I read two interesting articles in the press last week.  One stated that the Dutch are to abolish cash payments for public transport, the other, quoting a report from UK Payments, stated that debit cards are expected to overtake cash as the most popular payment form in the UK by 2021.  It went on to say that while in that year there will be over 14 billion debit card payments, the number of cash payments will be 13 billion.

Now 13 billion still seems a lot of payments to me.  In fact it works out at 24,733 cash payments every minute!

There is no doubt that some sectors are moving to cashless payments.  I recently visited Amsterdam and though I am quite a keen walker, the grey skies persuaded me to invest in a two day tram ticket, which I was able to purchase at my hotel.  On catching the first tram I discovered that there was a cash or card payment option.  If you entered the tram by a rear door you could pay a conductor situated in an on-board kiosk.  As a tourist I remember thinking it was a convenient though perhaps labour intensive payment solution.  I was therefore not too surprised to learn that these conductors are now to be replaced by card payment machines so that the system will be cash-free by 1 January 2017.  A search of the Internet revealed one or two comments that the move was ‘not very consumer friendly’, but next year the reality is you will no longer have the choice of paying by cash on the tram.

With public transport the provider of the service is in a strong position to define how it will accept payment.  In a competitive market, few retailers are in a similar position.  The reality is that though cash usage is declining it remains popular with large numbers of people and if you don’t accept their cash someone else will.  Whatever forecasts you consider, and UK Payments has a long track record, there will remain a large number of cash payments to be processed for quite a while yet.  What does this mean for businesses?  Unless you are in a position to refuse a significant proportion of payments then you will need to process cash as efficiently and effectively as possible. Going forward, it is an integral cost of doing business and the efficient management of cash payments will have a significant impact on your bottom line.  New solutions automate cash payments and provide greater flexibility and versatility in staff deployment as they remove the need for cashier intervention.  They also reduce time spent on reconciliation tasks by 50 percent.  Given the volumes we have already quoted, investment in the processing of cash payments remains an important aspect of future planning.

Returning briefly to my Amsterdam experience, though I had cards with me I also took a number of banknotes and indeed paid for my tram ticket at the hotel using cash. On reflection I wondered whether perhaps I was unusual in doing so, but some brief research revealed this was not the case.   Indeed, it is perhaps surprising how many travellers prefer to use foreign cash when making payments.  My figures refer to 2014, but they had remained consistent for the previous three years and there is no reason to believe they changed dramatically last year.  According to the YouGov ‘Holiday Money 2014’ report, 85 percent of UK adults who have been on holiday in the past 12 months preferred to use foreign cash as a method of payment whilst abroad’.  Indeed compared to the previous three years debit card usage had declined!  Why was cash so popular?  It was simple (60 percent) and convenient to use (56 percent).  For 54 percent an added appeal was ‘the freedom to spend it anywhere’. 

Given free choice, many people still choose to use cash, whether at home or abroad. Those running public transport schemes and companies focused on ecommerce may be the exception to the rule although even this may not be true everywhere – take India for example 50% of Amazon’s Indian customers pay for their online purchases in cash or Russia where estimates put the percentage “online cash transactions” over 65%.. For many, not just in tourist areas, accepting cash will remain an essential part of doing business for the foreseeable future. It’s a challenge that isn’t going away any time soon.

Just as I was putting this blog to bed, I came across a 2015 PWC report which puts the UK situation in a broader perspective.  According to their data, if we look at it in terms of number of consumer payments, in the UK 48 percent were cash payments.  Compare this with the US (55 percent), Australia (65), Japan (86), China (90), South Africa (94) and India (98) so it would seem fair to say the cashless society has a way to go yet.