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The Main “C” of 2021 Is Not COVID, It’s Cashless

Could we have predicted the dethroning of cash in early 2019? Perhaps. But in 2020, multiple tell-tale signs has indicated that in the payments world, cash no longer reigns supreme.  

The volume of non-cash retail transactions has been growing consistently since 2017 in mature APAC markets (estimated 10% CARG through 2022) and developing economies in Asia (estimated 23.5% CARG through 2022). The coronavirus pandemic has further accelerated consumers’ determination to switch to alternative touchless payment options — debit/credit cards, mobile wallets, and an array of other payment tools.  

Why cash is poised to go away  

Cash has long been a darling medium for settling transactions due to various historical and societal factors.  

Part of the reason why Germany remains a strongly cash-loving society has a lot to do with the country’s past surveillance state, economic devastation, and inflation. As Georg Hauer from N-26 notes in a BBC interview, “Many Germans continue to guard their personal data and privacy fiercely, and have been less trusting than many of their other European counterparts when it comes to adopting new tech solutions [for finance].” 

In 2017, a national study found that Germans carried an average of €107 ($116) in cash in their wallets — significantly more than other Europeans. Also, 88% of Germans said that they wanted to keep using cash in the future.  

Fast-forward to spring 2020 and we see quite a different picture: 57% of Germans now use debit/credit cards more often than cash, and almost 50% have significantly curbed their cash use. And it’s not just German consumers who are eager to drop cash.  

In the UK, the total number of ATM withdrawals declined for the first time in decades as people started prioritizing alternative forms of payment. A recent survey by Link found that 76% of Britons planned to use less cash and move to other forms of payment or online shopping in the next six months.  

"Globally, 45% of consumers plan to increase their usage of digital payment methods and the surge in adoption will continue over the next 6 to 9 months." — Capgemini Research Institute.

All around Europe, consumers are now favoring cards more than cash, even for low-value purchases, since contactless payments have become widespread. The latest data from Mastercard suggests that after all Eurozone countries increased contactless transaction limits, 78% of all Mastercard transactions in the region were contactless. Mobile contactless transactions also experienced double-digit growth in Q1 2020. 

The US has also historically loved cash, but the once die-hard habit is also being challenged by COVID. A June 2020 report from Square shows that at the beginning of the pandemic, on March 1, only 8% of businesses in the US were cashless. By the end of April, this number skyrocketed to 31%.  

Growing Asian economies have set a strong course for cashless transactions too, albeit for somewhat different reasons. With a high level of unbanked and underbanked consumers, developing markets such as Indonesia, Thailand, and the Philippines (among others) have become attractive playgrounds for mobile money providers and super apps with payment functionality.    

In Indonesia, $1.5 billion in transactions were made through 38 e-wallet apps in 2018. By 2023, the volume of mobile payments in the country is estimated to reach $25 billion.  

However, it’s China that’s been the true regional powerhouse for digital payments adoption. Home to the most profitable unicorn super apps — WeChat, Ant Financial, Alipay — and a government supporting payment digitization, in spring 2020, China set its course to beat Sweden in becoming a fully cashless society.   

In summer 2020, the Chinese government unveiled their grand initiative to deploy the world’s first digital sovereign currency — the digital yuan, existing fully as code stored in a mobile wallet and backed by the People’s Republic of China. At the moment, the government is hosting trials in four major cities. Local unicorn startups (Didi and Meituan-Dianping) along with international franchises such as Starbucks and McDonald’s are just some of those waiting their turn to join the test run.  

In a country where mobile transactions already account for four out of five payments, a state digital currency has a strong chance of taking off within a short time and fully replacing third-party payment services.  

Let’s recap the facts: in mid-2020, the payment landscape is taking an interesting turn. Four main consumer generations (Boomers, Gen X, Millennials, and Gen Z) are finally in agreement on the convenience of cashless payments.  

Older folks are getting sold on the ease of using contactless payments over paper and coins, while trailblazing digital natives are eager to explore mobile payments, IoT payments, and fully digital coins. 

Governments in the Asia-Pacific and Southeast Asia regions are actively promoting cashless payments, since cash has always enabled black money and corruption. With open banking on its way and legislative efforts aimed at expanding the use of non-cash payments, these regions will likely become a hotbed for digital payments. 

In the US, the prospects of going cashless are not as clear, as some legislators largely oppose the complete eradication of cash, as it may leave a large percentage of minority communities outside of the formal economy. On the other hand, higher-income Millennial consumers are among the frontrunners of adopting non-cash payments.  

While it’s hard to make predictions in the current climate, one thing is certain: COVID-19 is forcing cash out of the picture, and financial players should act on that trend.  


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Anna Oleksiuk

Anna Oleksiuk

FinTech Practice Lead


Member since

02 Mar 2020



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This post is from a series of posts in the group:

Payments strategies 2015-2020-2030

Payments systems visions, strategies, trends, pilots, forecasting, and planning for the short-, medium-, and far-term.

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