Traditional currencies came with a lot of challenges as exchanges grew frequent as well as unreliable. Back in the day, counterfeit money was rampant because of challenges arising from disparate currencies transfers. The modern banking model came into existence due to the need to address these issues.
How do modern banks function? Well, they function under the “risk management” business framework. While banks safeguard the money of its customers, they also give them interest on their money. The money sitting in the banks are issued out as loans with interest rates favorable to the banks.
Currencies can be organized into three different categories based on different intrinsic value. First, commodity money which is composed of goods and services and precious metals as well as stones such as gold and diamonds. Secondly, representative money is in form of bank notes and they verify ownership of commodities that are in the banks for safekeeping. Fiat money is an interesting category which makes up the most commonly used form of money. It falls under the mandate of the government to agree on ‘tender in trade’. The creators on fiat money decree value with total, exclusive authority.
The banking industry has been hit hard in the recent past by financial crises. In the 2008 financial crises, the U.S. federal government, as well as the European Union, came into the rescue of financial institutions which were on the verge of collapsing. Nowadays, investment banks are careful in their dealings by ensuring ethical practices in a way that can be likened to a normal subscription service such as Netflix subscription service.
Why Fintech isn’t just a phase >> https://t.co/iRvk1qlQua
— PSI-Pay (@PSIPayLtd) November 22, 2018
Crowdfunding, as well as a cryptocurrency, are emerging models that have sparked a lot of discussions among financial experts. GoFundMe and Kickstarter are some of the Crowdfunding platforms that have come up that eliminates the need of third parties. Crowdfunding enables a person to build on an idea he or she believes in without the fear of suffering damages or loss in case of an unfunded project. Through this platform, an investor can freely customize his or her investment.
Away from crowdfunding, cryptocurrencies are the most interesting emerging trend. While it brings a lot of applications and benefits, it has its share of challenges. The amount of energy required to transact using cryptocurrencies is numerous. Bitcoin is one of the many cryptocurrencies that has managed to overcome many of the challenges and is based on the blockchain technology. Bitcoin transactions are well secured from hacking and network outages by the distributed ledger model.
Because of the open-source nature of the software used to create cryptocurrencies, anyone can create a new cryptocurrency. They are more like fiat money in that they draw its value from an agreement among traders.
PSI Pay has harnessed the power of digital finance to offer digital payment services to individuals and companies across the world. It has now brought contactless payments to the market. It recently became Western Union online wallet agent.