Investor Column | A cashless Super Bowl 55 and the future of digital currency
As many local football fans will tell you, our hometown team the Tampa Bay Buccaneers are looking good and are attempting to be the first NFL team to play in the Super Bowl in their own stadium. Will Tom Brady (TB12) win his seventh Superbowl this year and his first as a Buccaneer?Time will tell.
One of our leading payment processing companies announced that they will offer a zero cash payment transaction experience at Raymond James Stadium on Super Bowl Sunday, Feb. 7, 2021. That payment company goes on to say they will have reverse ATMs that will take your cash and issue pre-loaded credit cards. Wait, what? Is that a benefit? There is a huge benefit to zero virus transmission due to not exchanging physical currency and the use of a touchless payment system. The benefits though are not just to public safety!
This payment processing company, like its peers, is attempting to seize the opportunity to reinforce the benefits of their payment system and package those perceived benefits with public health safety.Those additional benefits are transactions that are increased by 25% compared to cash, greater operational efficiency with purchase data, and customer loyalty.
Our electronic payments systems tied to banks and credit card companies have been slowly evolving, but now they find themselves in an environment that has in some cases doubled their payment processing activity year over year. We are living in a time where societal habits are changing with the way we purchase goods, services, and attend live events. We are buying more goods online and desiring less social interaction (which includes a sports venue like Raymond James Stadium) due to safety concerns.Those changes are becoming permanent.
In recognition of the permanent changes, I believe it is fitting to discuss the future changes to our currency that will affect all of us.Ever since 2009, when Bitcoin came into existence our world has been forever changed with the concept of a currency that is digital not physical.The idea of decentralized (less oversight and time delays) financial transactions using blockchain technology has triggered great interest.
Our interest in digital currency stems from the mind numbing fact that even though we can immediately download and watch a movie on a streaming web site, we still have to wait for a check or electronic deposit to clear our bank in a day or two.The reality is that payments should be instantaneous just like transferring data on the web. The U.S. Federal Reserve believes there is merit in a digital US dollar, but the benefit of decentralization disappears.
In October, central banks from the US, Canada, the EU, Japan, Sweden, Switzerland, the UK, and the Bank of International Settlements co-authored a report that identified three key principles that will guide their research on digital currency. The group said that central bank digital currency should coexist with cash and other types of money, it should promote innovation and efficiency, and not harm financial stability.
There are downsides to being cashless. Financially distressed and undocumented individuals most times cannot gain access to banks and credit cards except through pre-paid debit cards. There is a great digital divide that increases with low income earners, retirees, and the disabled. Meaning that access to the internet and smart phones to manage accounts and payments are difficult and sometimes non-existent. What if there is no power or internet as is the case in rural America? Do we use Bluetooth to transfer money to others in proximity when we have zero internet?Lastly, our privacy is at stake if the government and store merchants have a record of where our funds are being used and our activities are being reported to Big Data and Uncle Sam.
The desire to use and accept a decentralized digital currency such as Bitcoin will continue to be attractive, but its volatility will not. It appears that central banks are inevitably locked in on creating their own digital currency.The Boston Fed and MIT are currently working together on a digital currency research project code named “Hamilton.”I expect to see our banks to be a part of the potential new currency and not left on the sideline where the Federal Reserve takes away the need for a bank.
Danny Wood is a principal and founder of SeaCoast Financial Partners. To learn more visit MySeaCoastFinancial.com. The opinions expressed in this material do not necessarily reflect the views of LPL Financial. Securities and advisory services offered through LPL Financial, a registered investment advisor. Member FINRA/SIPC