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Life without cash seems impossible. But according to the Bank of Finland, cash could be obsolete by 2030.

The financial industry commands the focus of new technology. Both businesses and consumers help drive the need for better payments systems. The more the world goes digital, the less sense it makes to carry around cash.

Credit cards are a great alternative, but there’s something bigger out there that could completely change the way we make purchases and engage in monetary transactions.

 

Turning your Smartphone into a Fully Functional Wallet

Your smartphone can do a wide range of essential tasks, including pay for items electronically in any number of ways including a payments app with one’s registered credit or debit card details. When making in-store purchases, individuals scan their device on a NFC-enabled POS terminal, which picks up the payments information digitally.

Going a step further, you can also use a smartphone to send and receive money in seconds. Similar to the first method, the transaction starts by linking a card or bank account with the mobile service. Transactions are facilitated through an app or via text. Transfers are immediate and timely notifications are sent to both the sender and the receiver to confirm the transaction.

 

What’s Wrong with Traditional Banking Systems?

Kari Takala, senior advisor at the Bank of Finland’s Currency Department, said, “Many see cash as a backup system. It’s quick and convenient to use. In the future we’ll have to see how quickly mobile payment methods replace cash.”

The problem with cash is its reliance on traditional banking systems. Outdated financial services have no place in fast-moving markets. Sending money through a local bank comes with costly transaction fees and can take 3-5 days, as it goes through several clearing processes. Furthermore, strict banking hours leave little time for busy individuals to tend to their accounts.

 

The Future of Mobile Payments and the Underbanked

Opening a bank is serious business. It takes solid infrastructure and a consistent flow of incoming and outgoing transactions to maintain. In rural locations where average storage amounts are low, financial services are difficult to come by.

Because of this, paying with mobile devices in developing countries has become a necessity. Underbanked individuals without access to proper financial services rely on e-payments to send money to their family and pay for basic goods or services.

Handheld transactions are fast and reliable, making such method of payment ideal for areas where carrying large amounts of cash is unsafe. Some businesses pay their employees through mobile payment accounts, which can be received instantaneously.

“In Kenya M-pesa is being used for almost half of all transactions. Digital money has low transaction costs which is great for the poor because they need to do financial transactions with small amounts of money. Over the next 5 years I think digital money will catch on in India and parts of Africa and help the poorest a lot,” said Bill Gates during a Reddit AMA.

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