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The case for a future with cash

It can be a fool’s errand trying to accurately predict the future. In 1955 Alex Lewyt, president of the Lewyt Vacuum cleaner company, predicted “Nuclear powered vacuums will probably be a reality within 10 years.” There are many examples of technology predictions that haven’t quite got it right in hindsight – look at computers, cars, the telephone, television and of course the internet.

Having said that, I am going to make a prediction, not so much about the impact of a technology on society, but it’s impact on a form of payment thought to be more than two and a half thousand years old: cash. I don’t believe that a cashless world is a place that I will ever live in. While the growth of contactless and mobile payments is impressive for a new technology, the growth of cash, year on year, since the advent of these technologies, is equally as impressive. I am of course contradicting some of the most important voices in banking. “Cash I think in ten years’ time probably won’t (exist). There is no need for it, it is terribly inefficient and expensive,” said John Cryan, chief executive of Deutsche Bank. Please bear with me as I try to explain why I think cash will remain a fundamental part of society in the future.

There are 74 trillion emails sent worldwide, yet there is still a need for letters. PWC estimates that by the year 2023 there will still be 8.3bn letters sent in the UK alone. Netflix has 83 million subscribers worldwide, and while it has changed the way people consume entertainment the predicted impact on the cinema industry has not materialized. For example, in the UK alone there are still over 170 million admissions every year, and in France there are more than 200 million admissions yearly.

The internet’s impact on retail has been great, however, the predictions that the internet would be the death of high street retailers have been greatly exaggerated (with the notable exception of a few such as Woolworths in the UK). Indeed, in August UK high street footfall rose by 1.1% (BRC).

Let’s compare that with the volumes of cash transactions versus the volume of contactless card transactions. In the UK in 2015, £9.4 billion (UK Cards association) was spent on contactless cards compared to the £188 billion that was withdrawn from ATMs (RBR).

It is worth noting the noise around the “massive growth” of contactless is from those companies who are benefiting from merchant fees as a result of the use of contactless. We live in a world where financial inclusion is becoming a greater political concern for many countries. The unbanked and underbanked rely on cash transactions, and trying to move them to expensive devices, or using cards which they have no access to is only creating a barrier to them joining the financial world. Even the United Kingdom (2.3% unbanked – Financial Inclusion Commission) and United States (7.7% unbanked) have a large number of people who, without cash, would be left struggling to live their daily lives.

The drive to move people towards cashless payments is one which is founded in reducing crime and tax avoidance. These are of course noble and just reasons to move to a cashless society, but what of those concerns about a cashless society? The lack of privacy around an individual’s spending habits, for example. Cash allows for payments to be made with privacy, and a receipt from the merchant can be the proof of the payment if it is ever required. The fact that cash is tangible and something that the owner can touch and examine gives people confidence in the payment method that they are using – there can be little or no dispute over the value of a note or coin.

While cash may not be fashionable, or indeed desirable to many of those who set financial policy, it is still necessary and in general a force for good. The ability to self-regulate the payments industry by virtue of its mere existence, to bring those frozen out of the financial world in from the cold, keep privacy as a part of the buying and selling process and to give individuals confidence in the payment method they are using, and there can be no mistyping of numbers. The future for cash may be one that is under scrutiny, but while it still accounts for 85% of global consumer transactions, the future of cash is one that is sure to last.


Comments: (4)

A Finextra member
A Finextra member 20 April, 2017, 07:53Be the first to give this comment the thumbs up 0 likes How many Netflix subscribers pay in Cash? I think Book and Media retailers (such as Waterstones and HMV) will be able to illustrate the significant impact direct digital internet sales are having on their Businesses. Whilst I do not anticipate Cash dying anytime soon I do foresee a drastic reduction in its usage as Consumers start to realise the benefits of Electronic payment methods.
A Finextra member
A Finextra member 20 April, 2017, 07:58Be the first to give this comment the thumbs up 0 likes Fair point, though cash is a payment option, and one which will live in the future. Uber for example accepts cash in India such is the nature of the economy there. Businesses have to adapt there business models, just as much as consumers have to adopt payment trends. I'm not suggesting Netflix will ever accept cash, I don't pay any "bills" like a subscription service in cash, though from a personal point of view, I use cash everyday, and I trust it
Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 20 April, 2017, 19:28Be the first to give this comment the thumbs up 0 likes

"Uber for example accepts cash in India such is the nature of the economy there."

Uh oh let's not jump to conclusions about economy of nations based on what one company does or does not. India has >600M payment cards. Uber's customer base is 10M in India. So there are 60 cards for every Uber customer in India. Uber's acceptance of cash has nothing to do with economy. 

When Uber entered India, it didn't accept cash. Its target audience had cards and, like their brethren elsewhere in the world, liked the frictionless payment experience whereby the card account was debited automatically, with the rider having to do nothing at the end of the ride. However, "invisible payment" of this nature violated the Indian regulator's two factor authentication mandate for card payments. Uber was told to change its card acceptance procedure to comply with 2FA. Since 2FA causes friction, Uber decided to stop accepting cards altogether and started accepting cash in India. Uber went back to the drawing board and found a way to accept cards that complied with 2FA, still avoided the traditional 2FA friction. After its relaunch, card payments on Uber India work as follows: Riders still walk out at the end of the ride without doing anything. But they must make the payment via 2FA - or, if that fails, by cash or linked mobile wallet - before they book their next ride.

In short, Uber gives credit until the next ride. I doubt if Uber takes this kind of credit risk anywhere else in the world. That, to me, says something about the Indian economy.

A Finextra member
A Finextra member 20 April, 2017, 19:37Be the first to give this comment the thumbs up 0 likes I certainly wasn't drawing any conclusions about Indian economy from one companies policy, nor would I claim to be an expert on why uber did or didn't make that decision, merely making the point the cash is still a payment option for companies, even those who may be associated with a cashless future. That's all, I'm sure there is many examples the world over, UK taxis many don't take card payment. Was just an example that was fresh in my mind

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