Can Printed Money Be Replaced by Digital Payments?

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Digital payments are quickly becoming widely accepted. A recent report by Juniper Research suggests digital payments will increase by $2.2 trillion over the next five years. The results of the study are especially pertinent for e-commerce sites as the largest percentage of increased digital spending will occur through the virtual purchase of consumer goods. More advanced methods of virtual payment such as Bitcoin promise increased security and reliability. However, e-commerce sites might not see widespread acceptance of crypto currency in the next year or two.

Challenges Associated With the Acceptance of Bitcoin

Bitcoin resembles cash transactions in numerous ways. Unlike credit card purchases, the transactions are anonymous and irreversible. Consequently, it is conceivable that Bitcoin could be used for everyday in-person purchases as well as virtual purchases. Vendors do not have to worry about challenges associated with accepting credit cards including lag time between transactions and acquisition of funds, disputed transactions, and traditional swipe fees.

Successful merchants typically follow one rule. It is important to make it as easy as humanly possible to allow customers to complete transactions, regardless of payment method. Currently, numerous shoppers are not familiar with Bitcoin, and unfamiliarity poses a challenge. The nation of Australia only started to recognize Bitcoin transactions as taxable, and other governing agencies struggle with the concept of accepting crypto currency as “real” currency. Until there is widespread acceptance of crypto currency, it is unlikely that successful merchants and vendors will be able to eliminate cash transactions. However, the transition from printed money to digital payments is viable given time and continual education.

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Will Bitcoin Become a Widely Accepted Payment Method?

Widespread acceptance of new payment methods historically has taken decades. For example, Visa was launched under its current name in 1977, and MasterCard was launched under its current name in 1966. Both credit card giants took a several decades to become mainstream payment methods in the United States. E-commerce sites are highly competitive, and the success of individual sites is heavily reliant on positive user experience.

Currently, e-commerce sites and mobile app purchases introduced consumers to one-click purchasing on a broad level. Similarly, e-commerce sites such as Groupon sell experiences in real life rather than merchandise, and transactions are instantaneous. The dynamic nature of mainstream e-commerce makes the concept of an online crypto currency economy likely in the foreseeable future.

Concerns About Standalone E-Commerce Sites and Consumer Trust

Consumers want protection against various types of fraud on e-commerce sites. One proposed solution is to create a standard portal which supports all e-commerce activity. Regulation of all e-commerce activity would be an enormous undertaking, which additionally might not be particularly sustainable. Currently, credit card companies, banks, and merchants suffer substantial fiscal loss due to credit card fraud online. Additionally, numerous consumers risk identity theft. Experts attribute the rate of fraud and theft to numerous variables, including undereducated webmasters and merchants. However, theft and fraud is often unavoidable no matter what payment method is used.

Common Risks and Rewards Associated With Credit Card Transactions

Consumers are aware of risks associated with credit card use, but customers are also aware of benefits. Unlike stolen cash or bitcoins, stolen funds from a credit card can be refunded by the financial institution backing it. In the Catch-22 scenario, financial institutions and merchants have to suffer fiscal losses in lieu of customers.

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E-commerce transactions that use bitcoin are irreversible, and they are similar to cash transactions. If cash is given away and an item is not received, buyers have to work directly with vendors or e-commerce platforms to resolve the issue. However, consumers currently find working directly with e-commerce giants than credit card companies is a more efficient way to solve issues associated with virtual transactions. Plus, buyers have additional identity protection when using crypto currency as a primary payment method.

Customer Service Can Make Bitcoin Mainstream

Surprisingly, major e-commerce sites with a strong focus on customer service such as Amazon do not focus marketing efforts on customer service options for buyers. Similarly, eBay has increased its focus on being a buyer-friendly platform over the past several years, but numerous buyers are unaware of the change. The responsive nature of major e-commerce platforms can make bitcoin transactions viable for buyers and merchants. After all, few buyers or merchants want to complete transactions on a platform that is not viewed as trustworthy or responsive. Merchant and buyer trust is integral to adopting new payment methods, and successful e-commerce sites typically function like successful big box stores in order to build and maintain positive reputations.

The Possibility of In-Person Transactions Without Cash

Small cash transactions pose a substantial issue for brick and mortar storefronts. For example, the Federal Bureau of Investigation reported over 5,000 bank robberies took place in year 2011, and over $38,000,000 in cash was stolen. In the age of mobile technology, it makes sense to emulate cash transactions and eventually replace printed money for individuals that can suffer small personal losses that are nearly impossible to recoup as well as larger businesses.

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Increasingly, merchants use apps to swipe credit cards for small purchases in order to better serve customers. Additionally, merchants have recognized the value of virtual transactions via smartphone as funds are not lost. The use of crypto currency can better streamline routine purchases by immediately transferring funds rather than forcing merchants to wait for bank transactions to complete on banking days. Replacing printed money with digital payments is not as farfetched as it might sound. After all, a lost smartphone with funds attached could be similar to a lost wallet. However, smartphones have additional security measures. Wallets do not.

What Experts See in the Near Future for Merchants and Consumers

Bitcoin has gained recognition as taxable currency by first-world nations, and numerous experts speculate that crypto currency will make printed money obsolete in the near future. The transition away from printed money will likely be gradual. Over half of Americans own smartphones. In order for smartphones to truly replace wallets, the percentage of Americans that own mobile devices needs to reach over 90 percent. In order to better put things in perspective, information recently leaked that the iPhone 6 will be a wallet. Is it happenstance, or has tech giant Apple predicted the future of digital payments?

Top image ©GL Stock Images

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