If you’re reading this right now, you are probably familiar with what a currency is. If you’re not sure, it’s that pretty paper in your wallet that you use to buy goods and services with. I’m not sure if you were aware of this, but that particular form of currency (the paper with the designs on them) is called banknotes. However, that is not what I will be talking about on this page. What I will be talking about is electronic currency.
Have you ever heard of it? If you didn’t, you probably still have some idea of what it is based on the name. Electronic currency is in wide use all around the world and chances are, you use it yourself. In fact, there is more of it in circulation than banknotes. Do I have your interest peaked now? Well, let’s dive in.
What is Electronic Currency?
Electronic currency, as it’s name implies, is a digital, electronic form of currency. In many established economies, if not all, electronic currency is used more than physical banknote currency to purchase goods and services. With the advancement of technology, it is through the use of checks, debit cards, credit cards, bank wires, other forms of electronic transfers, like direct deposit and even the electronic transfers via cell phones, where electronic currency can be accessed. Because of it’s easy of use and convenience, consumers are using physical currency less and using electronic currency more.
It is understandable why consumers worldwide are using electronic currency more than physical currency. Electronic currency, also known as digital currency, is far more convenient. Plain and simple. There’s no need to open your wallet, shuffle through your various currency denominations and pay. Also, in most cases, the producer would have to issue change to consumers when ever they overpay for a good or service. Consider this example.
John goes to the food market to buy an apple. When he finds the apple, he notices that it costs $2.98 United States dollars. He takes one and heads toward the checkout counter. When John opens his wallet, he finds out that all he has one $5 United States dollar banknote. He gives the banknote to the cashier. Now the cashier has to give John change because he over paid by $2.02. So the cashier gives John his change and apple, and John leaves the food market.
As you see in this example, John was able to pay with physical currency effectively. However, there are a few inconveniences that occurred in the transaction.
I will list out those inconveniences later. Now here’s the same example, but now John uses a debit card in his transaction.
John goes to the food market to buy an apple. When he finds the apple, he notices that it costs $2.98 United States dollars. He takes one and heads toward the checkout counter. When John opens his wallet, he takes out his debit card and hands it to the cashier. The cashier uses John’s debit card and removes exactly $2.98 from John’s bank account electronically and transfers it to the food market’s bank account. The cashier hands over John’s debit card and apple, and John leaves the store.
Do you see how much more convenient the second example was. John simply handed his debit card to the cashier and John paid using his electronic currency. People love convenience; myself included. But why exactly is electronic currency more convenient?
Reasons Why Electronic Currency is More Convenient Than Physical Currency
- There’s less stuff to carry.
- No change.
- It’s safer.
- More documentation of transaction.
Those are the primary reasons why electronic currency is more convenient than physical currency. Let me expound on these reasons. Number one, there’s less stuff to carry. In the example above, John went to the food market with one banknote and left with two banknotes and some coin currency. Now I’m not saying that’s a huge burden to bare, but that is definitely more stuff to carry than one debit card. Even in your own personal life, you can’t deny that one card or one check book or your cell phone is way less stuff than carrying thousands, hundreds, or even a few banknotes in your wallet. Less stuff equals more convenience.
Number two is no change. In the example John had to get change because he over paid by $2.02. It’s very rare for a consumer to pay exactly what the total cost of what is being purchased. Ninety five percent of the time, the producer will have have to issue change. Not only can that be a waste of time and effort, but it increases the probability for errors. Simply removing the exact total from a consumer’s bank account and transferring it to the producer’s bank account is more efficient and lowers the probability for errors to occur. I’m not saying mistakes won’t occur, but the frequency at which they occur should decline.
The third reason why electronic currency is more convenient than physical currency is because it’s safer. We live in a dangerous world. Criminals are always looking for a way to steal money. Fortunately, electronic currency is harder to steal than physical currency. If a criminal approached John when he was carrying banknotes, all the criminal had to do is take it from him by force. Once the criminal has it, he or she is home free. The criminal can go to any producer and use it. The criminal doesn’t even have to hurry and use it either. The criminal can take his or her sweet time and use the stole banknotes whenever and where ever.
That is not the case with checks, debit and credit cards. I’m not sure about the security features of cell phones, but I’m sure they’re well secured as well. If a criminal stole John’s debit card, then the criminal would have to hurry and use it right away, because all John has to do is call his bank and tell them to deactivate the debit card. Calling your bank to deactivate a debit or credit card can take only a few moments. One can even catch the criminal by tracking where he or she is using the card. Checks can also be deactivated or cancelled.
The final reason on my list on why electronic currency is more convenient than banknote currency is because it provides more documentation of transactions. Let me explain. When John paid for his apple with physical banknotes, John should have received a receipt of purchase. I didn’t mention it in the example above, but in everyday life, a receipt is given. If John were to lose that receipt, he would have no other form of proof that he purchased his apple. Not so with electronic currency. Financial institutions who offer debit and credit cards offer additional documentation of transactions. Typically documentation of all your transactions within a given time frame is available online or is sent to you in a monthly statement. Now that’s convenient.