Will physical money disappear? Three game-changing trends that will affect the future financial sector

Money gradually changes form. From cryptocurrency to Web3 to Defi, the world of finance is evolving rapidly.

And our relationship with money is changing: from how we use it to the structures we rely on to keep it and how we treat it as customers. As a result, financial services providers, from wealth management to banks and insurance, are struggling to keep up.

Most of these new trends are the result of technological developments. Others are the result of a renewed emphasis on the consumer. To take a closer look at how this is happening, here is an overview of three game-changing trends that could affect the financial sector in the coming years.

Blockchain acceptance in the financial industry

Blockchain technology has long been synonymous with cryptocurrency, and experts believe the technology will only become more fused with existing and future financial systems. Why? Banks can carry out cheaper but efficient transactions with the blockchain while maintaining the security of their customers. It can also handle peer-to-peer lending, which is expected to reach $145 billion by 2025.

In addition, several banks will upgrade to cloud-based banking in 2023. Blockchain technology will help with this. Also, blockchain is being used by more than just banks. For example, various companies are actively using Blockchain technology in currency trading.

This makes one wonder: will online platforms ever integrate the use of cryptocurrencies to place bets physically and online? Several cryptocurrencies such as Bitcoin, Bitcoin cash, Ethereum, Ripple, etc are used to place bets and receive payouts on gaming apps.

With more and more states in the US adopting sports betting, more gaming platforms are starting to accept crypto as a form of payment, thanks to its increased convenience. Ohio is the latest state on the block to apply for the license and is set to become one of the largest online sports betting markets in America as of January 2023. If you’re a big fan of sports betting, learn more about Ohio sports betting apps and become a pro ahead of the launch.

In addition to sports betting, users can also use blockchain currencies to make payments on platforms such as Paypal and Mastercard. This of course involves cryptocurrency, but it shows banks’ willingness to accept blockchain.

E-money is on the rise

Guess you missed this train, Newsflash! Money has officially gone digital. Everyone can now pay for goods and services by scanning their phone or tapping a screen in a store. People in China can even pay by smiling, thanks to a facial recognition service called “Smile to Pay.” Physical money is not that important these days.

Essentially, digital money is money or payment in any form that exists only electronically. This can be something as simple as online payment or money transfer. A credit card company or traditional bank usually facilitates these) or when complex cryptocurrency such as Bitcoin (which usually sits outside of traditional financial institutions) is involved.

Credit cards, apps, online banking, smartphones, money transfers and cryptocurrency platforms are all forms of digital money, and the majority accept them. The bottom line is that no physical money is exchanged.

The Rise of Finance Apps

Mobile payment apps and “digital wallets” are paving the way for this new wave of electronic money.

This trend is significant because traditional banks offer few apps and services. Instead, they are pioneered by tech giants and digital-native startups like Google, Apple, Samsung and Elon Musk’s PayPal. These types of fintech providers, powered by data and AI capabilities, threaten traditional banks and financial service providers’ long hold and monopoly on money and payments.

In 2020, PayPal-owned Venmo processed over $155 billion in payments, a 59 percent increase from 2019. This would take a traditional bank years to achieve, and processes like these are predicted to rise even faster. Apps also make inroads in unsecured lending through BNPL services. For example, Klarna, a buy-now-pay-later digital payment system that is taking the millennial community by storm. These will shake up the market and take shares from lenders and high-rolling banks.

Finally, is an exciting future in sight?

The financial industry is changing rapidly. These three trends will only accelerate this development, dramatically redefining the sector between 2023 and 2025. The pace of change is so fast that financial institutions cannot afford to lag behind even for a moment.