What is digital money?
Digital money isn’t tangible like a coin or a bill. Digital money is a currency that only exists electronically. This means that it is transferred using computers through an internet connection. For example, cryptocurrency is a well-known form of digital money.
Digital money gets exchanged by using technologies such as online cryptocurrency exchanges, smartphones and computers, or credit cards. Transferring digital money into physical cash is also possible, and it can then be withdrawn from an ATM.
Digital money explained
The world is currently in the fourth industrial revolution, meaning that many new innovative technologies are available that weren’t 10 years ago. This has allowed online and digital currencies to thrive. These new technologies allow for seamless integrations and transfers. They ensure that people are onboarded quickly and that they can make use of the service almost immediately.
Cryptocurrency is a form of digital money that allows the user to invest for a return in real money. Many countries are starting to make crypto a legal tender, which will allow holders of crypto to buy things with this digital currency. The popularity of digital money is supported by the rapid growth of blockchain technology.
One name that may stand out to you when speaking about digital money is PayPal. The online platform first received a fair amount of backlash when they first started. The platform enables users to turn money from inside your bank account into digital money, facilitating transfers across borders or over long distances. Today, many e-commerce platforms would not have been able to strive without the advent of digital money.
Digital money vs cryptocurrency
Digital money is not cryptocurrency, but cryptocurrency is a form of digital money. Let’s explain. Digital money isn’t a synonym for cryptocurrency, it is a broad term that includes cryptocurrencies, fiat currencies, and any form of online money.
To further distance the two terms: cryptocurrency is an unregulated digital currency that is secured by cryptography. These are typically on a blockchain or similar distributed ledger. Cryptocurrencies are usually decentralised, meaning that no single entity has control over transactions or account balances.
However, digital money, unlike cryptocurrencies, are controlled by a single body, meaning that they have the ability to freeze or reverse transactions. Some companies or corporate payments systems that you might be familiar with are PayPal, M-Pesa, Alipay, or Venmo.
Advantages and disadvantages of digital money
Digital money offers ease of payment. It allows the user to make payments from the comfort of their own home. It also allows e-commerce sites to accept payments from across the globe, thus supporting the growth of e-commerce and convenience for consumers.
On the other hand, this form of payment is often also used by many fraudsters, who want to evade tax and cross-border transaction fees. This makes it difficult to know if you are dealing with real business owners or a fraudster.
It is best to weigh the advantages and disadvantages of digital money up against each other. This will help you understand the pros and cons of the different payment forms.
Advantages of digital money
- Allows for seamless, long-distance transactions without the fear of putting your credit card information at risk of landing up with a fraudster.
- Allows for cross-border transactions with cryptocurrency, which cannot be controlled by a bank.
- Usually doesn’t have any banking fees payable.
- No need to walk around with a stack of cash in your pocket.
- Allows for easy control of money, the exact amount can always be seen. No need to go to the bank to see how much money you have left.
Disadvantages of digital money
- No bank fees, but may incur other costs when making transactions.
- Digital money is seen as a soft target for hackers and scammers, and can easily be stolen.
- If cryptocurrency is lost or stolen, it cannot be retrieved. This is because it is decentralised.
- Not all entities accept digital money as a form of payment.
- Needs a constant Internet connection to be able to make payments.
Many are of the opinion that digital money is the way to go, whilst some disagree. When the advantages and disadvantages are weighed against each other you can understand why some are cautious of newer forms of transacting. Ultimately, you can decide which risks you are willing to take. It all comes down to personal preference.
PayPugs as a digital bank
PayPugs, a tailor-made financial service provider, offers you the right solution. We are dedicated to digital money and pride ourselves on extensive industry experience. We offer our clients multi-currency IBAN accounts, Visa and Mastercard (debit and prepaid cards), International SWIFT and SEPA payments, Forex exchange between 39 currencies, API, and crypto trading.
With a bank that offers you so many options and the ability to customise your preferences, joining the PayPugs family offers you a variety of benefits for your needs. To discuss your banking needs, book a call with one of our experts and speak to your personal banker today!