Stop what you're doing and check your pockets.
Do you have cash on you? Your answer will likely depend on where you live and your age, but odds are you're much less likely to answer "yes" today than you would have been 20 years ago.
From debit and credit cards to cryptocurrencies like Bitcoin, mobile credits like M-Pesa and digital wallets like Apple Pay, we have a growing number of digital currency options. This trend is only going to continue as innovation in the financial technology (FinTech) space increasingly reduces our need to use physical cash.
The fact that you can now buy a drink, feed a parking meter and pay back a friend without the need to handle bills raises an important question: are we headed toward a cash-free economy?
A New Digital World
Millennials in particular are embracing the ability to manage their lives online, via smartphone and in plastic. Think Uber for getting around, AmazonFresh for groceries and Splitwise for tracking bills between roommates.
But what about moving money between people?
In the old days, your options were limited to passing your friend a wad of cash or maybe writing them a check. When it comes to cross-border transfers, consumers have been limited to services like Western Union. Today, your options are greater thanks to clever FinTech solutions.
Show Me The Money
Take Venmo, a popular payment app owned by PayPal. Download the app to your phone; connect your Venmo account to a bank account, debit or credit card; and start making or receiving payments among friends. There are no transaction fees, except a 3% fee on payments made via credit card and some debit cards. Its popularity among millennials and college students is no surprise given that the service is fast, easy to use and often free. Perhaps the biggest drawback is that Venmo is currently available only in the U.S.
nTrust is another option, with the added advantage that it works internationally--it's currently available in Canada, the EU, the UK, Australia and the Philippines, with further expansion underway. Most domestic and even some international transfers are free, making it great for sending money for free from Canada to a relative abroad. You can also load a prepaid MasterCard and spend it globally, online or in-person. If you're an expat or frequent traveler, the ability to link multiple bank accounts from 20+ countries under one nTrust account and move money between them is incredibly useful.
TransferWise is a UK-based option that allows you to transfer money abroad at the mid-market rate with a small fee. Sir Richard Branson has even backed the company as an investor. Another huge player in this space is M-Pesa. Launched in 2007 by Kenyan telecom provider Safaricom, this innovative payment solution uses prepaid mobile money as currency. It has achieved massive success by facilitating payments in a region where many adults have a mobile phone, but not a bank account. While M-Pesa has in the past few years expanded to other countries in Africa, Asia and Eastern Europe, it has not yet ventured into North America.
Almost a Reality
Digital solutions such as these are making cash increasingly redundant. In fact, countries like Sweden are already close to going cash-free. Bills and coins represent just 2% of Sweden's economy.
There are plenty of compelling reasons to support the move away from cash. For consumers, there is the convenience of managing your money efficiently without visiting an ATM. For businesses, less cash can mean simpler processes and greater control. For governments, it can lead to fewer lost tax dollars on unreported cash transactions.
While there are clear advantages, there are also potential risks. Some segments of society, such as the poor or elderly, may struggle with this move. And while less cash could lead to a decline in some types of crime, such as robberies, we may see cybercrime become more mainstream, targeting double-swipe POS systems. Businesses have to be prepared for such threats.
It's not too far off to think about having the choice of credit, debit, Bitcoin, or mobile minutes at the till. As the FinTech landscape continues to evolve, consumers and businesses need to stay informed about the various digital payment and currency options and find the solutions that make the most sense for them.