Financial markets are always changing. The way we spend, use, and think about money is in a constant state of flux. Those changes have been growing more rapidly over the last decade or so, as a combination of developing technology and unstable world events continue to cast uncertainty over financial institutions. Nobody knows anything for sure, but what are five of the key things you should consider about the future of money?
- How long is cash involved?
You may have been reading reports predicting impending doom for the future of cash, but the truth is that, as time goes on, it doesn’t seem so farfetched. For many, digital payments have become the default. Coronavirus has hastened the potential incoming demise of cash, with the volume of cash being used in the UK throughout 2020 dropping by as much as 60%. For most buyers, digital methods of payment are more convenient, accurate, and easy to trace. A lot of shoppers don’t even bother carrying a card anymore, with the rise of phone-based payment systems such as Apple and Google Pay. Cash will always have its die-hard supporters, but its use is dwindling more and more with every passing year.
- Open APIs continue to change banking
An API (Application Programming Interface) is an interface that allows two separate pieces of software to communicate together. These are growing increasingly popular throughout the banking sector, mainly in the form of third-party providers. They exist to make the process of dealing with the bank a more personal one, by tailoring key elements of the interaction process. They can be used to predict needs and offer suitable suggested products and packages, automate affordability checks, and prompt money-saving advice. Their continued use will help to personalise the way many people engage with their bank and ensure they’re able to receive a more tailored financial service.
- Will the banks start losing?
Cash is expected to be used less and less over the coming years, but in a slightly more unexpected twist, so are conventional banks. For many, the traditional approach of banking, which revolves around capital and scale, have no real place in an increasingly digital future. Rather than being key players in the financial marketplace, it’s possible that banks could be nothing more than companies designed to facilitate payments and nothing more. Many physical banking branches are being closed and countless staff laid off, as a combination of low-interest rates and the rise of digital banking render them increasingly obsolete. They will not go altogether, but banks as we know them will change.
- The fluctuating presence of currency
Many in the financial industry are on opposite sides of the argument when it comes to the future role of currency. Some believe that currencies will multiply in nature as the financial markets open up and it becomes easier than ever to establish new currencies and put them into use. For others, the same conditions are expected to mean fewer currencies, as more users will become drawn to the same group of new currencies that offer the most appealing rates and broadest acceptance. Wherever you stand in the debate, it’s fair to say that, in the long term, the digitisation of currency will have a profound effect on the way we approach new currencies and the level at which legacy currencies continue to be used.
- Will money start becoming programmable?
There is increased speculation that currency and data will become more inseparable than ever in terms of the way they’re used. Many predict an exponential rise in “programmable” currency, namely currency that is used for a specific transaction. Those predictions are currently not coming to pass, as legacy financial institutions continue to try to exert control over the markets in an effort to stifle new currencies. This doesn’t necessarily mean the meat of the prediction is untrue, however. As money becomes more technologically dependent, it stands to reason that the role data plays will also continue to grow, maybe to the point where the two are interchangeable.
Whatever your predictions on the future of money, it’s fair to say that payments, currencies, and institutions as we know them are all experiencing turbulence. It’s a guarantee that things will change, we just don’t know by how much.
