As innovative payment technologies hit the market, like the PayPal 'check in' service that launched in London this month, it seems that coins and notes are becoming less important. As countries like Sweden appeal for a 'cashless society' and physical cash
continues to cost economies vast amounts annually, one needs to ask if cash really will die out in the near future, or if this is simply an urban myth.
Electronic alternatives to bank notes?
The growth in internet and mobile banking in recent years highlight the value that customers place on making payments and conducting financial transactions electronically. With revolutionary NFC and app solutions, customers can now make payments with a wave
of the phone or a tap of a card. From the merchant's point of view, mPOS means that more customers can be served in a shorter period of time without the faff of handling cash, and the big data capabilities of this customer information will be priceless.
A cashless future does not seem as remote as it once did. In the UK, a recent survey by the British Retail Consortium highlighted that only eight per cent of consumers believe that cash will be the preferred payment method by 2020. This is further reflected
in stats showing that cash made up just £28.93 of every £100 spent at UK retailers in 2012; a fall from £32 in the previous year. Of course, this can partly be attributed to more widespread card usage, but it could also be pointing to mobile payment adoption.
Recent research we conducted found that only 16% of respondents in the UK ever choose to leave their mobile phone at home when they go out, while in-store mobile wallet payments are set to grow at a compound annual growth rate of 275 per cent to reach €45
billion across Europe by 2017, according to Berg Insight Research.
Across the pond, the US has also seen its use of cash, as a percentage of retail spending, fall from 36 per cent in 2002 to 29 per cent in 2012, according to data from Barron's. At this rate, it would take nearly 200 years for cash to be wiped out in the
US, but of course as technologies develop at an exponential rate, this time window will probably be dramatically smaller.
Sweden and Australia - cashless societies?
Sweden is one country that is leading the way for non-cash payments. An increasing number of businesses now only accept cards, while some bank branches will not even handle cash. A recent report (May 2013) by Swedish payments expert Niklas Arvidsson estimated
that Sweden could be cashless by 2030.
Cash has also been in steady decline in Australia. A Reserve Bank survey in 2011 highlighted that cash represented less than a quarter of all payment values made by individuals. By March 2013, the value of transactions made on debit cards in the previous
12 months had even exceeded the value of all cash withdrawn from ATMs and over the counter.
So what does all of this mean?
Cash can be very expensive for economies. Nations are shelling out vast amounts to print, count, store, secure, transport and dispose of cash itself, while it can also cost the wider economy in tax avoidance.
However, a cashless society will naturally have its obstacles, too. What will be used as an emergency backup during power cuts? What happens when electronic systems crash or are hacked? How will it be received by older generations that tend to use cash more?
Will any government be brave enough to withdraw all notes and coins? These are some of the questions that need to be answered.
If the availability of electronic alternatives is going to contribute towards non-cash economies, consumers and retailers must not only want to use them but also find them as easy to use as cash currently is. And this will primarily depend on card companies
and mobile firms developing an accessible service that is easy to understand and quick to use. Undoubtedly, this will be the deciding factor on whether a future cashless world will be either a myth or a technological reality.