Rise of the Virtual Financial World
The financial world has been evolving through the ages. The evolution in the financial world serves as the foundation of improvements in the financial conditions in the economy. Since the ages of early trade when barter trade was the main financial exchange method, the financial world has developed to date to the level of the state-of-the-art system. Virtual financing is mainly experienced in terms of internet banking. In addition, the money systems within the economy are changing to embrace the virtual money systems. Therefore, the advancement of the internet has been the main reason why the financial world has undergone development to the virtual financial status. The stability of the virtual financial world and the security associated with virtual finances ought to be considered alongside the development of the virtual financing. The essay aims at analyzing the time frame for the virtual financial world in replacing the real time financial sector; hence determining the validity of the replacement.
The advancement of the internet has been seen as the main reason explaining why the financial world has undergone development to the virtual financial status (Chaikin, 2013). The virtual financial world leads to the creation of a virtual economy. The virtual economy is referred to as the emerging one that involves the exchange of virtual goods. The virtual economy exists in a virtual persistent world creating aspects that are otherwise seen in a real economy (Kulmala & Lonnqvist, 2006). The time frame for the realization of the virtual financial world to absorb the real time economy is high because the recent developments that have been made around the virtual financial aspects are significant enough to make the absorption achievable. The historical background to the virtual financial world creates a better time frame for the replacement of the real time financial world where the emerging trends help in setting the platform for the virtual financial world.
Virtual financial world is mainly made up of the virtual banking system and the money systems in an economy. The virtual banking field in an economy has been described as one of the most rapidly expanding sectors. Virtual banking includes the provision of banking practices that are executed on the virtual platform instead of the physical one. Virtual banking is commonly seen in internet banking whereby the virtual nature of the banking system is created by the internet services.
Existence of virtual banking can be explained using its history that provides an appropriate time frame for understanding the process of its the replacement of the real time financial world. The history of virtual banking dates back to the 1970s when the internet services were discovered. In the 1970s, installation of ATMs was realized which was a move that revolutionized the banking system (Jiang, 2014). The period also saw the integration of the internet services into the banking activities, such as smart cards, intranet and internet banking, phone banking, and EFT point of sale systems. The developments in the virtual sector are significant factors explaining the advancement of the efficiency of the banking activities.
Virtual banking has developed into two main models. The models include the electronic replacement of existing banking services by the internet and the second model involves offering of new services that were not previously offered. The new services that have been introduced into the banking system feature a virtual form while expanding the range and thus boosting the overall success regarding virtual banking services. The history of virtual banking has been also strongly associated with the development of direct banks. A direct bank is a bank that provides services virtually through telephone and online banking.They also include provision of ATMs, mail and mobile banking. Direct banks were initiated in 1989. Full direct banking models were realized in 1990 when full internet modification was applied to the banking systems (Chaikin, 2013). Operational costs for a client using banking services were lowered due to the mobility created by the direct banks internet services. For example, in the United States, the first functional direct bank was launched in the year 1995 whereby it was known as Security First National Bank (SFNB). Recognition of direct banks was guaranteed in the US which was the reason why the Federal Deposit Insurance Corporation insured SFNB. Direct banks have been developed universally, and today they are present in most countries. In United Kingdom, they were started in 1999 while in Europe they were started in the late 1990s, when the first direct bank – First-e by ENBA- was established in Dublin. Therefore, virtual banking has had a well-laid background. The step by step development of the virtual banking system thus creates a firm base for the replacement of the real time financial world with the virtual financial world.
Virtual banking offers additional services compared to the physical banking. The services are efficiently offered due to the presence of internet involvement in the services. Therefore, mobility of the banking services within the virtual banking services is guaranteed ensuring the intensification of the banking services. The added banking services under virtual banking systems are informational, administrative, transactional, and portal services (Jiang, 2014). This range of services forms the basic banking services. Extra services within the virtual banking system are also provided. The extra services include financial educational information, interest rate quotes, account information and online brokerage and insurance services. The most important service offered by virtual banking systems is seen through the linking of businesses and community information to the banking system. These services provide the efficient financial environment whereby virtual financial facilities are boosted. Therefore, the virtual financial world is faster realized through the services that the virtual banking offers.
