As we progress further into the era of fintech, we’re beginning to get used to the idea of fully digitised transactions. Generally, the thinking has evolved somewhat, so much so that a digital transaction is not just one made through the internet, but rather one that takes advantage of advanced security and processing methods to provide a quick, reliable solution. In some cases, it can even mean a whole different form of currency that exists solely as a digital asset.
Methods and assets of this nature are still only in the very early stages of going mainstream, however. And the following are some of the areas in which we expect to see them making an impact next.
International Business Transactions
Naturally, it’s in the best interest of any business with international dealings to make sure that any payments or contracts it has to handle are managed with the utmost security and efficiency. And since this is essentially the very idea of digitised transactions, it makes perfect sense that this is an area ripe for adaptation.
The idea came up quite clearly in our look at Currency Cloud, a fintech company that was founded in 2012 but which is now positioned to make a major impact on modern businesses. That company provides a fast, transparent, and secure payment engine meant to transform the way businesses move money around the world. This speaks to the potential of fintech solutions more broadly — and sure enough at this point, in 2020, Currency Cloud is just one of many specific options. We’re beginning to see large businesses with international activity increasingly relying on solutions of this sort to make their transactions more reliable, as well as to earn the trust and confidence of partners and clients alike.
In-Person Retail Stores
In-person retail might get more attention than the rest of these areas put together when it comes to transitioning to digital payments. And there’s a chance that attention is actually somewhat unwarranted, in some sense. Surveys just last year indicated that most retail shops won’t go fully cashless, which is to say they’re not ready to fully support a digital payment revolution.
At the same time, the fact that this is even a discussion indicates how much has changed already. Just five years ago the idea of paying for goods at a retail store by digital means was a foreign concept to most consumers. Most stores couldn’t even support such payments. Now, the same stores are adopting the technology and equipment needed to handle instantaneous, cashless, and touchless transactions from a variety of mobile services. They may still accept cash and cards, but they’re becoming more inviting stores for those customers who prefer digital payments.
Forex trading, in many respects, represents a fairly ordinary financial market — with a few key distinctions. The forex market is the largest financial market in the world, for instance, and it is also one of the most accessible, with 24-hour trading on business days. Fundamentally though, it’s fairly straightforward: Traders make accounts with forex brokers and input currency trades, which are then enacted for small fees.
Here too though, we’re beginning to see a gradual transaction toward modernised digital payments. With transactions conducted via secure digital networks, forex brokers can offer traders lower fees, faster trades, and in some cases a greater degree of security and transparency. Any full transition of the market to options like these is going to take time, but already some financial institutions supporting forex trades have reported significant savings on transaction fees. That could accelerate the process of digitisation in this specific area.
Central Bank Distribution
Maybe the most fascinating area in which digital transactions are beginning to take hold is in central banks. Institutions in China and the United States have made major headlines by introducing their own “CBDCs” (Central Bank Digital Currencies), and the Bank of England is considering a change as well. Not all CBDCs are arranged the same way, or introduced for the exact same purpose, but they are all quite literally introductions of new digital currencies.
In some cases, those currencies are meant primarily for institutional use, or simplified cross-border transactions. These serve a purpose similar to the digitised international transactions for businesses we discussed above. In other cases though, central banks are in the early stages of trying to replace ordinary money with digital alternatives — which could ultimately be the most significant and comprehensive transition of all toward digital transactions.
Beyond these areas, there are also some smaller or more niche spaces in which digital payments are beginning to prevail. For instance, some sports teams are following retail’s direction and embracing contactless pay options in stadiums; some social media platforms are building in digital transaction platforms to facilitate peer-to-peer payments. And the list goes on. But the combination of fintech in business dealings, retail stores, trading platforms, and central banks makes for a fairly significant overarching shift in modern society.