Understanding Digital Money and Its Importance

Digital Money

In today’s growing world, have you ever counted how many times you tap your phone to pay any bills? Not only for paying bills or transferring money, people are using it as a way of investment as well. It has made our life easier than ever before. 

Here in this blog, we will be learning various things about digital money. We will discuss its definition, types, characteristics, pros and cons, and lastly, digital money’s future. So let’s dive into the topic.

What Is Digital Money?

Digital money is a type of money that only exists in electronic form. It can’t be tangible like you do with notes and coins. But this type of money will solve all your purposes, from purchasing and investing to transferring through a particular platform. Using a platform like Google Pay, PayPal, or any other app can help you pay for anything you wish. 

For digital money, there is a digital wallet as well. 

When it comes to exchanging money, you can use smartphones, laptops, and computers. Aside from this, users can also go for ATM service to convert the digital money into cash. 

Types Of Digital Money

There are a few specific types of digital money you will always hear about. Let’s know about them right below.

1. Stablecoins

The aim of using stablecoins is to reduce the volatility risk, which is generally associated with cryptocurrencies. This coin maintains a stable value by holding them to a reserve asset, just like gold and Stable INR.

2. CBDCS

CBDCS stands for central bank digital currency, which is the digital money that is issued by central banks and follows the process of traditional fiat money.

3. Cryptocurrency 

Cryptocurrency is one of the most popular digital currencies, and it is designed using cryptography. Examples of this currency include Litecoin, Bitcoin, and Ethereum. To initiate a transparent transaction experience, it is operated on a backlog technology. 

4. Digital Wallet

Digital money is not a digital currency but a place where these types of currencies are being stored. More specifically, it refers to applications or platforms like Apple Pay, Google Pay, PayPal, and many others.

The status remains complex till 2024 about cryptocurrency in India. In 2018, there was a banking ban on cryptocurrency transactions imposed by the RBI (Reserve Bank of India). But in March 2020, the rule was lifted by the Supreme Court of India and required banks to give services for cryptocurrency exchanges. 

Take note, just like many other countries, in India, cryptocurrency, Ethereum, and Bitcoin are not considered legal tender; there is no particular licensing regime for cryptocurrency operators in India as well. So before you start using it, remember the legalities associated with digital money. 

Characteristics Of Digital Money

Once you start using digital money, there is no way back. But before initiating, you must be aware of the characteristics. Here are,

1. When it comes to digital currency, a lot of you might be getting worried about security and privacy, but as it follows advanced cryptographic techniques, it issues safety for all users. 
2. There is no physical counterpart; it all exists in electronic forms. 
3. People prefer this system as it is less time-consuming and easier to access compared to the old banking systems. 
4. If you have an internet connection, you can completely access digital money no matter where you live. 
5. Anonymity is available for various digital currencies as it focuses on protecting information and identity during any type of transaction.

Types of Payment Methods in India 

There are a lot of types you will get to see when it comes to payment methods of digital currency. Here are some of the most popular ones briefly discussed: 

1. UPI

One of the most used payments in India is UPI from 2020. In this method, users can access multiple accounts in a single platform to transfer money and check their balance. 

2. Banking Cards

After UPI, this is one of the most used methods of transaction in India. As an alternative to cash, people prefer to use the banking cards due to safety, convenience, portability, and security as well. 

3. Mobile Banking

It refers to making any transaction via mobile, more specifically, the bank’s application. 

4. Internet Banking

It is also quite similar to mobile banking. All you need is high-speed internet to make transactions through the bank’s website and application. 

5. Micro ATM

A micro ATM is nothing but a BC device that provides essential banking services like deposit, withdrawal, transfer, balance inquiry, etc., to people who have Aadhar-linked bank accounts. Generally, local store owners have this device and provide micro ATM services. 

6. Bank Prepaid Cards

In this card users need to reload the card first and then go for single use. From standard debit cards because prepaid cards can not be used numerous times.

Pros Of Digital Money

There are some genuine reasons why people in today’s generation prefer using digital money over the traditional method. Here are the advantages:

1. When you start using digital money, you are refusing physical storage, and therefore, nobody can steal money from you. 
2. Digital money helps in eliminating the need for intermediaries. 
3. No need to keep records and manually check the transaction history, as it includes accounting and record-keeping. 
4. Digital money like cryptocurrency has more privacy, especially for retail users. 

Cons Of Digital Money 

Along with the benefits, digital money has a few cons as well, but your sincerity may help you in reducing the risk factors associated with digital money. Check them out right below,

1. With digital money, one of the most significant risks is cybersecurity. It is always susceptible to hacking. 
2. As we already mentioned with digital money the accounts are always recorded. But due to this some of you may quote it as a disadvantage while seeking privacy, but for others, it can be an advantage due to transparency. 
3. The acceptance of digital currency is not available in every country therefore it limits the use of digital money for a daily transaction. 
4. Digital money like cryptocurrency is extremely volatile. So the price fluctuation can be risky for the investors and also for the users. 

Future Of Digital Money 

Throughout the last few years, people have been using digital money unexpectedly. Keeping the risk factors aside, online transaction platforms are equally spreading their business in India. According to the statement given bythe  RBI, retail digital payments have risen from 12 crore in FY13 to more than 14,726 crore transactions in FY24. In the upcoming years, the numbers are expected to grow immensely. 

Aside from this, shortly accessing digital money is expected to be easier to use for all types of users and secure in all aspects. 

Also, Check – Money Market Instruments

Wrapping Up

So, what’s your take on digital money? 

You might not realise it yet, but this evolution of money has made life much easier for every generation. As time goes on, with the advancement of technology digital money will unveil betterment and shape the future of finance. So be sincere about the T&C and keep using digital money.

The success in financial growth depends on staying informed and disciplined together with making decisions based on your personalized financial path.

Please share your thoughts on this post by leaving a reply in the comments section. 

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