Money Has Been Digitized, But Its Movement Still Faces Physical Roadblocks

The opportunities that an open digital economy could create for business and individuals.

Things that were once physical and are now digital–information, videos, photos and messages–make their way around the world in seconds. Meanwhile, there’s one thing that still can’t easily transcend borders despite shedding its physical form: money.

Unlike photos and messages, which travel freely on the internet, money is still largely managed and moved on closed-loop networks that don’t interact with one another, whether within the same country or across international borders. This blocks the flow of free money movement, creating gaps in commerce, payments and limiting economic growth. 

The solution is simple, but not necessarily easy: structure money’s movement based on a framework that mirrors the internet. An open financial network linked to browsers that facilitates seamless payments could unlock opportunities for growth in the same way interoperable protocols for the internet enabled seamless communication. To illustrate this, most regions of the world today have 80-100% internet connectivity and since 1990, world GDP per capita has doubled. 

Modeling money movement after the internet would also enhance a global economy defined by workers, trade and commercial interactions eager to cross borders.

Here are four problems that an “Internet of Opportunity” could solve, and how addressing these issues would activate economic opportunities for both communities and individuals.

When businesses face fees that restrict contracting overseas, individuals miss out on financial opportunities too.

Gig workers who contract their time to businesses are expanding globally, now representing approximately 12% of the global labor market. This type of work has become attractive for the flexibility it provides over hours, work location and more. As a result, the sector is rapidly expanding, with a projected annual growth rate of more than 16%. 

At the same time, companies are looking for talent across borders. For instance, an American company wanting to expand into Europe might hire a contractor in the region first before fully investing in their expansion. Or, a small business in the US might hire overseas contractors to develop their website, since the cost of wages is often lower than hiring stateside talent. 

But working across borders as a contractor is easier said than done–because sending money internationally is slow and expensive. Right now, cross-border transfers cost workers up to 7% in fees on average–creating a costly, potentially prohibitive headache. This, in turn, can limit the businesses a contractor wants to interact with–leading them to only take on domestic projects or short term international projects.

Therefore, as contracting creates new ways of working, it also needs new ways of getting paid. 

With an open connected financial infrastructure, contractors will be able to get paid instantly, directly into their digital wallet, with low fees. They will also be able to take home the full amount they earn, leading more workers to pursue this way of working and increasing the workforce in potentially untapped regions across the world.

By increasing the take home pay of contractors, they will also have larger spending power. It means people can not only spend the additional funds in their local communities, boosting economic growth, but they can also participate in the global economy via a digital wallet linked to a browser and spend their money however and wherever they choose, without unnecessary fees. The economic power that this shift unlocks will not only benefit workers: it’ll benefit the businesses who can now recruit based on talent, not just geography

Businesses are losing money to transaction fees, domestically and internationally. 

Accepting payments for goods and services is the backbone of every business. However, if a business wants to operate internationally, they must integrate multiple payment providers and–for US businesses that accept major credit and debit cards–pay fees of 2-3% per transaction.

These inefficiencies cut into profit margins and limit not only the funds that businesses have on hand, but the vendors, contractors, and clients they work with. However, it doesn’t need to be this way.

With open digital payments, both small and large businesses can make and receive digital payments at a lower cost with faster settlement. This would also allow them to pay workers, including contractors, and their suppliers instantly–giving the business the chance to explore new ways of hiring and diversifying the vendors they work with.

Organizations are limited in the business models they can explore due to the walls created by payments. 

Today’s consumers are used to several different types of payment options at checkout. There are one time fixed price payments which are typically used to pay for goods like groceries or clothes. Subscriptions have become commonplace for entertainment like movies and music. And additionally, the rise of buy now, pay later allows consumers to break up large payments into different installments. 

Most businesses center their strategy on how one, or several of these payment structures can help the business generate revenue. But these payment methods are limiting to businesses who want to create entirely new payment models that aren’t currently feasible. For example, most purchases today for entertainment are charged on a subscription basis at a fixed price. However, with an interconnected financial system based on browsers, a pay-as-you-browse model where customers purchase only the exact amount of content they consume, in real time, would be possible.

For example, a news site can charge a small fee for the end user to just read one article, rather than requiring them to purchase a full month’s worth. And, instead of taking time to create a new user account, consumers could pay and view media with just one simple click.

Each of these use cases can create new opportunities for businesses to sell their services and hire workers in industries beyond just entertainment, including utilities.These would also lower the barrier of entry for their products–providing new possibilities for revenue streams in a global, seamless financial system.

Individuals are losing money on fees–and under participating in commerce–but the digital economy doesn’t yet fully support them either.

As businesses create new payment models, individuals will in turn need new ways of using them. For cross-border consumers–and those who are currently locked out of the digital economy–this will require a rethinking of how money is spent.

As previously mentioned, consumers face a 2-3% foreign transaction fee today if they want to purchase a product or service outside of the country they’re located in. This essentially places a “tax” on any international payments–one that many have no choice but to pay.

Additionally, without a digital way of transferring money across borders, an individual who wants to send a payment to a family member overseas often has to pay high fees to a provider. Meanwhile, the receiver has to wait days before going, in person, to retrieve the funds. This particularly affects people in rural communities whose community financial institution is not connected to the wider global economy. 

The latter problem doesn’t only affect individuals making international payments to peers; it affects more than one billion people around the world who don’t currently have access to digital financial services. Put another way: that’s one billion people not contributing to the larger economy, but who would be willing to if they were empowered to do so on their own terms.

Both scenarios are remedied when individuals can send money through the Internet of Opportunity–an open, connected financial ecosystem. For example, if a consumer has a digital wallet that holds funds and is connected on the same network to every other individual or business’ digital wallet across the world – then there would be no artificial walls restricting money movement. Using personal identification as the unique identifier in this case, rather than a bank account or credit card number, allows people without a bank account to participate in the digital economy.    

If anyone, anywhere can spend and send their hard-earned money as easily as they can make a video call to a friend internationally, a series of both obvious and not-yet-anticipated opportunities would unfold, significantly benefitting domestic and global economies.

Without artificial walls standing between them, businesses and individuals would be able to put their money to work for the benefit of the whole.

Making this open, global financial ecosystem a success will not happen overnight. It requires buy-in from key stakeholders, including government bodies and regulators, and the active participation of workers, businesses and individuals around the world. It also means addressing areas of the world that remain with limited or low internet connectivity, who face an increasing digital divide and limited access to digital financial services, disproportionately impacting on the global south. 

However, as burdensome costs are removed and universal access to digital financial services is fully in place, the promise of technology–and the internet–and the connectivity that it offers will serve as an accelerant for global financial growth.