The Future of Payments: When Wallet in the Pocket Will Become Obsolete?
Technological development inevitably changes not only the ways we interact with each other or use various services, but also how we settle for them, make payments or other financial transactions. Financial technologies are the fastest growing ones and innovations in this field can quickly turn cash into obsolete.
The future of payments, most promising technologies in this field and the prospect of replacing wallets with smartphones were the topics discussed at Rise Vilnius Fintech Week events organised by FinTech community Rise Vilnius.
The Future of Payments: Cryptocurrency
Linas Rajackas, CEO at Kaiserex, a company providing cryptocurrency investing exchange services, says that particularly cryptocurrencies and blockchain technology are the future of our payments. He also forecasts that cryptocurrencies have the potential to become a mainstream form of payment within the next 10-15 years.
“So far, it is difficult to predict which type of cryptocurrency will prevail. Maybe it will be based on the blockchain technology adapted to the international payment network SWIFT, a similar way chosen by Ripple, a company collaborating with international financial institutions. Or maybe we will have a fully decentralised system, as originally envisioned by developers of Bitcoin and other cryptocurrencies. In any event, the advantages of blockchain sooner or later will make this technology the basis for all payments,” said Rajackas.
According to the expert, using cryptocurrencies allows people to bypass the costs associated with traditional financial intermediaries, which can amount to one tenth of the total value of transaction. Therefore, blockchain technology can make the process of payments much cheaper and faster.
Obstacle: Underdeveloped Infrastructure
However, even if the technology itself is well-functioning and reliable, the lack of infrastructure necessary for massive use of cryptocurrency still is a big issue. According to Rajackas, this is the main reason we still have to rely on traditional money.
“First of all, traditional banks do not support transactions, accumulation of savings or investments involving cryptocurrencies. Consequently, even if we use cryptocurrencies, the necessity of it being pegged to traditional currencies still remains. Actually, there are no financial institutions providing services of cryptocurrency storage. This is why many investors still consider traditional securities and assets in regular currencies to be more preferable,” said Rajackas.
In the opinion of Rajackas, conservatism of certain people is another reason why it will take at least a decade until the public switches to a virtual currency. Nevertheless, the expert in cryptocurrency has no doubts that the development of suitable infrastructure would encourage people to quickly adapt to innovations. The example of financial services company Revolut proves it right. The alternative platform to traditional banks offered by the company has taken root very quickly in Lithuania and can already compete with traditional banking in terms of the amounts of transactions performed in the country.
All Finances on a Smartphone
Meanwhile, Rūta Banytė, CMO at the financial services company Foxbox, said we are steadily getting closer to the cashless future. Moreover, the expert believes that all future payments will be made just via smartphones.
“Payments via mobile phones, as well as fast, cheap or absolutely free of charge transactions are already available today. The questions is how quickly such payments can replace the traditional ones. I suppose the shift to innovative payments should take place gradually, it can not be sudden, because people and businesses need some time to get used to it,” said Banytė.
She also added, that we are already moving from cash to electronic payments in small steps, thus, the task of financial technology companies is to offer handy ways to dispose of them.
Small but Sure Steps towards the Future
“I believe that in the process of developing and offering new financial products, models and services it is crucial to consider the needs of their users, who are not always open to innovations. Involvement in the matters of financial technology community together with like-minded people often makes one to forget that the entire society may not be so enthusiastic, and for the majority of people the innovations under development may not be so comprehensible and acceptable. Therefore, financial technologies should be introduced gradually, seeking to protect consumers from getting shocked. Innovation developers, in turn, could be successful in developing their own solutions,” shared her thoughts Banytė.
She added, that habits, attitudes or fears of people or businesses related to financial issues are not always rational. According to the expert, finances and payments are areas where carefulness, ability to manage risks and attention to security are crucial.
“We rarely think about threats, so it is always good to listen to your common sense and to evaluate technological solutions from various aspects before going along with the crowd. In spite of possible threats, financial technology sector has huge potential and, most importantly, it can make payments more convenient and efficient,” concluded Banytė.