The year 2020 will always be regarded as a significant milestone in the history of the digital age. The onset of the 21st century gave rise to a rapid trend in globalization with the age of data boom. The world witnessed a surge in improved communication opportunities and faster travel of information. The digitization process has been relatively rapid across several developed countries. However, with the arrival of the Covid-19 pandemic, several developing and under-developed countries are trying to jump on the digital bandwagon.
The breakout of a global pandemic made the world realize the inefficiencies in the conventional systems and standards of procedures. Even though it is simply impossible to quickly digitize essential industries such as healthcare, government, and education, the global pandemic has put things in perspective. Industries that previously relied heavily on the physical exchange of goods, services, and physical presence of employees, are now actively seeking ways to reduce contact. Long before this pandemic, the world was already going through a digital revolution. However, the year 2020 has accelerated this process by manifolds. Below, we will explore three significant trends that the finance industry is starting to witness:
- World Goes Cashless: Spikes in Digital Transactions
Online banking and digital payments through debit and credit cards were already well-known to the world. Banks and governments alike have always pushed for plastic money ever since its introduction. Going cashless and utilizing plastic money meant that banks could sell more accounts and cards associated with them. However, for the governments, it meant that they could ensure every transaction that took place through plastic money was well-documented. If one seeks to dig deeper into the financial world, a master of accountancy online will help serve as a stepping stone. Since the industry is fast expanding with newer opportunities, a career in it translates into lucrative prospects.
Additionally, companies such as Apple and Google saw potential in this new form of digital financing. They, therefore, introduced products such as Google Pay and Apple Pay through utilizing NFC payment technology. Users only need to swipe on their smartphones to make payments without using any cards or paper currency. Since banknotes pass through several hands in a day, governments also realized the potential of a virus spread through banknotes. However, since centralized institutions offered the existing “digital money,” developers like Satoshi Nakamoto invented a new way of conducting decentralized transactions. It is what we now call Bitcoin, the world’s first cryptocurrency.
- Reimagining The Way World Views Money
Experts argue that this new form of digital currency can replace all existing institutions and create a decentralized currency by removing the middlemen. Transactions can take place between end-users while they are validated by blockchain technology. Every transaction that takes place will add as a “block” on the network. Individuals cannot create or remove these blocks independently since the entire system relies on a network of interconnected nodes competing to solve complex math problems. When a node solves a problem, it gets rewarded through a new “coin,” validated by all other nodes. This new technology might not entirely replace existing financial institutions. However, one can see the potential it has in terms of revolutionizing how the world views the concept of money.
- Traders Move Off Trading Floors
As the global economy started to take a hit from the spread of the coronavirus, financial markets equally bore the brunt. Trading floors that used to run hot with the bickering of buyers and sellers had to shift entirely on the digital floor. As corporate offices shut down, so did global exchanges. Except for a few, the majority of traders started working at home to continue their operations. While conventional stock exchanges suffered due to the economic downturn, the cryptocurrency market, especially bitcoin, shot up in value.
Several analysts attribute the sudden rise of bitcoin amidst a global shutdown as a sign of loss of trust in conventional financial institutions. Closure of borders and ban on international travel already created a frenzy amongst several economies, derailing their financial markets. Consequently, the cryptocurrency market made its way to challenge the existing financial markets. It has successfully captured traders’ and speculators’ interests.
Changing global tides and trends are forcing people to adapt to the new normal. Public and Private institutions are already in the process of choosing sides. Some countries, such as Australia, have realized the potential of Fin-tech and digital currencies. Thus, they are actively integrating the new developments and providing the masses with better solutions. As the world adapts to the digital era, financial markets are bound to follow. What is essential to consider is the scale of the impact on existing institutions and infrastructures caused by growing interests in this new form of financing. Regardless, increasing acceptance of these digital payment methods and adoption by institutions will soon replace conventional paper bills.