Investing.com — Banking innovation has mostly focused on user interfaces rather than the plumbing behind money. Payments still settle in batches, often with delays, while deposits sit idle for long periods.
Digital money changes that by allowing money to move instantly, around the clock, on shared systems rather than through layers of intermediaries.
The biggest shift may come from speed. If payments and transfers settle instantly, money does not need to sit waiting to clear. That raises the pace at which deposits move through the system, which in turn changes how banks fund themselves and use their balance sheets.
Banks may earn less from holding deposits, but process far higher volumes of transactions.
Digital money could also blur the line between saving and investing. Instead of holding cash in a traditional savings account, customers could keep funds in digital form that can earn returns and be moved or invested at any time.
Some large asset managers have already begun offering digital versions of money market funds that settle instantly, showing how this model could work in practice.
For customers, the appeal is straightforward. Payments could be faster and cheaper, especially across borders. Access to investments could widen as assets such as bonds or property are broken into smaller digital units, lowering the barrier to entry.
For banks, the trade-off is higher technology spending and lower reliance on physical branches and staff.
The transition is unlikely to be smooth or even. Adoption is expected to be uneven across countries and customer groups, with businesses and younger users moving first. Regulators also remain cautious, which could slow progress.
Though the direction is clear. As better products tend to win over time, banks that adapt early to digital money may gain an edge, while those that rely on older systems risk falling behind.
The future of banking may not be defined by new apps, but by a quiet overhaul of how money itself moves.