The use of digital currencies is exploding across the world. As user education and popularity grow, digital spending using assets such as crypto is increasingly being used in day-to-day environments - whether that’s buying groceries, receiving a paycheque, or purchasing from online stores. Now, utilizing your crypto to top up your gas is as easy as buying a loaf of bread with fiat currency.
There’s a reason for this growing popularity. In this blog, we will explain exactly how digital currencies make daily spending easier, and touch on how they can help transform societies from cash-based to cashless.
The world of digital currencies
What are digital currencies?
The term ‘digital currencies’ includes Central Bank Digital Currencies (CBDCs), crypto, virtual currencies, and stablecoins. Digital currency transactions are facilitated over the internet and can be stored in a digital wallet. They can be centralized, such as CBDCs, or decentralized, like crypto.
Digital currencies can be integrated more deeply into our daily lives through advancements such as crypto debit/credit cards, crypto adoption by merchants and payment gateways, stablecoin cross-border payment transactions, crypto-compatible point-of-sale systems, in-game integration to create virtual economies, and simplified conversion through fiat on/off ramps.
Cash vs cashless societies
Some societies have taken to digital currencies quicker than others. The reasons range from infrastructure to user education in digital transactions, but the differences are stark. Digital currencies are allowing some countries to become almost completely cashless. Norway, Finland, Sweden, and China typically top lists of the most cashless societies. Norway, for example, only sees around 2% of cash payments a year. At the bottom of the list, Egypt, Morocco, and Kenya are the most cash-based economies, with more than 75% of payments in Morocco made with cash.
Digital currencies contribute to these cashless countries. Users in these regions can choose from a wide variety of ways to pay, and with this ease of use comes a stronger leaning toward digital payments of all kinds. Conversely, in countries that have an underbanked population, it is difficult to incorporate digital currencies into existing systems, no matter how the resulting use would benefit the unbanked. One way in which cash-based societies may be able to switch to digital currencies is through CBDCs. Governments and central banks will be able to offer the stability of traditional currency with the fast access and lower transaction fees of digital currencies to otherwise unbanked populations - just through the use of a smartphone, something which increases drastically every year around the world.
The day-to-day impacts
What are some of the ways digital currencies can make everyday spending easier?
Faster payments. Digital currencies offer instant, more efficient payments for day-to-day spending, the same way standard digital payments can be made on the spot with a person’s card or smartphone.
Reduced transaction fees. Transactions can be expensive, with transfers going through multiple intermediaries charging fees. Sometimes, transaction fees are a limiting factor to using a card, therefore making daily payments less affordable. With digital currencies, intermediaries are eliminated and costs lowered, making small everyday purchases a much more economical option.
Personalization. Digital currencies offer opportunities for trackable payment histories, allowing for a more personalized financial and retail experience. It’s also possible for digital currencies to be hosted on multiple digital platforms, depending on what an individual already knows and owns.
Integration. Digital currencies are becoming increasingly integrated with existing e-commerce platforms thanks to merchant and payment processes making it easy to convert digital currencies to fiat instantly. With this integration, more daily spending opportunities can be made using digital currencies.
The future of digital currencies
Digital currencies are already significantly reshaping our everyday transactions and payments, driving different ways for us to interact with money and financial services. Cryptocurrencies laid the foundation, but there are a number of ways in which we can now utilize all sorts of digital currencies for the transactions that we need every day. As these technologies advance and user education in these capabilities increases, it will become more common for people to pay their rent, groceries, gym membership, anything, with digital currencies only. With CBDCs being explored by more and more governments, state-backed digital currencies can provide unbanked populations access to these modern financial systems through their smartphones.
Challenges remain, however, in integrating these currencies. User education, and trust, is one of the most challenging to overcome. Technologically, digital currencies are easy to integrate into most parts of our day-to-day spending. Whether people can access, understand, and trust this technology remains to be seen, and with some regions of the world still remaining predominantly cash-based, even with high smartphone usage, there is not a simple, single factor that will make digital currencies the default for day-to-day spending in the near future.
