Digital: The Future of Payments

The old adage used to be that “cash is king” but in recent years there have been many steps taken to depose it from its preciously unassailable position. As we’ll see, technology has been at the heart of this switch towards digital, cashless transactions and there have been other factors too. For example, the growth of different cryptocurrencies. Bitcoin is no longer just an appealing investment choice on the cryptocurrency markets, increasingly, it’s being accepted as a payment system in its own right.

This has all been playing out with the decline of cash as a backdrop and there are a number of reasons for this. The first is that having large sums of money in circulation has always been something of a risk: cash can be lost, stolen and even destroyed by accident. It’s also more complex for banks to handle and manage than digital payments.

So, it’s no wonder that it’s the banks themselves that have led the way to urging us towards a more cashless society. They have done this both by encouraging online banking as well, more controversially, of carrying out mass branch closures. The figures are stark. In the last five years a third of all bank branches have closed down, particularly affecting rural areas. Along with this, 400 ATMs are disappearing each year as we head towards a cashless society.

A number of methods of digital payment have stepped in to replace the old cash systems and the use of the debit card is probably the one that most people are familiar with. With the advent of contactless payments this has undoubtedly become the quickest and most convenient way to pay. Cards have also been largely responsible for the proportion of payments made in cash to drop down to just 28% in 2018 compared with 60% a decade earlier.

E-wallets such as Skrill and Neteller have also become increasingly popular methods of payment. These are connected to an individual’s debit, credit or pre-paid account and provide a quick and convenient way to transfer funds.

We’ve already touched on cryptocurrencies and, for their evangelists, these are the digital payment method for the future. Designed for fast, 100% secure transactions, they are already being accepted as payment methods by businesses as diverse as Microsoft and Starbucks. So, while their future can’t precisely be predicted at the moment, they are very possibly going to grow in importance in coming years.

Another factor that is continuing to drive the growth of digital transactions is the convergence of technology. Through apps like Apple Pay and Google Pay even the days of the traditional debit or credit cards may be numbered as we use our smartphones instead.

But, for all this talk of a bright new digital future, there are some major issues to be ironed out. The first of these is one of security. We have already seen, all too often, how the digital world has attracted fraudsters of all kinds. So security is of pressing importance and this is why more and more steps of identity verification, for example through biometric data, will surely be required.

There’s also the question of inclusion. For people who have no access to the internet or the necessary technology for digital payments, they risk being left behind.

However, progress will continue to march ahead and, no doubt, solutions will be found and implemented to ensure the continuing success of the digital revolution.

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