In this final part of our series on Fintech trends to watch out for in 2017, we look at the growing phenomenon of digital money and ask whether we’re moving towards a cashless society.
In November 2016, Indian Prime Minister Narendra Modi shocked the world, and more importantly his own citizens, by discontinuing the 500 and 1,000 rupee notes. Considering these notes made up 86% of the total in circulation in the Indian economy1, this move caused significant upheaval. The government’s goal was to stifle corruption and clamp down on undeclared money in a country which relies heavily on cash.
One effect this could have is to push India further towards digital money. The government has already taken steps in this direction. In 2009, it launched a project called Aadhar with the aim of giving everyone a digital identity based on biometric identifiers. Indians can use these IDs to open a bank account. Within a few years, there were 270 million accounts holding billions of dollars’ worth of deposits 2. The government then launched its Unified Payment Interface which allows banks to transfer money directly to each other using the Aadhar ID number. That means Indians can simply download an app and use it to send money or to make payments.
The world’s first borderless digital money thrived amid the Indian cash crisis. The value of one bitcoin- a cryptocurrency relying on a shared ledger to record transactions, so it doesn’t fall under the control of a single authority- climbed from $757 to $1,020 on Indian exchanges3. This jump prompted arguments that bitcoin is becoming recognised as a safe haven currency which people turn to in the face of economic uncertainty.
Kenya is another country leading the way in digital currencies. 2017 sees the 10-year anniversary of mPesa, a mobile money service allowing users to transfer money to each other or to pay bills and make purchases. It has since been extended to several countries in Africa and Eastern Europe and serves more than 29 million customers who made roughly six billion transactions in 2016.4
This trend is set to continue with the growing usage of mobile devices. In the post on mobile money, we explored how smart phone adoption is increasing exponentially around the world. And as we explained above, the majority of the innovation in digital currency relies on mobile technology. So the ecosystem is in place to bring us significantly closer to a cashless society.
Written by Sudhesh Giriyan, COO, Xpress Money