unthinkable to achievable. We have had huge advancements in technology including digital money where transactions are made without physical currency. It is now possible for real-time communications, for small businesses to operate globally, and money sent internationally all in the virtual platform. Purchases are paid and money transfers done online and paid with virtual accounts. With all the tools that we have, is it possible for the world to transition from the traditional cash based monetary system to a cashless society?
Cashless and digital transactions are now commonly practiced worldwide. Countries like Sweden, India, and Belgium have taken steps away from the paper currency. Sweden is aiming to be the first country to go 100% cashless. India demonetized in 2016 and 93% of Belgium’s population pay through cards and phone applications. They even created a law to limit cash transactions to 3,000 euro.
Based on studies, governments are losing approximately $200 billion due to fraud and corruption. This is what administrations and financial institutions are trying to eliminate. The blockchain technology offers a solution to combating these problems. Money transfer transactions processed through the blockchain are recorded and authenticated. This prevents double payments and money laundering.
Hyder Jaffrey, head of Fintech Innovation, once said when asked about digital transactions, “You need a form of digital cash on the distributed ledger in order to get maximum benefit from these technologies.”
One of the most popular digital currency is Bitcoin which was invented by Satoshi Nakamoto last 2007. Prior to Bitcoin, there have been other digital currencies circulating online but this currency went above the others as it solved problems of double spending through the use of white paper. And by 2011, establishments already started accepting Bitcoins as a mode of payment. The industry continued to grow until 2015 where Coinbase, a company that caters digital transactions, raised $75 million worth of digital currency. It can’t be denied that from then on, companies have been benefiting from cashless transactions.
Jack Ma, a former teacher in China, decided to establish Alibaba, the first online wholesale marketplace which was originally based in Malaysia. Starting a business to business online shop was a huge risk especially with digital transactions just starting. But they slowly gained footing and earned investors. One year after it was launched, Alibaba already had $20 million worth of investments. And in 2001, Alibaba reached 1 million users.
Alibaba is a noted as one of the largest and most influential companies to use virtual currency in their dealings. Realizing the cashless future of business and international money transfer, Alibaba invested and affiliated with the India-based Paytm. This proved to be substantially advantageous to the company, as supported by Julio Faura, head of R&D Innovatio who said, “Today trading between banks and institutions is difficult, time-consuming and costly, which is why we all have big back offices”.
Another company who have been enjoying the advantages of cashless transactions is Voyagin. Established by Masashi Takahashi along with two other friends of his, Tushar Khandelwal and Hiroyuki Hayashi. He started by hosting guests from all over the world. This opened his interest and excitement to run a travel business. So, he developed a website that offers travelling tours and packages to people across the globe through a ‘host’ system. The travelers pay Voyagin through their most convenient means, and Voyagin, in turn pays hosts electronically through CoinPip. Through this, Voyagin has established its credibility among frequent travelers all the while supporting digital transactions. Voyagin just merged with Rakuten, one of the Japan’s largest marketplace which also runs Rakuten Travel, another online travel agency.
Apart from its success, international money transfers through digital transactions have its disadvantages too. Companies like Google supporting Google Wallet and Apple who created Apple Pay are in a continuous war against hackers to protect the information of their users. Google Wallet even had to temporarily suspend their services one time due to a hacking incident. Also, people without credit cards or bank accounts cannot take advantage of any online transactions.
Here is an awesome infographic detailing the shift from using cash to non-cash mode of payments in various regions around the world. North America leading the trend with more cashless transactions than the traditional mode of payment – cash. While Singapore, Netherlands, and France ranked the least users are cash as transaction payments.
It used to be an impossibility to imagine a cashless society. People have been so accustomed to using the physical currency that the virtual form of digital transaction scares most of us. But, as major companies across many industries – travel, online shopping, electronics among others have taken the step of using the more sensible way of money transfer, society is more exposed to its virtues. This new way of international money remittance eliminates risks presented by cash payments. Governments, as well as financial institutions have started to support this change leading us to the next generation of transactions without the need of cash as we know today.