It’s interesting that whilst paper cash has been around for over three centuries the move away from it has been difficult to imagine.
The huge increase in the use of credit cards as a form of conducting business was believed by many to have signalled the death knell for cash, but it just never quite happened. People still like the feel of folding money in their pockets and, unlike cheques, the fact that cash can’t bounce (counterfeit notes excluded).
With the development in fintech industries, the world might well at last be moving away from traditional payment methods and towards a truly cashless society. With mobile apps like Paypal, Square Cash and Venmo, things have been starting to happen for quite a few years now.
This is not just a Western world thing either, much of the developing world is catching on, fast. Mobile payment platforms are springing up all over the world. Kenya has had mPesa since 2007 and Bangladesh’s bKash launched in 2010.
The worlds of photography and music long since ditched their old media and made the move into digital technology, to the point where the old systems have become obsolete. Sure, the purists in music are seeing a bit of a renaissance in vinyl, but all other analogue media has disappeared as the drive for first CDs then online downloads took hold. Now it seems that money itself is finally going digital.
It is though not a a foregone conclusion that this will happen fully. Many countries are reporting that cash is alive and kicking and doing very very well indeed. In fact the amount of Euros and US dollars in circulation has doubled since 2005, to €1.1 trillion and $1.48 trillion, respectively.
Whilst it is possible to explain this away due to the rise in popularity of these currencies in other countries, there is more to it. Look at the huge numbers of American and European tourists on holiday and Asia and you are likely to see large wallets be brandished at cash registers. Despite the obvious risks involved in carrying large sums of cash around in public, it seems that for many, it is still the way to go.
Bloomberg reports that the niche for cash is small transactions. This, of course, is understandable. It is easy to walk in a shop, purchase what you need and hand over a note or two. Waiting for the credit card to be verified, then for the staff to comeback to you with a receipt to sign, takes time and when you are only buying a canned drink or a pack of cigarettes, it isn’t worth the effort.
Bloomberg looked at spending patterns in seven countries: Australia, Austria, Canada, France, Germany, the Netherlands, and the U.S. Typically we make one or two purchases a day. For the cheapest purchases, consumers in the seven countries prefer cash the vast majority of the time. When they looked at the more expensive purchases, there were interesting variations in payment choices. In Austria and Germany people still use cash for big purchases, but most other countries prefer debit or credit cards or even cheques.
The banks of course have genuine concerns about relying too heavily on cash. As global trends have seen loss of faith in many of the banking systems, there is a very real threat that consumers could simply withdraw their cash and hoard it. With negative interest rates in some domains, this threat is worrying the banks. The move to a cashless society would reduce and even eliminate such a threat, it is therefore in their interests to promote it aggressively.
So whilst Fintech isn’t having things all its own way, there is definitely a move towards cashless living. As more and more mobile payment platforms become available and are more readily recognised it would seem that change is firmly on its way. The fat lady may not yet be singing for cash, but it looks like she’s clearing her throat.
