Money has been used as a medium of exchange for thousands of years. It has allowed us to purchase goods and services, save for the future, and invest in different ventures. However, in recent years, money has changed hands much less frequently than it once did.
This shift can be attributed to several changes in our society that have made other forms of payment more convenient and efficient. Here, we will explore why money is changing hands much less frequently and what this means for the future of money.
Digital Payments Becoming More Popular
One major reason why money is changing hands less often is that digital payments are becoming increasingly popular. Digital payments allow people to make quick and easy transactions without having to exchange cash or other physical forms of payment.
This can include anything from tapping your debit card at the store or transferring funds through an app like Venmo to paying for something online with a credit card. All these methods of payment are becoming more popular because they offer convenience and security that paper money and checks cannot provide.
The Decline in Cash Transactions
Another reason why money is changing hands less often is due to the decline in cash transactions. According to a recent Federal Reserve Bank of San Francisco study, only about 30 percent of all consumer purchases were made using cash in 2018, down from over 40 percent just five years ago.
Thus, this drop in cash transactions is largely due to the increase in digital payments and the rise of contactless payment methods like Apple Pay and Google Pay.
The Impact of Mobility on Money Velocity
One final factor contributing to why money is changing hands less frequently is the impact of mobility on money velocity. Money velocity refers to how quickly money moves from one economic actor to another throughout an economy. This can be affected by a variety of factors.
Recently, one major factor for this is the increased use of mobile devices for financial transactions. People are now able to send funds or make purchases with just a few taps on their smartphones, which greatly increases the speed at which money moves throughout an economy.
Parting Thoughts
As we can see, there are a variety of reasons why money is changing hands less frequently than it once did. From the increasing popularity of digital payments to the rise in mobile commerce, our payment habits are shifting away from traditional methods. We are now moving towards more convenient and secure alternatives and it will be interesting to see how this shift impacts the future of money – and what new innovations may arise as a result.
However, it goes without saying that money is still an integral part of our lives and will continue to be a driving force in the global economy.