Is This the Beginning of a Cashless, Bankless Society?

I read yesterday’s Money Morning with great interest. My colleague Jason Stevenson had been over in Florida. I personally love Florida. As does my wife. Every year when we’re thinking about potential holiday destinations, it’s always on the list.

It’s warm, sunny (usually) and as Jason said, they’re friendly over there too. I even like that at about 3pm most days you can expect a roaring rain shower to roll on through. But it’s warm, so who cares? It leaves as fast as it arrives, and everything is dry 10 minutes later.

But aside from the lovely part of the world, which Florida is, I was fascinated to hear Jason say,

I didn’t bring any cash for my visit — I didn’t need to. I used my credit card for every purchase, eliminating all the fees and charges I would’ve had to pay swapping Aussie dollars for US dollars.’

I can relate to that. I travel a lot through the UK, Europe over in the US, Asia and of course back home in Oz. Jumping borders every few months sounds like fun (it is a bit) but it also throws up its fair share of headaches.

The biggest is cash. Do you take it out and carry it? Do you pay for everything on your bankcard? It’s a nightmare. But a nightmare that new financial tech companies are helping to solve.

Tap, pay, no fees, that’s the world I want

I remember back to my first trip overseas on my own. I think I was about 20. I was heading over to Europe and the UK. I remember my folks giving me a little bit of spending money they’d picked up from the bank. A little plastic sleeve with some euros and pounds in it.

I also remember them going on and on about travellers cheques. Remember those? I only vaguely remember them. Back then they were on the way out. After all, you could use your card to take out money in any country you wanted.

But of course taking out money in Amsterdam using my CBA bank card wasn’t really that smart. It was convenient. But the CBA slugged me with conversion fees and non-CBA ATM withdrawal fees. It tallied up pretty quick.

The only way to solve it was take out a heap of cash all at once. But then I had to be paranoid about keeping it safe.

Fast forward to my latest trip to Europe, this year. I went to a shop to grab a six-pack of Afflighem beers (my favourite). Instead of paying cash or card, I paid with my phone.

I unlocked my Samsung S7 Edge with my fingerprint, tapped the phone to the payment terminal, and that was it. The cute little chime sounded on my phone and a big green tick appeared. Approved and paid for. Too easy.

That’s how payments should work. And it shouldn’t matter if I’m in Australia, Amsterdam or London. I should be able to pay for goods and services in an instant, digitally and without fees.

However, I still have to deal with conversion fees. It’s ridiculous, really. The banks always take an excessive cut when it comes to currency conversion. We know they do it, but no one seems to really care.

I care. And that’s why, when it comes to converting currency, I try to avoid the banks at every point I can. Fortunately, in today’s world we can use peer-to-peer currency exchanges to beat the banks.

£29.10 multiplied by 136 = ?

I spoke about this a little bit back in October, at our Port Phillip Publishing conference. After my presentation, one of the things many people wanted to get from me was the website I used to do all my currency exchange.

I wasn’t all that surprised really. Lots of people travel. Lots of people live in places different to where they were born. People have family and friends overseas. And a lot of people need to send and transfer money around the world.

They want to do it as cheaply and hassle-free as they can. But it’s still amazing how many people don’t realise that you don’t have to use a bank when you exchange currency.

Personally, I use CurrencyFair. I’ve been using them since March 2014. I’ve processed 136 different currency transactions in that time. That’s pretty much once a week for two and a half years.

And before I go any farther, let me make something clear. Neither Port Phillip Publishing nor I have any relationship with CurrencyFair. We don’t receive any incentive or reward for my talking about them today. In fact, I doubt they’ll ever know that I did!

If, after reading this article, you’re considering using a service like CurrencyFair to exchange money, do some research of your own. You may well find a competitor offering even better rates!

I use this because I can get very close to the mid-market rate of exchange. For example, at the time of writing I also processed another currency exchange. Aussie Dollars for British Pounds.

Again at the time of writing the CBA will sell me 0.5625 pounds for one Aussie dollar. So if I wanted to exchange $1,000 CBA would give me £562.50.

However, the current exchange rate on CurrencyFair is 0.5916 pounds for one Aussie Dollar. That means for $1,000 I would get £591.60. That’s a different of £29.10 — a bit over 5%.

Imagine if every one of my 136 transactions was for $1,000. I would save almost £3,957.60 just on better exchange rates. That’s powerful.

The other thing is, the mid-market rate at the time of writing according to is 0.59434 pounds per one Aussie dollar. With CurrencyFair I can actually set my own rate.

I can set it at 0.59434 and leave the order in the marketplace. If someone decides to match it, I get the exchange. If the exchange rates head south, it’s more unlikely someone will match my order.The future of money is approaching

You see CurrencyFair is a peer-to-peer exchange. When I sell my AUD for GBP I’m selling it to someone else on CurrencyFair that wants to sell GBP and buy AUD.

CurrencyFair matches it all together, and enables the exchange to take place. I never know who is buying or selling currency. I just place an order. Either get it matched right away (at a far better rate than the bank), or I wait till my set rate is matched.

This is what a world without banks has the potential to provide. And it’s one of the early steps away from the ‘traditional’ banking system. Digital payments, peer-to-peer exchanges are just the beginning of the future of money.

I think that companies like CurrencyFair will evolve from where they are today to provide even better service. For example, imagine if I could exchange my money into GBP and EUR ‘wallets’.

Then if I was over in Europe I could use my smartphone like I did earlier in the year to make a purchase. Except instead of using my UK or Aussie account, it would just come from my EUR ‘wallet’. I wouldn’t cop a transaction fee, a non-bank usage fee — no fees.

I simply exchange my money and spend it, all without having some fat cat clip off their slice just because they can.

That’s how the future of money looks. Borderless, fee-less exchange and transfer, without going through the banks and without them clipping off easy money from the top.

We’re not there yet, but we’re heading in the right direction. And as we do, these non-bank companies like CurrencyFair will be the most important financial companies to people like you and me.


Sam Volkering is an Editor for Money Morning and is small-cap, cryptocurrency and technology expert.

He’s not interested in boring blue chip stocks. He’s after explosive investments; companies whose shares trade for cents on the dollar, cryptocurrencies that can deliver life-changing returns. He looks for the ‘edge of the bell curve’ opportunities that are often shunned by those in the financial services industry.

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