Aşağıda yayınladığımız yazılar, Prof. Dr. Selim Yazıcı’nın Özyeğin Üniversitesi, Financial Engineering and Risk Management (FERM) Yüksek Lisans Programında vermiş olduğu Financial Technologies dersinde öğrencilerin bitirme ödevi olarak hazırladıkları çalışmalardan oluşmaktadır. Yazılar kendilerinden izin alınarak yayınlanmaktadır.
Future of Money
Hazırlayan: Cihat Karaismağiloğlu
Everything has a time. Everything is born, grows and dies. This is the cycle of time. The same process is valid for money. Money is evolving over time. The coin is a phsical item. You can hold it and pick up on your hand. You are confident that it has a value but the value may disseappear as time goes on. It might be fully wasted in the future. Even you might not be holding a phsical coin in the future, you might only have a access to digital currency which you do not know how it looks. Financial revolution is upcoming. Be prepared !
The current monetary system is subjected to undergo significant changes because of inflation, illicit economy and counterfeiting. When money was born, there were 2 million people in the world but today, there are seven billion of us. The system is under heavy burden because of increased demand for money. The huge demand occurs because of high growth and this growth brings historical level of financial debt in the world. The system does not contain enough money to pay off all the debts in the World. Therefore, digital currency revalution is required.
Money is only valid when it brings value and we accept it as a payment method for goods and services. However, the trust in money is under pressure. we do not believe the system as much as before, especially for younger generation.
We have seen that defraud, cheat occur easily in the current financial system. The bank print money out of thin and profit from doing so. Today financial revolution is closer and money will disappear and be replaced by something else. Local social currencies where you earn by doing social work, services or companies’ own currency based on custumer loyalty replace banknotes.
The use of credit cards has dramatically increased in recent years. Visa and Master Card take a share of more than 80% of global credit card payment market but a new , more comprehensive method, of mobile payment solutions is upcoming.
Consequences of a society without money is crucial because security is not maintained yet. Even payment networks can close people’s accounts in no time when a political disagreement occur between countries such as Russia, Iran. Furthermore, we might experience a huge IT breakdowns that the consequences would be heavy. Future wars will be fought by computer screen rather than with troops. Banks do not provide evidence to secure our privacy and to protect our sensitive datas. With digitilased financial system, we might face new and challenging ethical and security related problems in the future.
Israel is known as a trend setting nation regarding innovation and IT. Ennrepreneurs are working on future currencies in Israel because Israel is suitable place for such innovations. The American company Robocoin has set up their Bitcoin ATM, which makes it possible for people to exchange their virtual currency to cash. Israel is currently the world’s most active Bitcoin market and the home to hundreds of new start-up companies that focus on the development of technologies related to virtual money.
Digital world is growing. Smartphone application transform the device into remittance, payment tool, remittance, seamless wallet granting unprecedented convenience to many people. So far money has been exchange value for goods and services for approximately the past millennium. It is time for money to transform to satisfy current needs.
Cash is highly used payment for individuals and organisations taking part in criminal activities. Cash provides untraceable way to facilitate and grow criminal economy. Without physical cash, criminal activities would be much easier to detect. Transaction will have to bypass bank accounts which are traceable. They are forced to more troublesome form of bartering. Furthermore, street violence reduce when dependence on cash decreases. There is a strict correlation between cash and street violance. By digital currencies, it is estimated that street violance would decrease by 10%.
It costs money to manufacture money. Penny cost more than its actual value. It costs 1.43 cents to manufacture a penny even before it’s massive environmental effect created by mining, smelting, minting, and transportation operations.
Cash causes hidden economy. It is easy to see why as it does not leave any traceable paper to investigate and tracked by taxation investigators. For example, when an employer pays a worker under table, both employer and employee do not pay income tax for transaction. Because of that, many workers are paid primarily in cash. Therefore, they underreport their income. Underreporting of income by individuals is one of the largest contributor to tax gap. Tax evasion costs 200 billion dolar to United States every year, which is about 1 percent of the country’s GDP. OECD countries lose about 2–3 percent of their total tax revenues every year. Lower Income countries tend to lose more, approximately 6–13 percent.
Governments are also taking steps to advance cashless payments. For example the Singaporean government aims to reduce cash transaction by supporting several digital payments initiatives. A nation-wide electronic payment system ‘PAyNow’ implemented by the Association of Banks in Singapore is one of them. The transactional value of e-payments in the country has grown by more than $10 billion a year since the launch of PayNowi while ATM cash withdrawals have declined by more than $300 million.
As a conclusion, it seems that physical money comes to end. Digital currencies, blockchain, bitcoin will inevitably replace phsical cash. Governments has started to take precautions and preparements for digital currency. Finance is getting more and more integrated with technology. Banks also integrate themselves to technology. People will even not need to go bank in the future. People will need banking system ,phsyical bank will not be necessary any more. Banks are becoming ready for digital transformation. Governments has started to build their own cryptocurrencies. Technology is revolutionising money. There are now myriad of different ways to pay, with innovations like contactless cards, mobile payments and digital currencies. On the other hand, we depend more on private financial institutions to access our money as we move electronic payments.