Payments and Wallets
Money has taken many forms throughout the ages. The first kinds of money were represented by cowrie shells. These shells have been found in burial sites a great distance away from where these sea creatures live. Money quickly evolved into coinage and then more recently, paper money was developed. One of the reasons paper money came into use was for storage reasons. Unlike coins, paper money could be carried far more easily and safely and was cheaper to produce.
Cryptocurrencies are a novel medium of exchange that form a new step on the evolutionary ladder of money. Like cowrie shells and coins, cryptocurrencies have a value. Unlike their physical counterparts, cryptocurrencies do not and cannot have a physical manifestation. This means that storing cryptocurrencies is vastly different from storing standard fiat. Cryptocurrencies must always be stored in a virtual wallet whereas cash can be stored in either a virtual wallet (e.g. a bank) or in physical form.
While both fiat and crypto can be stored in virtual wallets, the similarities end there. Fiat money is easy to transfer out of a bank at ATMs, or via transfers to other accounts. It is easily exchanged for foreign currencies and is accepted at all merchants. Online banking is a convenient form of ‘wallet’ that makes it easy to manage money.
Cryptocurrencies do not have the same kind of links with the traditional financial system. A crypto wallet usually only offers limited features, such as sending the same cryptocurrency to another wallet. Most wallets do not have the ability to easily exchange between different cryptocurrencies, let alone selling cryptocurrencies for fiat. There is no account that offers both fiat storage and crypto storage. Some wallets are making progress on this front and hold multiple cryptocurrencies, such as Ethos and Exodus. However, these wallets have drawbacks in terms of security. The most secure hardware wallets, such as Ledger currently offer a clunky experience that only crypto enthusiasts can grasp. What all these wallets have in common is the inability to conveniently transfer between fiat and cryptocurrencies in a single place. This functionality will not be introduced anytime soon.
In a sense, cryptocurrencies and fiat currencies are part of parallel financial systems. The roadwork that links them together is still under construction, and the lack of infrastructure is a tremendous barrier to the mass adoption of digital assets. In the future, it is likely we will see fiat and cryptocurrencies integrated seamlessly in single wallets. In order to achieve this goal, traditional corporates like banks and payment providers will need to work closely to new crypto related companies to deliver a unified experience for consumers. Companies that are working on bridging the gap between traditional finance and crypto finance include Worldpay, the world’s largest payments provider. They offer a solution that allows crypto based companies to accept credit card payments, and send fiat currency directly into bank account. Companies like Worldpay that are helping build the roads towards a financial future in which Crypto and Fiat exist side by side.
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BCW Group is a global strategy and management consulting firm with a variety of high-profile corporate clients focused on making blockchain use cases come to life. We work as an integrated partner with global payment and technology infrastructure firms to rapidly advance the blockchain industry ecosystem.