Digital Money
Facebook recently announced the launch of its own digital currency ‘Libra’. Facebook envisions this currency being used to pay for everything including your daily coffee, eCommerce and even financial services.
Facebook are not alone in this space. There are currently over a thousand forms of digital/crypto currency available and this number is only likely to balloon as we progress in to the 21st century.
This week we talk about the implications of digital money for Kiwis.
Tracking your balance
A savings account balance of $10,000 is tangible and easy to understand. We don’t need to see the cash to understand its value and even if it’s only numbers on the screen of a mobile – for most of us it feels real.
But add a balance of 4,500 Libras on top – things start to become less tangible.
Now consider a world where TradeMe has its own currency. Additionally, your internet provider, power company, online streaming service and supermarket have grouped together around a separate currency altogether. Just how much money or wealth do you have and how do you even start to measure it?
This future may sound farcical – but even 10 years ago the idea of paying for goods and services by just tapping your phone was not on the radar for most of us. Technology is continuing to change the way we transact and at a more rapid pace than ever before.
One thing is clear – Kiwis are going to have to become more financially literate in this digital world to compete.
The positives
Digital currencies have the potential to radically disrupt commerce in New Zealand. The ability to instantly settle funds with negligible transaction fees will allow businesses to reduce costs and collect their funds sooner – fueling expansion and innovation.
For international trade, currency conversion and exchange fees are likely to disappear – expanding the global horizons of many Kiwi firms.
It’s not just Silicon Valley
The Indian Reserve Bank as well as many South Korean banks are actively exploring the use of digital currencies. There are still plenty of practical and legislative issues to be tackled around financial security, crime and technology when it comes to digital currency but the change is well underway.
Our recommendation is to keep abreast of these changes. Digital currencies won’t arrive overnight but by being on the front foot, we can minimize the disruption that may occur in our lives when they do. If you want to talk about the implications of digital currency, feel free to give us an email at info@foxplan.nz to speak with one of our financial advisers.