Virtual financial world comprises of the virtual banking and rapidly expanding virtual currency sector. It is noteworthy that the currency system is a crucial element of the financial world since it establishes the transaction platform for the trading partners. Thus, virtual currency can be seen as the use of digitalized currency (Kulmala & Lonnqvist, 2006). Such innovation means that currency used in this case is not used in physical form but it has been digitized to transform into other forms. For instance, smart cards are a form of a digital currency that carries digital money. Therefore, a smart card is a form of virtual currency that brings efficiency into the financial environment.
Virtual currency has also significantly demonstrated the capacity for the replacement of real time financial systems for the virtual financial systems. The history of virtual currency has foreseen various achievements that have brought important roles into the financial world. Virtual currency has been embraced recently in the 2000 millennium whereby the international financial bodies recognized their use. For instance, in the year 2012, the European Central Bank described the virtual currency as unregulated digital money that is applied and allowed among the individuals of a certain virtual society (Chaikin, 2013). This definition shows the intensified use of the virtual currency among the society. In addition, the definition by European Central Bank shows that the virtual currency is only used by people with a common characteristic. Such emerging trends give ideas of the virtual characteristic that virtual currency contains, for example, certain and specific requirements why individual choose to use them. One noteworthy feature in this regard is the desirable security level that ensures the success of the currency in replacement of the real time financial systems for the systems of the virtual financial world.
The European Banking Authority “in 2014 defined the virtual currency as a representation of value that is digitized which is neither issued by a central bank or a public authority (Jiang, 2014).” The banking authority defined the currency as not being attached to a flat currency but it is accepted by people as a means of payment which can be stored, transferred, or traded electronically. Thus, virtual currency is not regulated by any authority (Jiang, 2014). This nature of virtual currency makes it reliable among the available currencies. Therefore, the application of virtual currency is more freely experienced since the null restriction nature of the currency leads to the development of the virtual financial world. In addition, the frequent use of currency as defined by the European Banking Authority as a means of payment creates more practical reasons why virtual currency should be used. The electronic use of the currency in cash trading, transferring and storage ensures the intensified use of the virtual currency. This intensified use of the digital currency is the main reason why it should be incorporated as the currency arena for transactions. Moreover, the virtual currency reveals to contribute significantly to the replacement of real time financial world in favor of the virtual financial world.
Virtual currency has proved its stability into the currency environment whereby they have intensified their use in the centralized and decentralized forms. Centralized virtual currencies are the virtual currencies that are under the check of the central banks for their authorization. Moreover, the decentralized virtual monies are virtual currencies with no core repository or a distinguished administrator. The decentralized virtual currency is dependent on the distributed system of trust which is a common phenomenon in the financial markets. The most common form of decentralized virtual currency is the bitcoin (Chaikin, 2013). Bitcoin is the first form of decentralized digital currency that has enhanced stability within the financial environment. Bitcoin is highly dependent on the transaction ledger which is jointly maintained by the currency users. The use of decentralized forms of virtual currency leads to the intensification of virtual currency use in the financial environment. Therefore, the different forms of virtual currencies create a better ground for the development of the virtual financial world.
The replacement of the real time financial sector for the virtual financial systems is highly probable to occur. The main reason behind the rise in the use of the virtual financial elements is the advantages that the elements have in the financial market. The virtual financial elements are generally secure. The security level of the virtual financial elements is guaranteed by the internet security protocols (Jiang, 2014). For attracting a user with an aim of using the virtual financial networks, the sites for the networks are enhanced with valid security certificates. This idea creates certainty of the use of financial virtual networks because they are free from cyber thieves who tend to steal personal and financial information. Therefore, the security levels of the virtual financial world enhance their successful application and growth in the financial market.
The availability of the virtual financial elements makes the virtual financial world reliable and efficient. The virtual financial elements are available for use on a twenty four hours basis that makes the elements more convenient whereby their use is intensified by their availability. Unlike the real time financial sector whose elements are available for use only on the working hours, the virtual financial elements are always available for use (Chaikin, 2013). Therefore, the availability of the virtual financial elements makes the virtual financial world to be at a high stake of replacing the real time financial sector.
In conclusion, virtual financial world is a desirable financial environment that has been a recent development in the evolution of the financial environment. The elements of the virtual financial environment, virtual banking and virtual currency have undergone significant historical development showing their success in outdoing the real time financial sector. In addition, the advantages of the virtual financial elements create a solid ground for the replacement of the real time financial sector.