Digital Cash as Economy Tool

In recent years, the debate on ‘bank the unbanked’, namely the 1.5 billion people in the world who have no access to financial services, has gained popularity, underlying the view that access to financial services is a prerequisite for development. The experts believe that constraints can better be addressed through leveraging digital technologies, which also leads to greater efficiency in economy and to enhance their living standards. In 1983, a research paper by David Chaum introduced the idea of digital cash, defining it as, “An intangible form of money, is any means of payment that exists purely in electronic form”.

In light of the recent penetration rate of mobile across the Globe, mobile money is considered as an innovation to enhance the reach of financial services. This idea can be observed largely from the success of the first mobile money service M — PESA introduced in Kenya, which has shown impact on academics, development, and humanitarian assistance. Additionally, evidence from USAID shows that e-payment can be a powerful tool to deliver humanitarian assistance quickly and conveniently. Humanitarian cash can be transferred in a variety of ways; these may include NGOs distributing physical cash; recipients collecting cash from money-transfer vendors; direct deposits into bank accounts; value-loaded or reloadable cards similar to debit cards or gift cards. Crowdfunding and microlending have made it possible for people to acquire financing who never could before.

Even in a quickly digitizing society such as Kenya, at least 90% of all economic transactions are still being carried out in cash. Cash is tangible, unlike digital money, and one might contend that this physicality helps to get constant feedback about their running balances. It is unlikely that cash will become completely obsolete, but it will definitely become less important in the future than it is today.

That money folds up and stash away, are headed toward cryptographically sealed digital streams, stored on smart card, electronic wallet and virtual buying. The coming of e-money would seem to demand that the governments of the world get together and implement a scheme to make the shift in an orderly fashion. It is a future not of digital money, but of digital monies, and to shape it, we need to better understand where our money system has been, where it is now, and where we would like it to go next.