Defining Digital Money
The State of Digital Money has the pleasure of hosting the conversation on new innovations and technologies disrupting the global financial system. As the leaders of that conversation, it’s important for us to define what “digital money” is and how this definition helps us curate our focused content.
Digital money uses technology such as computers, smartphones, and the internet to handle and transact financial or payment activity in a purely electronic way. It is a movement away from physical money, such as cash, coins, or the use of ATMs.
In today’s age of the internet, we find that the use of physical money is declining and disruption has occurred in traditional banking models. People are now able to store and manage finances digitally and send payments electronically through peer-to-peer. In many instances, this cuts out the need for a middleman or a central authority handling transactions. Digital money delivers convenience to the consumer and offers greater global access and connectivity to the underbanked.
The State of Digital Money explores three pillars of interest – Fintech, Blockchain, and Digital Currencies. Let’s examine these topic areas and view the trends:
Fintech is a portmanteau for finance and technology. The word used to refer to systems and technologies developed in the back-end for banks and financial services companies, but it has since evolved to a much broader scope of technologies that are transforming the financial sector. Fintech applies to many areas of finance such as banking, payments, wealth management, currencies, and regulations.
Digital banking is a fast evolving trend, where consumers are handling their money online without having to speak to a teller or visit an ATM. Most major banks have already adopted digital banking platforms and accessibility on mobile phones. Payment platforms such as Paypal, Venmo, or Apple Pay are facilitating convenience for consumers to pay electronically to merchants or peers, and are moving them away from physical wallets of cash to a digital mobile wallet.
Other technology trends that are disrupting financial systems are the adoption of big data, artificial intelligence, and machine learning. One area that this is being applied to is in digital wealth management and financial advisory, or what is called “robo-advisors”. Algorithmically driven financial planning services like Wealthfront, Betterment, and Robinhood are helping consumers invest and create portfolios through a mobile phone, eliminating the need to visit a financial advisor in person.
Others area in which AI and data are building opportunities are in financial regulations and security. A new trend in fintech called “regtech” is utilizing technology to help financial companies navigate and comply with rapidly evolving financial regulations as well as help secure cybersecurity and prevent data breaches and hacks. These technologies help reduce risk and costs of resources with compliance teams.
Blockchain and distributed ledger technology is one of the most disruptive technologies in the financial sector today. The cryptcurrency bitcoin was the first use case of blockchain, but has since been adopted for several other use cases in finance and beyond. In short, blockchain is a secure way to record digital transactions by decentralizing a public ledger that is distributed globally. Blockchain creates a system that makes it difficult to change the ledger due to its decentralized nature and amount of computing power required to reverse the data.
Needless to say, without going into too much detail on the technology itself, blockchain has allowed for greater security for transfers of digital assets, which can include money, contracts, or digital content. We are experiencing the infancy of blockchain technology today, and the community is equating the power of the technology to that of the internet in the early 90s.
Most fiat money and currency can be handled digitally today. However, new digital asset classes such as bitcoin are their own store of value and have disrupted the way in which we can trade and transact globally.
Bitcoin is the most popular digital currency and the first use case for blockchain technology. However, many other digital currencies (or alt-coins), have arisen for a variety of use cases such as Ether, Litecoin, and Ripple to name a few.
Recently, startup companies have been able to utilize digital currencies as a way to crowdfund their initiative by creating their own tokens of value, in what has been called “initial coin offerings”, or “token generated events”. Utilizing blockchain technology and tokens as a digital asset class, companies have been able to secure initial rounds of funding in the millions without having to go through investors or a bank. In its early stages, digital currencies and token offerings are suspect to scams and frauds among regulatory uncertainty. However, the potential and future for digital currencies, tokens, and their underlying technologies will undoubtedly be transformational.
Digital Money Opportunities
Digital Money is the future of finance, and will create global opportunities for businesses and consumers to connect in ways that were not possible before. Transformational financial technology will provide greater access to capital, decentralized financial freedom, and entrepreneurial opportunities for all. The State of Digital Money provides content, education, and access to a community to help you navigate through these exciting developments and propel your business forward.
To learn more about the State of Digital Money 2018 conference, visit our 2018 agenda page and list of speakers.