Is digital money transforming business payment systems? Yes, it is. Digital money is a payment that exists solely in electronic form – the most common are cryptocurrency and digital assets. But digital money can also represent fiat currency like the US dollar.
The idea of digital money actually originated over 30 years ago in 1990 – a pipe dream from David Chaum’s company DigiCash and the attempted curation of eCash. It was a flop, but little did they know they had started a digital revolution.
Fast forward 19 years, and along came Bitcoin – the coin that brings us here today. As of November 2023, there are 10,748 cryptocurrencies in existence. Not all of them are viable in the context of revolutionising business payment systems, but the number highlights the rapid evolution of digital money.
And that doesn’t even touch on the growth of the digital assets. By the end of 2022, 10.30 million people owned NFTs.
So how does this revolutionary currency that has undeniably changed financial principles transpire into a revolutionary tool for payment systems in business operations? Let’s explore.
Understanding Digital Money
The first thing to understand is that digital money isn’t cash, and it never will be. There’s a digital representation of cash in our online banks and mobile banking. Yes, that’s revolutionised businesses in a way, especially with the ease of business banking, but it’s the other three forms of digital money that have the power to revolutionise business payment systems and operations.
The variants of digital money holding power are cryptocurrencies, central bank digital currencies, and stablecoins. Traded online through cryptocurrency exchanges and usually stored using digital wallets, these three forms of cryptocurrencies have exploded into every corner of the financial market.
Cryptocurrencies and Blockchain Technology
Bitcoin is the leading cryptocurrency that many businesses have begun accepting in the US – and an estimated 2,352 US businesses accept it as payment.
But it’s the blockchain technology that promises to revolutionise business payment systems and operations. Blockchains essentially store the information in block form, hence the name, that constructs a ledger for enabling exchanges between multiple parties.
The data stored on the blockchain is chronologically consistent – you can’t delete or modify information on the chain without consensus from the network. How does this benefit businesses? Essentially, decentralised technology has created an unalterable ledger for businesses to trust.
Trust is the keyword.
Revolutionising Payment Systems in Business Operations
This immutable and unalterable ledger serves to revolutionise payment systems in business operations. It creates consistency, transparency, and security – the built-in mechanisms within the system that require multiple nodes to authorise a transaction to prevent unauthorised transactions.
Consistency and Transparency
The issues with traditional banking systems are prominent. The first is transaction recording. One business example includes a recording of sales or the payment of invoices – one party could argue they haven’t received the money.
To prevent the legal conundrum, there’s a third party that doesn’t exist in the decentralised world that supervises and validates transactions. The issue? There’s a single point of vulnerability.
With the transparency and robust structure of digital money and payments, any tampering in the ledger created between the two parties will result in corruption of the ledger – there’s complete transparency.
Blockchain and digital money use three principles to ensure high levels of security – cryptography, decentralisation, and consensus. The three combined create an ultra-secure underlying software system that’s almost impossible to tamper with. Unlike with traditional banking systems, there’s no single point of failure.
Blockchain technology and the use of digital money slash auditing times and make financial management easy – especially with the use of cards like the Nebeus that we mentioned earlier. Thanks to the chronological nature of blockchain, all transactions are recorded in order of time.
Possibly the most revolutionary benefit of digital money is the ease of transactions between businesses. Traditional banking and money have operational loopholes that often delay transaction processing times, especially with international transactions.
Blockchain technology allows instant, or almost instant, transactions once it has been authorised across the network.
If you use digital money correctly, your business will revolutionise its payment systems and business operations. The technology itself is still very much in its infancy compared to traditional banking systems and fiat currency, so expect the benefits for business to continuously grow.