Is Cash(less) the New King? An Update on the Shift to a Cashless Society

Is Cash(less) the New King? An Update on the Shift to a Cashless Society

Is Cash(less) the New King? An Update on the Shift to a Cashless Society

Chris Osborne

Chris Osborne

Chris Osborne is currently a Sr. Technical Trainer at TSYS, where he develops and delivers training related to payment processes, products and technologies to internal team members and external clients.

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There is an astonishing visual in the TV show "Breaking Bad," where the main character's life savings – $80 million in cash – is piled over three feet high in a storage shed. In a similar scene in the film "The Dark Knight," the Joker burns a mountain of hundreds of millions in cash.

Fast forward a few years and entertainment depictions of money are vastly different. The film "Plastic" dramatizes the true story of a quartet of teens who blackmail business executives to gain access to their credit cards. And the recent remake of "SuperFly" is about a young entrepreneur who scores big in cryptocurrency.

While money is defined as anything accepted as a means of payment or exchange, we have been conditioned to immediately picture cash and coins. However, that imagery is rapidly evolving to include a variety of currencies.

The king, dethroned

As it most often does, art imitates life. In the real world, cash has been dethroned as the payment method of choice in many parts of the world. With consumer preference being the major driving factor in the payments market, worldwide cashless payments increased by more than 11 percent from 2014 to 2015, according to the World Payments Report 2017. This represented the largest growth since 2004 and totaled 433 billion digital transactions. A joint study by Capgemini and BNP Paribas projects that number will increase to more than 700 billion by 2020, fueled largely by technology innovation.

As plastic and digital payment methods have clearly usurped paper and coins, it begs the questions if going 100 percent cashless is feasible, and if so, is it in the best interest of all merchants, consumers and financial institutions?

Sweden: a case study

The closest example we have of a cashless society is Sweden, where less than 1 percent of the total value of all payments made in 2016 was by cash, and where it's common to see signs outside merchants' storefronts stating that cash is not accepted.

Sweden is somewhat of a distinctive unicorn, as there has been a near perfect storm of circumstances that led to the wide acceptance of cashless payments. With a total population smaller than the state of Georgia's, there is a fertile environment for groupthink in early adoption of new technologies. These include homegrown fintech innovations like mobile card reader iZettle and mobile payment system Swish. Future technology even includes surgically inserted grain-sized microchips that can be used like contactless payment cards.

Other favorable conditions include a recent overhaul of the banknote and coin system that formerly confused merchants, as well as a general public trust in financial institutions.

Cash Has Been Dethroned - Worldwide cashless payments increased by more than 11% from 2014 to 2015. This represented the largest growth since 2004 and totaled 433 billion digital transactions.

The United States – in cash we trust

The United States has been slower to adopt financial technology, and the move to cashless has seen less momentum there. TSYS' most recent U.S. Consumer Payment Study found that 14 percent of consumers still preferred to pay with cash in 2018.

With U.S. consumer interest in moving completely cashless remaining stagnant, Visa employed the strategy of encouraging merchants to stop accepting cash, including offering $10,000 each to 50 independently owned food establishments to go completely cashless. Unsurprisingly, more than 70 percent of the recipients were located on the tech-rich west coast.

The m-factor

According to eMarketer, global e-commerce retail sales totaled more than $2 trillion in 2017, or about 10 percent of all retail sales, demonstrating a significant increase from 2016. Digital payments, particularly mobile payments or m-commerce, were a major factor in this surge.

Ironically, traditional retail-disrupting behemoth Amazon may have found the ideal marriage of e-commerce and brick and mortar retail. In January 2018, Amazon opened its first Amazon Go, a 100 percent cashless convenience store. The checkout process is completely digitized, with items added to a digital cart within – what else – a mobile app.

Roadblocks to a cashless society

Regardless of geographic area, a number of practical challenges must be resolved before cash is fully retired. The majority of cashless payment types require access to some form of financial institution, and the most recent data from The World Bank's Global Findex database indicates more than 30 percent of the world's adult population does not have access to either a traditional bank account or mobile money service.

Other inhibitors include creditworthiness to obtain credit cards, technology adaptability and smart phone access. Most concerning to many consumers is the issue of security, as data breaches have become disconcertingly common. Consumers also need confidence that protection exists from large-scale crises that could disrupt digital connectivity for an indeterminate amount of time.

The sound of money

Perhaps the most appropriate comparison to moving to a cashless society is the transition from physical music to digital. CDs dominated the music industry for two decades until downloading, streaming and satellite radio slashed the CD industry by more than 80 percent in just a 10-year period. Like cash, CDs are no longer the format of choice, but they're still around, with certain populations (country music fans and older listeners primarily) refusing to trade out their discs.

Depending on who you ask, moving to a 100 percent cashless society is either inevitable or impractical. Now if you'll excuse me, I'm going to stream some music on Spotify… which I pay for with an electronic billing subscription. 

The statements and opinions of the writer do not necessarily reflect those of TSYS.

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Chris Osborne

Chris Osborne is currently a Sr. Technical Trainer at TSYS, where he develops and delivers training related to payment processes, products and technologies to internal team members and external clients. Prior to joining TSYS, he was a college administrator, and has also contributed to entertainment website WhatCulture.

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