Money of the Future
We are on the brink of profound transformation in so many areas. Obviously, AI will have a significant impact, so will innovative new medical technologies. Some of this will be for the better, and some, perhaps not so much. It will be a turbulent time, no doubt.
One thing that’s also changing is the landscape of our financial transactions, from banking to payments. It’s not difficult to see that all sorts of institutions are invested in taking cash out of the equation. Not only is it more difficult to manage, it’s also not easy to track. And everyone seems to like tracking.
Businesses benefit from tracking because it gives them insight into consumer behavior. It’s data they can use, and sell. Governments tend to like it because it means that they can crack down on crime, and better control their citizinary. When everything turns digital, footprints become incredibly difficult to erase.
So what are we likely to encounter in the future? Is it possible that cash will be completely out of the picture in a few years?
Even if it’s not legally phased out, it is practically so when businesses no longer accept it. I recall not too long ago there was a major outage where I live. Businesses had to completely shut down because almost none of them accepted cash.
And if almost no business accepts cash, we’re considerably less likely to carry it. Besides, our credit cards give us “free” rewards each time we use them.
Could all of this be leading to an eventual universal digital currency? Everything is so global these days that it seems like the natural progression. It would streamline transactions and eliminate those painfully hefty exchange fees. We’ll no longer have to convert currency in our heads when making purchases abroad.
Putting aside the potential for outages and dependence on technology, privacy concerns and security risks, and potential environmental impact (digital currency requires substantial computing power), there’s a few other concerns to take into account. Most prominently, that it becomes more challenging to address things like inflation rates on a more local level, as well as properly manage the money supply in a way that would help stabilize national economies, which have different needs and structures—particularly when it comes to more developing economies.
It would also undermine seigniorage revenue, which is a profit the government makes when they issue a currency.
Cryptocurrencies have a large number of people who have placed faith in it—whether Bitcoin or Dogecoin. Many believe that over time they will become more stable and will address issues related to privacy and security due to their decentralized nature. We are already seeing more businesses, especially online, willing to accept them and perhaps in time something like Doge might even be used as a way of tipping favorite creators on platforms like X, which will likely see it rise in value.
Many are also excited about blockchain technology because of the opportunity to issue smart contract, which will automate complex agreements with transparency and efficiency, without the need for intermediaries since they automatically execute actions once predetermined conditions are met, there’s no need for trust between parties. This minimizes dispute. For example, in a real estate transaction, the contract could automatically transfer ownership of the property to the buyer once the payment is received.
For now though, the future is still somewhat uncertain for decentralized currency—although its increasing adoption is a healthy sign. Nonetheless, price volatility keeps many from making a risky investment. Transactions are also irreversible. That’s not necessarily a bad thing as it ensures a safer transaction between buyer and seller, avoiding “reverse charging” scams, however it also means that if funds are inadvertently sent to the wrong address, or if one falls victim to fraud, there’s no real recourse. Like centralized digital currencies, there’s also always concerns around hacking or cyberattacks. Security breaches do happen and there’s no real consumer protections in place, unlike with more traditional currencies. Even worse, if a user loses access to their cryptocurrency wallet or forgets their private keys, they can lose their funds permanently. There is no central authority to recover lost or forgotten credentials.
Ease of use is still something that hinders the growth potential of cryptocurrencies. There’s not enough vendors accepting crypto for it be used in everyday transactions. It tends to be more widely accepted by businesses who are motivated to have their transactions tracked. *hint* *hint*
Critics also point to environmental impacts given the substantial computing power required for many cryptocurrencies, and mining for them.
That said, as more businesses and consumers adapt cryptocurrencies, they will play a more significant role in our financial ecosystem, and offer increased privacy—something that many of its proponents value. However, as its popularity grows, it will also likely succumb to even more regulatory measures and restrictions, something that we’ve already seen being enacted by many governments and financial institutions.
As we gallop into the future, security will continue to be a major driver and we will likely be seeing more reliance on biometric and quantum authentication. It means that we’ve need to give up our biological markers in exchange for far more heightened security. Will we take up this opportunity? It’s unlikely that we will have much of a choice.
The future of financial security lies in biometric data and quantum encryption. Transactions will necessitate unique biological markers or quantum keys, rendering fraud nearly impossible. This heightened security level, integrating cutting-edge technologies, will instill unparalleled trust in digital financial systems.
Artificial intelligence (AI)/machine learning is already playing a key role in our financial transactions. For example, it tracks and analyzes our behaviors and detects when patterns are inconsistent and may indicate fraudulent activity. Indeed, it’s highly effective for fraud detection, even though it might occasionally get something wrong and shut down your credit card mid critical transaction.
Still, AI isn’t going anywhere. And neither are AI-power chat bots who will handle most consumer interactions when it comes to banking. It will even be able to analyze our financial data and offer customized advice on your spending, or recommendations on investment opportunities and trading strategies. AI fund managers are definitely edging in on those investment advisor jobs. Given its predictive analysis, it may even generate higher returns. Then again, what’s the implication of EVERYONE using AI to invest and trade?
Consumers already get credit scores and risk assessments based on particularly algorithms, AI will increasingly be used to assist with that—even deciding on loan eligibility. This can take personal bias out of the process—however that depends on the datasets and criteria being inputted.
It’s difficult to predict exactly what our financial futures hold, but clearly technology is going to continue being a major driver of it. The challenge is figuring out how to balance concerns over privacy and control, with the opportunities these technologies open up.
What are your thoughts: Will cryptocurrencies thrive? Will a universal digital currency replace cash? What does the future hold?
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I wonder how the anti-cash economy will affect people based on economic class. And how will it affect the folks who aren't tech-proficient or who don't have access to current tech. The pandemic certainly highlighted how many poor kids don't have high-speed Internet (or Internet at all). I just assume that any popular economic change will continue to screw the poor and I'm highly suspicious of the cryptocurrency coterie.