It’s no exaggeration to say that the way we make payments, as individuals and businesses, has changed dramatically over the past decade – especially with the rise of mobile payment options and cryptocurrency. As a result, the world is rapidly transitioning to a new digital economy where money can be exchanged easily and quickly without borders or restrictions.
This article discusses how electronic payments have evolved over the years and explores why experts predict that up to 10% of people will trade crypto in 2023! Read on for an in-depth look at what this exciting change holds for us all.
The Original Electronic Payment Method
For centuries, it was common practice for customers to pay for their purchases physically. However, that changed dramatically when Western Union introduced a form of EFTs (electronic money transfers) in 1871. EFTs also referred to as “wiring,” gained popularity as a convenient means to transfer funds between accounts without needing a physical cash transfer.
In 1914, Western Union developed charge accounts that could be used at many businesses, further revolutionizing payments. Previously, such accounts were only usable at the specific stores that offered them. Customers could use the associated cards to make in-store and online purchases on credit, with repayment to the issuer afterwards. This electronic payment was widely used in the first half of the twentieth century and was known as a “charge card.”
Changes in Money Transfer Technology Since the 1940s
Credit cards emerged in the 1950s as a solution to the problems that plagued charge cards and checking accounts despite their widespread use. In 1950, Diners Club was the first to market a “general purpose” charge card; subsequent companies, such as Carte Blanche and American Express, quickly followed suit. Trailblazers of the credit card era established the norms for the widespread acceptance and use of plastic.
Modern credit cards allow users to carry over amounts from one billing cycle to the next without paying the full amount due immediately, unlike traditional charge cards requiring the full sum to be paid off at a specified interval. Bank of America used this payment method, termed “revolving credit,” to issue the first modern credit card in 1958.
Background of the Credit Card Usage
Bank of America’s credit card, first called the BankAmericard but now known as Visa, was an instant hit. A thoughtful approach to issuing the card entailed delivering it to people in neighbourhoods where many homeowners were already Bank of America customers, rapidly expanding the pool of potential users and raising the possibility that retailers would accept the cards.
Despite the success of Bank of America and its imitators, the broad acceptance of credit cards was met with resistance from certain consumers. This was partly because utilising them was much more labour-intensive back then than now. For example, before credit card information was digitised in the early 1970s, when a client paid with a credit card, the retailer had to call the issuing bank, which then phoned the credit card business, where an employee verified the customer’s name and credit balance to confirm the transaction.
As a result of the hassle, several stores started allowing unverified purchases if they knew the buyer or if the total didn’t exceed a specific threshold. As a result, businesses were exposed to a higher risk of credit card fraud, chargebacks, and other penalties. Many businesses, however, have opted to take the chance in exchange for easier, more expedited transactions.
The Internet and Financial Transaction Processing
E-payment systems had already been rapidly developing before the widespread use of the internet made additional strides in this direction. Previously, card-not-present transactions took the shape of telephone orders and other related exchanges. However, this age saw the introduction of e-commerce as a speedier, more efficient form of card-not-present exchanges. This followed the introduction of electronic verification systems, which rapidly checked and authorised digital payments through various channels. As a result, mobile gadgets like Apple Pay and Google Wallet quickly became widespread ways for customers to make purchases.
Cryptocurrency as a digital payment
Since the launch of Bitcoin in 2008, the cryptocurrency market has been growing rapidly. It is quickly becoming the way of the future when making digital payments. Gone are the days of relying on traditional banking systems to transfer money. Because there’s no need for intermediaries like banks or other organisations to host transactions, there are very low fees compared to other payment methods. In addition, with an increasing number of companies accepting crypto payments, it’s never been easier to make fast and secure purchases, no matter how far away you are from the checkout line.
How many people will be using crypto actively in 2023
Around the world, there are over 420 million users of Bitcoin and other cryptocurrencies. The active exploration of this market by well-known individuals and significant, regulated financial institutions has also increased cryptocurrency awareness.
According to research conducted by Deloitte and PayPal, many consumers are now very interested in making payments using digital currencies. Additionally, they are certain that consumer interest will grow over time, and approximately 75% of them stated intentions to take cryptocurrency and stablecoin payments by 2024. The recorded estimation of over 420 million crypto users worldwide equates to a global ownership rate of 4.2%. A tightening of crypto rules has also sparked much interest in this area. The regulatory environment for cryptocurrencies is progressively changing and has become quite dynamic inside national jurisdictions and worldwide.
The new crypto infrastructure suggested by the cryptocurrency industry allows for direct transactions between individuals and organisations without intermediary institutions. The technological stack behind cryptocurrency payments can alter how individuals make payments and completely alter the nature of the online marketplace.