How digital technology influences money and paying?
Let us think about money. Before the concept of currency came into existence, human beings were bartering. They exchanged what they have to get something they needed or liked. However, those who owned what they need may not want the things they could exchange. Therefore, some other goods were used as transitions to set up the deal. The transitions were the precursor to currency, though they were also part of the exchanged goods at the beginning. Shells were once used as currency, so did stones and some metal with specific shape. These currencies have their own value without being a transition, as they were generally liked, and were not easy to get.
Gold and silver were also used as currencies in the past. They are similar to the shells, as beside being a currency, they also have their own value. Gold is still directly related to currency, as it can be used as international reserve and hedging tool, just like what dollars do. This is one reason of the negative correlation relationship between dollar and gold price. Another reason is gold is USD-denominated.
Cash is now the most common currency, while coins play the roles of small amount of money. When we take a look at the payments 100 years before, all of them are by paper, either paper money or cheques. Compared to the heavy and insecure metal coins, these paying methods are already great improvements, and seems cannot be improved anymore. However, there are always progress. The first bank cards came in 1967 by Barclays in London. Though it was an ATM card, it remains the precursor to other bank cards of the future. In 1972, Lloyds Bank issued the first bank card with PIN (personal identification number) for safety reason.
The ATM card allows its owner to withdraw cash. Users make deposit, and the bank record how much money the user owns. When users need money, they can withdraw cash with any available ATM. During the whole process, the money is digitised, as all the ATM cards can show are lines of cold numbers and they still mean money. The ATM cards make it possible transfer physical money into digital, and lay the foundation for the popularization of electronic payment in the future. Recently, debit cards and credit cards are more common compared to ATM cards.
Debit cards and credit cards can be used as paying method, but their working principles are different. When using a debit card, the card holder already has money in the bank account, and what happens during the payment is the money is transferred to the seller. For a credit card, it is more like the bank lends money to the cardholder in payments, and all the cardholder needs to do is paying the bill every month. In general, both two types of cards make money digital, and bring digital payments to daily life.
After a while, there comes mobile payment. A simple sample is Apple Pay. In some years before, making payments requires cards, and that was already a simpler version compared to the cheques and cash. As mobile phones becoming more and more common, the idea of including the function of paying on phones comes to some companies.
The banks should be happy to hear that the mobile payments are not take over the traditional bank cards. The mobile payments are based on the existence of bank card, as when the paying amount is getting large, a bank account is always safer. Also, the mobile payment is acting more as a digital wallet connected to bank cards instead of being bank cards themselves.
While using mobile payment, the chance for the bank card to be stolen is minimised, as there is even no a physically existed bank card taking part in the payment. Beside the “absent” bank card, the mobile phones already have its own safety measures, either the password, the face ID or the Touch ID will be needed before making the payment.
Also, because of the popularization of mobile phones, more and more people will prefer pay by their phones, which they always carry with them no matter where and when, instead of taking banks cards with them.
However, each coin has two sides. Mobile payment is not an exception. Telecom fraud are easier, as the payment can be made as soon as the victim trusts the lie. In the past, money needs to be transferred through bank or by cash, and that costs more time. The longer the time it takes, the more likely the victim is reminded.
Besides the telecom fraud, the mobile payment generally has a limitation in the amount of the transaction. This is a protection for avoiding telecom, but also an unsatisfactory shortcoming. Some payments like paying tuition fee or rent are always large in numbers, the limitation will make the payment more complex.
All we have mentioned in this blog are making money digital. The numbers in digital wallets and bank cards mean the same amount of money in real life. At the same time, there is a type of digital tokens called cryptocurrency. Digital tokens are also known as digital currency. Cryptocurrency is different from the savings, as it does not have a physical form, and only exist in digital form. They can be traded as goods with real money, and are also supposed to be a type of currency that can be used for buying. It is similar to the original shell coins, but their value as goods depends on users. Cryptocurrency only worth how much the costumers and sellers believe they worth.
Bitcoin is one of the cryptocurrencies, and seems to be the one of the most famous ones. The picture above is showing the logo of bitcoin in the middle. Bitcoin was first introduced to the public in 2009 by someone unknown with the name Satoshi Nakamoto. This is a presumed pseudonymous, and who is behind this name is left unknown to the world till now. In short words, bitcoin is a currency not restricted by any country or government or organisation. Bitcoins are “buried” in blockchains and waiting for being mined. Every new appeared bitcoin belongs to its miner.
However, the value of bitcoins depends on how people believe they are. The price of bitcoins varies from its birth to recent days, and its future is yet unclear.
