The banking sector worldwide has been changing ever since digitalization has taken up the lead. Technology, the booster for the banking sector had eased the process for ages as a new upgrade with gadgets and systems enhance the user interface and makes it simpler for banks to work with customers. One of the most changing aspects of the banking sector is cash, the decade has been furiously showing signs of a cashless world with substituting a wide range of banking services.
“On a global level, the total number of real-time transactions in 2020 was 70.3 billion, up 41 percent from 50.0 billion in 2019.”
The ease of doing business with a safety net, the ease of being a cashless customer providing time-saving derivatives, the ease of being an online processed bank making cash needs smaller but upkeep profits more are some significant best possible outcomes that can boost the world economy.
The leakages and uncertain outflow of money are negligible when the world goes cashless with recorded transactions increasing accountability and reducing the cost to economies and growing a digital banking setup helping in modernization. The transition to a cashless world will also improve savings in financial assets which will benefit intermediaries such as banks, NBFCs, microfinance and digital money operators.
Non-cash services substituting cash in early digital banking
The era started with cheques, then drafts and then the real game-changer entered the banking market with debit and credit cards, ATM’s and now when we see around we barely recognize the importance of all these services rather the world more intrigued towards digitalization “banks at home”. Smart banking has further made the possible preference changes in all the verticals of the economy. Online bank transfers, new payment applications and further credit and debit cards have completely paved the way for the forgotten cash regimes.
The banking sector has introduced the ATM years ago and now the fastest digitalization taking place all over the globe have put their share on the lower side. Payments are done directly through cards, net banking, web applications and whatnot. This leads to lesser people being willing to use the cash generated by ATMs and certainly lowering the burden on banks for the upkeep of cash-based services. The change in the pattern of earning, savings and spending has also played a major role in the use of cash as well as physically approaching banks.
“ACI Worldwide released a new report that indicated more than 70.3 billion real-time payments transactions were processed globally in 2020, a surge of 41 percent compared to the previous year.”
However, cash is still the king for small payment scenarios. The development of online banking services and the evolution of several modes for money transmission has generated a demand for easier steps and hence dismantled a lengthy procedure of visiting the banks. Virtual banking setting higher and higher expectations for future transactions, money management and cash usage.
“By 2024 the share of real-time payments volume in overall electronic transactions in India will exceed 50 percent. This will further touch 71.7 percent by 2025.”
The chart above clearly indicates the level of rapidly changing and fast-moving pace of economies towards the cashless and more systematic transaction. Majorly this shows the role of web applications that further reduce direct bank transfer and hence limiting banking sector interference.
The role of CryptoCurrencies in the cashless economy and future banking styles
Cryptocurrencies being another form of new transaction category have been viewed for having a great potential in upcoming great economies and would change the big transaction regimes.
The growth prospects and cost reduction properties of cryptocurrency make it feasible and suitable to call a substitute to direct bank transfers. Surely the fan following towards crypto investments have been enormous in recent times and hence created a big boom on banking and transfers.
Understanding the logic behind cash and crypto gives you a clear picture of how you use investments for the matter of service trades. Payments done in crypto and received in crypto can call off the banking sector for its usual mechanisms.
Once you as an individual ensure the transfer of your purchasing power from banks to crypto trading, you as the individual are free to buy, sell and use those investments without any restrictions and therefore eliminating the banking sector in this matter.
CASE OF SWEDEN
Sweden is rapidly dismantling the cash structured economy and moving towards a completely cashless economy. Demand for cash has dropped by more than 50 percent over the past decade. cash accounts for just 13 percent of payments, according to a study of payment habits in Sweden (Riksbank 2018). Now as Sweden is moving towards digitalization as a whole the finance authorities are looking into various aspects of indulging digital and E-currencies in the economy.
This points out the two frames of the future banking sector, one is the cash requirement elimination and bringing forward more innovative ways to banking and transaction on tips.
The second is the preference of buyers and sellers in the goods and service market towards crypto might capture the transaction and trade setup hereby a threat to relevant future banking services of digital transactions. So the future holds a clear-ended possible framework of a cashless world with vague predictability of how cashless economies will work in accordance with the banking sector and cryptocurrencies.
The other side of the story
Talking about how in the modern world banking will change is an opportunity for economic derivatives but as rightly said the real world is much more complicated.
The civilized and modern world comprises of a set of people who understand the trend and economic power but real-time scenarios do challenge the variability of the poor population comprising of less educated and aware. This serves as a big disadvantage on the part of digitalization globally. More the uneducated and dependent population less the cashless conversion aim.
Another fact to be taken into consideration is the risk that comes along with opportunity. The computerized and online systems are just similar to a thief taking away your cash on the street, correctly these technological systems take web hacking and cyber risk along which if happened to you, can take away the whole of your money in digitalized mode. However, with a proper institutional setup and responsible authorities, the risk can be reduced if not eliminated.
