E-Money is a familiar word to Kenyans; it’s actually a progressive term that defined the future of money. If asked to define E-money most Kenyans will mention M-pesa. In a newspaper article written on 2018, in the Daily Nation, E-money was viewed as a new entrant that had caused disruption in the financial system and was posing competition to the traditional banking system.
In 2022, 4 years later, Crypto currencies are now posing a greater threat to both E-money and the traditional banking system. But should this be the picture? In this article we will examine both Crypto currencies and E-Money as a payment options and why Crypto currencies shouldn’t pose a threat, as a new entrant but an alternative to the available payment options.
E-money is defined as a digital, monetary medium of exchange that is represented on an electronic device. The device could be software, payment service provider or a phone or a magnetic device such as a prepaid card. Whilst Crypto currencies is a decentralized digital currency, without a central bank or single administrator, that can be sent from user to user on the peer-to-peer Crypto currencies network without the need for intermediaries.
From the above definitions, we can already pick similarities and differences. To better understand, let’s start with the similarities. First of all both, Crypto currencies and E-money exist in digital form this means that they are not printed. This poses an advantage in terms of hastening payments of goods or services. Digital form means that the user/holders bypass the need to physically appear in person to pay for goods and services, and also the need to have physical proof of receipt of money.
Secondly, they are both fast and make global payments easy. Global payments in the past would take days for money to reflect to the seller’s account, with numerous bottleneck processes posing as hindrances. With both E-money and Crypto currencies as payment options, global payments done reflect within hours into the sellers account ,this has been a great boost to local economies as more and more multinationals have now opened up branches and satellite offices in different parts of the world.
Thirdly, both Crypto currencies and E-money are safe to carry out transactions this as a result of passwords and encryption keys that exist to ensure that only the authorized person receives the money and also makes payment. As a result, there are minimum cases of theft or crime or even dangers posed when moving with large sums of money.
Although both E-money and Crypto currencies offer great advantages, they also have disadvantages. Firstly, they are both prone to cyber crime and hacking. This is as a result of its digital form.
Secondly, the users are prone to forget their passwords. Both E-money ad Bitcoins, users are prone to forget their passwords. This has resulted to a lot of cash being held in virtual form and as result being unaccounted for.
Thirdly, they further segment the market. This means that, unless you have the basic education, transacting or using E-money and Crypto currencies can be challenging.
Lastly, Technological issues and power blackouts pose a great challenge to transactions. In instances where power blackouts are experienced transactions come to a standstill.
Having understood the definitions and the opportunities offered by both e-money and Crypto currencies, saying the two cannot work autonomously is an understatement.
Assuming client A, who lives and works in country G and client B who lives and works in country X have entered into a cross border transactions that involves shipments of goods from country W. With E–money, there are various challenges that will be encountered, first, both clients have to agree on the platform to use for their transaction, and secondly, they have to agree on the amount to pay inclusive of the exchange rates and withdrawal charges, thirdly they might agree to cost share the transaction cost which will in this case be high. Looking at the same transaction , the two clients can agree to settle the same amount in Crypto currencies, the advantage will be the Crypto currencies will not incur and transactional cost ,the amount will reflect faster in the account and thirdly there are no extra cost incurred as a result of trans-border transactions.
Looking at the future of payment systems and of course financial systems, we cannot close our minds toward the possibility of there being room for more than the two modes of payment, of course assuming that governments will come up with policies and regulations to govern the use of Crypto currencies and other crypto currencies.
If we look at the future as being fronted by E-commerce then we have to think of payments differently, firstly customers will need Payment systems that are synchronized and can work with multiple P2Ps and Pos systems, secondly, they want their money mobile and can be accessed in a touch of a button. Thirdly, they are looking for transparency, unlike traditional banking methods where customers are unconcerned about where money was stored and the balances, the current class of humans want full access to their bank accounts. Fourthly, customer want several payment options and modes, this is to ensure that payments are done within the fastest timelines.
Governments via the central bank should therefore smell the tea and regulate the use of Crypto currencies just like they did E money. This would not only bring foreign investors to set up their companies, but would boost local economy, encourage E-commerce and create jobs for many young people who are currently trading crypto currencies illegitimately.
The government can start by licensing and regulating the use of crypto currencies, they can even select the allowed coins per country, secondly they should allow bank to process transactions that are related to crypto currencies. Thirdly, they can train people on how to purchase and sell crypto. Fourthly form multi-displinary sectional team’s with the various stakeholders and discuss how other forms of payments can be introduced into the economy.
In conclusion, in a progressive economy, innovation within the technological sector especially one that is geared towards creative ways of payment options should be encouraged and fostered. Both E money and Crypto currencies or any other crypto currencies can offer alternative payment options.
Imagine a world where a transaction can be completed within 10 seconds with no physical cash, no 3rd parties, no transaction cost and can be paid via multiple options, that’s the future.
