Through the history the money as payment service has changed in accordance with the population needs and with the circumstances that have ruled: coins, paper money, bills, checks, etc. Industrialization and rapid growth appealed the need of developing payment systems that could face accelerating need of money transfers. In the last 50 years money payment systems supported by the IT industry are facing development with very fast pace. As the systems of money payment are developing, the money are also evolving, so the first electronic money (electronic transfer of money) has appeared. After that there were launched payment cards and cards that are used in supermarkets for collecting points. Such cards in addition could be used for purchasing products from the same market. By that they represent one type of electronic payment. In the last 20 years, as the result of the development of IT Industry and internet as communication tools, electronic and internet payment has reached its peak. In the developed countries there are more rare situations of using paper money, so digital form of money is not unknown, and we are not going to be astonished if on some shop window we can see the following caption “we are not receiving cash, only payment cards’’.
In our days money transfers unroll very fast, but the costs of such transfers are very high and they are circulating in the range between 7 % and 10 % from every single transferred amount. Annually, the quick transfer money global market is around 38 billion dollars. Provision margins in the relative and in the absolute amounts, have attracted the large companies to find new innovative resolutions in aim to simplify and make cheaper quick money transfers. Until payment systems are growing and went through modernizations more and more, financial markets always will need finding new more sophisticated payment systems, who are going to increase the payment security and rapidity from one side and who are going to reduce the expenses from the other side.
Rapid development of the applications used for communication, their networking implementation on the social media and the ability the same applications be incorporated as payment tools and money transfers, are changing the relations toward banks and financial institutions as well they are redefining the entire money perception. Some payment tools instead electronic moneys are connected with bank bills and are using so called crypto value (currency). Crypto values (currencies) are representing digital form of currencies that are not issued and that are not under control of any central bank. Crypto values (currencies) are not the subject of any national legislation and for that reasons they cannot be used unlimited. Crypto values have reached its own popularity in the last several years when some traders have accepted it in their daily operations. Crypto values, development of the quick payment tools, and development of the artificial intelligence and the possibilities of their implementations in the bank’s operations as well other themes were among the topics of the Singapore fin – tech festival that was held from 11 till 15 November this year. There were enormous numbers of participants, more than 40.000 from more than 100 countries. Among more prominent participants we could pulled out the following: India Prime Minister – Narendra Modi, Christine Lagarde – IMF Director, as well Canadian Prime Minister – Justin Trudeau.
With the development of the IT Technologies, smart mobiles, applications that enables payments as well and crypto values (currencies) that take more place in everyday payments, central banks should reconsider for new changes and adaptation regarding new occurred reality. Time for changes toward money digitalization has come and central banks should accept such changes. According Lagarde, central banks should think to launch national digital currency which is going to be also guarantied and supported by the states that also issued presently paper and coined money. With launching of the publicly issued digital currencies except cutting transfer money costs, digital currencies will have serious impact toward gray economy.
If the central banks avoid digitalization of money markets, the power of the popularity of the crypto values will afford too much power on several private digital payments providers. The truth is that the deposits in the banks are now already digitalized, but the digital currency will be state owned liability, the same as now are the securities. Therefore, it wouldn’t be liability of only private banks.
Central Banks of Canada, China, Sweden and Uruguay already seriously think in this direction and are in the process of analyzing potential risks and challenges that can outcome as result of issuing digital currency. As possible solutions are stressed the possibilities central banks to issue token, digital wallets and similar solutions and by that everyone will have its own personal bank account in the central bank and the opportunities to use it by its own needs.
In that direction the challenges of digital currencies are going to be as the following:
a) Financial inclusion of the entire population: Payments with the new digital currencies must be simple and achievable everywhere in the country;
b) Security, customer protection and privacy
c) Financial Integrity: Central banks could designee digital currency, so the users’ identities are going to be verified through particular procedures for analyzing registered costumers and transactions.
d) Financial stability: it opens the following dilemma – Are there any possibilities, digital currencies to ruin the financial stability? If all legal and private subjects have its own accounts in the central banks, the ownerships of accounts in private banks came under question and by that the existence of the private banks are also under question mark.
e) Shrinking the new innovations interest: If the central banks offer complete solutions for every payment from digital wallets and payments, so called private sector that is usually generator of new innovations wouldn’t be challenged for developing of new innovative resolutions.
This shortcomings and risks will be overcome with simple technical solutions, private protection legislatives, as well share and distribution of jurisdictions between central bank and other participants that are going to have imposing role in the new world of digital currencies.