Michael Batley, Head of Strategy, Travelex
From Apple Pay to Bitcoin and Venmo to M-Pesa, across the world innovative payment methods are replacing cash. When Chip & Pin, contactless, mobile payments and other cashless payment methods are combined, cash is beaten—no longer king, at best minor royalty.
These technologies aren’t just a young person’s game—in June 2018 it was reported by UK Finance that more than half of over-65s used contactless technology to make payments. People like the convenience of being able to tap-and-go, to make purchases without visiting an ATM first, to send their friends money without faffing around with small change. Some have predicted that cash is on the way out, to be replaced entirely by cashless technologies, and a few countries, Sweden being the most notable example, have already embarked on programs to achieve this.
However, we’re not quite as far along this path as some futurists would have you believe, according to research carried out by Travelex. Despite the success of cashless technologies, cash is still the most popular way to make a purchase—taken together cashless technologies win out, but no single technology is as popular as cash.
The future of cash will be determined by one question, albeit one with a double meaning: “How desirable is a cashless society?” Is the cashless society a good idea? And do people actually want it?
What is cash good for?
Cash may seem to be on the way out, but there are good reasons to keep it around. The country that can best claim to have the most cashless society, Sweden, has recently considered what getting rid of cash entirely means. The Swedish government previously pursued cashlessness hell for leather, but in recent months has applied the brakes as the reality becomes apparent.
Less than 2% of transactions in Sweden use cash, and this is predicted to dip below half a percent by 2020. Cash acceptance is, in turn, becoming rarer—why accept a payment method hardly anyone uses, especially when cash handling takes up so much time, is costly, and increases the risk of theft? But this could mean certain people end up locked out of the economy if they lack the access to the right technologies.
Those who lack such access are generally those underserved by banking—the elderly, refugees, those without or with a poor credit history, and so on. Without access to a bank account, it’s near-impossible to pay using cashless technologies, whether it’s EMV, chip and pin or mobile wallet. The cashless society could further alienate those who need the most help.
Cashless technology also relies on a payments infrastructure which is not infallible. Visa’s outage in June 2018 lasted long enough to worry people about what happens if foul play or accident takes systemic payment infrastructure down for days or even weeks. Even more recent mobile data outages made mobile point of sale devices useless. Will future problems limit access to the everyday basics? Are we creating centralised vulnerabilities that could be exploited by cybercriminals or nation states? Many central banks have expressed concerns on this very matter and see cash as an important hedge—it can help keep the financial ecosystem functioning in the case of a malicious attack or systemic outage.
But maybe they don’t need to worry. Sweden may be an outlier in taking cashlessness to the extreme, and others may not be quite so keen to dump cash.
Do people want to keep using cash?
The trend may seem to point towards people giving up cash altogether, but do people actually want this? After all, the industry debate around the cashless society is for naught if those who will live in it reject the idea.
Travelex asked people from around the world to find out just what they thought of cash and cashless technologies. Are they happy using cashless technologies, and would they ever see a time when they would leave notes and coins completely in the past?
The answer was that some would, but nearly a quarter of people were unwilling to give up cash completely—no matter what new technologies were available. Most people wanted to use a mixture of cash and cashless technologies, though new ways of paying were more desirable where they were less common. It seems there is an equilibrium to be found, and that while cashless technologies may end up being used for most purchases, cash will always have a place.
This is a problem for those who see the move away from cash as inevitable. Cashless technologies have both pros and cons, but what’s ultimately important is what people want. Unless people are forced to give up cash, then a significant number of people will continue to use it.
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