Jerry Kuch, Yacov Yacobi, and Paul England, cryptography researchers at Microsoft, proclaimed that eCash will be the future of money. According to these researchers “we’ll carry little cards with computer chips called e-wallets and exchange encrypted bits of information for things we need.” They also predicted that we’ll be able to:
- Make one-click micro-payments online.
- Have anonymous payments online.
- Use non-traditional devices like a smartphone to make payments.
Does any of this sound familiar? It should. Because those predictions have already come to fruition to make this an exciting time for electronic payments. But, where are we headed next?
Dan Schutzer, Senior Technology Consultant, BITS, believes that the future of digital cash could go in four different directions:
- Digital cash would be replaced by an alternative, such as a pre-paid or debit card, or a new start-up payment processor that meets the security and privacy needs of customers.
- Digital cash will continue to grow and may even get embraced by governments and banks. This could already be in happening. In 2012 the MintChip was introduced by the Royal Canadian Mint. The chip was attached to SD cards and contained a private key that was signed by the mint.
- Digital cash will only exist in niche markets, similar to how PayPal started because it was the preferred payment gateway for eBay users.
- Bitcoin and other blockchain alternatives will be replaced by improved financial platforms.
For the purpose of this guide, this is where we expect eCash will bring to the future of the payments industry.
Bitcoin Will Be Replaced By the Blockchain
One interesting development that has occurred is the work that IBM has contributed to the blockchain that could have serious implications. In March 2012. Reuters reported that IBM was working on a way to create a digital cash and payment system for major currencies. While this would use the blockchain idea, the “transactions would be in an open ledger of a specific country’s currency such as the dollar or euro.”
In December 2015, this became a reality when it announced that the Open Ledger Project had been created. This new blockchain was supported by IBM, Intel, JP Morgan, the Linux Foundation, and several big banks. As stated in Fortune, “The Open Ledger Project isn’t proposing another cryptocurrency, but rather it wants to use blockchain technology to create tools to allow businesses to build a distributed ledger for anything they can dream up–from exchanging automotive titles in seconds to paying retail suppliers when a sale is made.”
Because this new ledger is connected and distributed, the changes that have been made in the database will be easy to track, as well as be more difficult to forge. Currently, Honduras is using this technology to keep tabs on land titles and musicians are able to let fans pay them directly for their music.
There won’t be just one blockchain. There were be several versions that could bring an end to Bitcoin, primarily because these specific blockchains will be more exclusive. Unlike Bitcoin, which basically allows anyone in, the blockchain will be a part of a limited community.
Besides the Open Ledger Project, there are a number of innovative companies embracing the blockchain. Bitwage uses the blockchain to make international payroll cheaper. Voatz is aiming to make elections cheaper and more transparent through smartphones and the blockchain. And, Chronicled has merged RFID tags with the Blockchain in order to validate luxury goods which will curb counterfeit items.
Mobile Payments Will Go Mainstream
This shouldn’t come as a surprise. With more than 6 billion in the world having access to a mobile device, and that figure expected to grow, electronic payments via mobile devices will become more common. This will be accomplished with near-field communication. With NFC chips already installed in most mobile devices, the transfer of electronic payments is already taking place. Users simply have to download an app and will be able to transmit banking and payment data when placed near readers. And, unlike debit cards, mobile devices are capable of displaying the payment details in real-time.
Mobile devices, however, are only a part of the potential that NFC chips present. NFC chips can be installed in wearable devices, like a watch, wristband, or ring. Instead of using plastic or even pulling out our phones, we’ll be able to tap or swipe or use a wearable device to complete a purchase.
On top of NFC chips, the use of proximity beacons will enhance the growth of mobile payments. Companies will be able to target customers based on their location. For example, as a person approaches a store that they are already a customer of, the store will send you a coupon. The customer can then make the purchase through their mobile device and pick-up their item in swift motion.
The convenience of making electronic payments with your mobile device isn’t the only benefit. As noted in Forbes, “Ridding ourselves of cash will require new thinking on customer interaction, crime, value, and even cars.” For example, you could take the EZ Pass idea and apply that to drive-throughs at fast food restaurants where payments are collected from a device located on your vehicle.
Without cash registers and physical cash, the amount of robberies and pickpockets could be reduced. Governments could track how money is moved in real-time and use that information to solve problems like poverty. Check-out lines and transaction costs will also decrease.
Beyond the blockchain, mobile devices, and wearables, we may even experience digital currency exchanges by using biometrics. Companies like Apple and Samsung are already using fingerprints to verify transactions. But, don’t be surprised if someday soon people will have chips implanted in their hands that will contain payment information.
That’s not to say that cash will be completely eradicated. There may still always be a need for physical cash, however, digital cash will continue to evolve quickly.