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Digital Currencies: The Future of Payments?

Digital Currencies: The Future of Payments?

Summary

Digital currencies – particularly bitcoin – have vast disruptive potential in payments. These currencies have their weaknesses, but even if bitcoin itself never becomes popular, the technology that underpins it will change financial services entirely in the longer term.

Synopsis

  • Gain an understanding of the key aspects of how digital currencies such as bitcoin function, and their strengths and weaknesses.
  • Learn what is being done with digital currencies currently, and how these implementations may be improved upon.
  • Benefit from a strategic view of this emerging market, with a focus on how banks and payment providers should respond.
Reasons To Buy
  • What are digital currencies, and what impact might they have on your business?
  • How do digital currencies work and what benefits can they offer?
  • Can digital currencies be adopted by financial institutions, and is it worth doing so?
  • What action, if any, needs to be taken to remain relevant in the changing market?
  • What are the challenges facing digital currencies, and how might they be overcome?
Key Highlights

Bitcoin can offer faster and cheaper domestic and − most significantly − international payment services than the majority of alternatives in the market, threatening to displace the incumbents.

Bitcoin has numerous weaknesses including the diminishing returns of the mining system, its complex security requirements, its volatility as a currency, and the lack of regulation in the market.

Blockchain technology is the most important aspect of bitcoin and other cryptocurrencies, and can be adapted to numerous purposes both within financial services and in the wider technology market. Within the payments market, blockchain technology offers banks advantages in terms of speed, cost, and transparency.


  • Executive Summary
    • Digital currencies represent a new paradigm for payments
    • Key findings
    • Critical success factors
  • Defining the Potential
    • Bitcoin is the best-known and most widely used cryptocurrency
      • The blockchain allows bitcoin to function as a trusted medium of exchange
      • The finite supply of bitcoins is both a strength and a weakness
      • The bitcoin market is currently volatile
      • Bitcoin wallet security is based on "private key cryptography"
    • Bitcoin offers advantages to consumers and merchants
      • Merchants gain a range of savings from accepting bitcoin
      • Bitcoin offers consumers the benefits of cash online
  • Disruptive Opportunities
    • Bitcoin start-ups are disrupting both payments and banking
      • Bitcoin's biggest immediate opportunity is online consumer payments
      • Bitcoin start-ups are also offering alternatives to mainstream banking products
    • Blockchain technology may have more impact than bitcoin
      • Sidechains enable bitcoin to do more than just transfer value
      • Central banks can use blockchain technology to boost the payments infrastructure
  • Challenges and Strategic Implications
    • Bitcoin is the strongest cryptocurrency now, but it faces challenges
      • The regulatory situation with regards to bitcoin is currently unclear
      • Bitcoin has some inherent weaknesses as a system
      • Alternative cryptocurrencies may be more suitable for financial institutions
    • Bitcoin is a long-term threat to the established payments infrastructure
      • Banks have a role to play in the changing market
  • Appendix
    • Abbreviations and acronyms
    • Definitions
      • Altcoin
      • Blockchain
      • Cryptocurrency
      • Digital currency
      • Online commerce
      • Private key
      • Sidechain
    • Methodology
      • Industry expert interviews
      • Online Consumer Payments Model
    • Bibliography
    • Further reading

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