With the advent of digital currencies like Bitcoin, Ethereum, Ripple and a host of blockchain based projects, traditional currency as we know it is facing a threat of extinction. Paper money may not be destroyed completely, but it will definitely receive a huge blow from the smart and speedy transactions of cryptocurrencies. Does this mean that the future of finance will be totally different from what we imaged ten years ago?
How will your money change?
At the moment, it seems highly likely that cryptocurrencies will become mainstream, – regardless of any dismissive opinions of the banks and governments. In a future where cryptocurrencies are the norm, transactions could become faster, smoother and safer, and we will enter a future of true globalization. There will be no boundaries and people will be able to interact with each other, send money and trade freely using digital currencies.
Of course, there will be multiple cryptocurrencies on the market, but a basket of 10 to 20 top currencies could be accepted the world over. Trading one currency for the other will take a matter of seconds, and the financial system will become ever more transparent. Even the banks may eventually have to shift to blockchains to reduce cost and honour customer sentiment.
What about lending?
If there is one industry heading towards being completely reborn ten years from now, it is in lending. There are already several digital lenders across the finance industry, offering a variety of financial services, including banking and investment as well as lending on both short and long term bases. The lending process – right from application to approval and loan disbursement to repayment, could be handled on the blockchain in the future. Entire transactions could be done using cryptocurrencies. It is hoped that market values of digital currency will stabilise in the coming years to allow it to function as a working means of payment. Of course, there are many factors which will need to be taken into consideration – such as the demand for record keeping and payment logs. At present, cryptocurrency transactions are anonymous – meaning it could be difficult for lenders to monitor how and when their customers are making a repayment.
Short term loans may still operate using traditional currencies like the GBP for now, however it is unlikely that they will be completely untouched by the digital currency revolution. In the future of finance, it could be possible for people to borrow money from lenders around the world and repay them using smart contracts or other such blockchain concepts. Digital currency-based lending could become a reality in the tangible future, with FCA authorised creditors such as Mr Lender potentially moving away from transacting via more traditional means, using a simple cryptocurrency wallet to carry out transactions instead.
It is highly likely that money in the future will be paperless, and our transactions will be cardless too. Payments will become mobile, whether you are paying for groceries or for your monthly cable subscription. Dollar, GBP, Yen and other currencies will not be out of circulation completely in the near future, but they can certainly be out of fashion.
Overall, we are looking at a more robust, more transparent and less wasteful financial system that will help small finance companies and small lenders and debtors as much as it would help larger competitors in the market. This could be the best time to be alive, especially considering that such a world has the potential to solve problems related to foreign remittances and inflation while reducing fail rates or transactions.