“How much for the coffee?” a dollar, 10 yuan, 1 euro… Whatever the price, you might pull out local coins or notes to settle your bill. Or you might wave a phone or swipe a card and walk away knowing that your bill is paid. Someone watching from the 20th century will think it’s magic. It nearly is.
Alipay, Wechat, Zelle, Swish, Paxos, Mpesa, stablecoins, are increasingly replacing out fiat currency wallets. In Kenya and China, for instance, digital money already rules. In Kenya, 90 percent of 14-plus years-olds transfer money and pay for their purchases using M-pesa. The value of virtual money transactions in China – on platforms like Alipay and WeChat, surpasses the combined Mastercard and Visa transactions.
Money is going digital faster than anyone anticipated; here is why:
- Convenience: Virtual money is well integrated into our digital activities relative to fiat money. It’s typically handled by firms that fundamentally value user-centered design. For instance, at xCrypt, you can directly buy digital assets using a credit and debit card. The process is as easy as shopping online using your card.
- Ubiquity: Cross-border transfer of digital assets is cheaper and faster compared to bank and cash transfer. At xCrypt, we are working to create a debit card that allows users to withdraw their cryptocurrencies in fiat from any ATM in the globe.
- Functionality: The functionality of digital assets can easily be extended by its developer community, which may tap into the open-source codes; this is contrary to the proprietary technology that underpins central bank money.
- Transaction costs: Transfer of digital money is typically immediate and nearly costless, which makes it more attractive than inter-bank transfers or card payments.
- Trust: The technologies that underpin digital assets are typically decentralized and ‘trustless,’ meaning that users don’t need a centralized authority like a bank to transact. And, their distributed nature safeguards against double-spending and thus creates a trustless system.
- Network effects: Once peers and merchants start accepting e-money, its value to users increases. This draws in more users; in turn, increased use bolsters the value even further.
The first five reasons are the sparks that lit the fire of digital money; network effect is the wind that’s spreading the blaze. The efficacy of network effects in spreading the adoption of new technology or services cannot be underestimated. What triggered the switch from email to text messaging, and from texting to messaging though social platforms like WhatsApp?
WhatsApp adoption was one-third faster than Gmail adoption. Today, WhatsApp has over 1.5 billion users, which is way over the number of Gmail users. The chasm between WhatsApp and standard text-messaging platforms is even wider.
All of the three texting solutions facilitate communication in writing. Why did one of them dominate over the others? Well, social messaging apps integrate better with other features like photos. They are also cheaper, and a tad friendlier. More importantly, they are interoperable between phones, providers, and borders, and most of our friends and family used them.
Network effect magnifies the small differences in features. WhatsApp is a perfect example of a service that spread primarily through network effects. Network effects also impact payments. Payments are not just about settling of debts. They are also a social experience. If two people share a method of a payment, a third person is more likely to join them. Payments can be fun, fast, easy, and convenient too.
This is where companies like the xCrypt exchange come in. Xcrypt has created a platform where purchasing, trading, and transferring of e-money is low-cost, convenient, attractive, and reliable. xCrypt utilizes a user-centered design, and the team takes into consideration how people behave online and on social media.