The late 20th century’s digital revolution transformed how money is stored, transferred, and spent. From debit cards to online banking, finance became faster and more convenient. Yet while technology solved some frictions, it did not remove the structural problems of money management. In some cases, it magnified them or introduced new challenges relating to cost, control, and accessibility.
Online Banking and Payment Systems
Today, most people handle money through digital means: bank transfers, credit/debit cards, and online wallets. These systems rely on a network of intermediaries. For example, to pay a friend with your credit card, your bank, the card network (Visa/Mastercard), and the merchant’s bank all get involved. This network of trust is efficient for many uses, but it brings costs and friction. Every transaction can incur fees: merchants pay “swipe” fees to card networks, and international transfers go through systems like SWIFT with charges and delays. As the Bitcoin white paper (2008) noted, online payments “needed a third-party authority” (banks, PayPal, etc.) to ensure transactions were secure and settled. This reliance means small transactions are often impractical: banks may require a minimum amount to make an international wire profitable, so sending $5 cross-border is nearly impossible without the money being eaten by overhead. In contrast, handing a $5 bill to a friend costs nothing.
Quick explainer of how the SWIFT messaging system routes cross-border payments, why it can be slow/costly, and how sanctions can exclude banks from the network
Inefficiencies: Fees, Delays, Censorship
Digital finance can also be slow or restrictive. Even though online transfers seem instant, cross-border payments can take days and get flagged for compliance checks. Paying high fees for low amounts erodes the benefit for poorer users or migrants sending remittances. A 2024 World Bank study found average fees around 6–8% of the transfer amount, with some corridors (e.g. Sub-Saharan Africa) exceeding 10%. Cumulatively, this means billions lost to fees. Moreover, governments and banks often impose controls on digital money. Accounts can be frozen or closed (for alleged fraud or legal reasons) without warning. For instance, class-action lawsuits have accused PayPal of freezing customers’ funds for months under vague “risk review” policies. A frozen bank account in Lebanon or Cyprus can leave someone without any cash in a crisis. Thus, even in the digital age, money can be censored or seized by central authorities.
Report on Lebanon’s banking collapse and withdrawal restrictions that shows how depositors were effectively cut off from their funds — a concrete example of centralised systems freezing access
The analogy is often drawn between old money and digital money: imagine digital money like a water supply controlled by a utility (the banks). If that utility shuts off your tap (freezes an account), you have no money flow. In Bitcoin’s design, Satoshi explicitly aimed to remove the “third party”—the bank or platform—from the picture.
Emerging Digital Innovations (Fintech and Mobile Money)
Fintech startups have tried to address some issues. Mobile apps (Venmo, Cash App, WeChat Pay) make person-to-person payments easy within closed networks, but they still rely on banks behind the scenes. The rise of online-only “neobanks” (Monzo, N26, Revolut) and fintech lenders offers a slick user experience, but fundamentally they operate under banking licenses or partnerships. A major innovation has been mobile money in developing countries. As discussed, systems like M-Pesa in Kenya enabled cash-like transactions using phones. This has dramatically increased financial inclusion and even boosted local economies (studies link mobile money access to lower poverty rates). These successes show the power of digital technologies to improve money’s usability.
Overview of M-Pesa’s mechanics and socioeconomic impact in Kenya and beyond
"Neobanks are financial technology—or fintech—companies that typically offer mobile-focused banking accounts with eye-catching features such as low-cost credit or cash-back rewards. Some established neobanks offer loans, credit cards or investing products, too"
However, even mobile money is tied to telecom operators or licensed providers. It cannot easily cross borders or escape regulation. And it generally still depends on a local currency. For example, if a government still controls foreign exchange, mobile money users feel the same devaluations or controls as cash users. The limit of these digital systems is that they are built on top of the existing monetary system. Digital innovations have improved the interface of money but not its underlying structure. The fundamental dependency remains: users rely on centralized currencies, intermediaries, and legal frameworks.
As we’ve explored, the digital age has brought significant innovation to traditional finance—introducing online banking, mobile payments, and faster transactions. Yet, despite these advancements, many of the core challenges—such as limited financial access, centralization, and lack of transparency—still remain. This growing disconnect between technological capability and financial inclusion has paved the way for bold new solutions. In the next lesson, The Dawn of a New Era: Cryptocurrency as a Solution, we’ll examine how cryptocurrencies emerged to address these persistent issues and redefine how we think about money and value in a digital world.