Is the Future Cashless?

Is the future cashless?

Payment technology is getting increasingly sophisticated, with the introduction of innovations such as payWave and Apple Pay and the increasing dominance of eCommerce driving an obvious trend towards digital payments.

More and more vendors are no longer offering cash payments. In fact, Visa recently launched an initiative in the USA that will see it handing out up to $50,000 to 50 restaurants, cafes and food trucks that pledge to go cashless. And while cynics might argue that companies such as Visa have a vested interest in pushing towards electronic payments, what can't be argued is that more and more people are eschewing cold hard cash altogether.

So is cash dead?

While the evidence is mounting that cash is on the way out, it's not exactly case closed. A study from the Reserve bank of Australia (RBA) certainly shows that cash use is dropping (47 per cent of payments in 2013 were made using cash, down from 62 per cent in 2010), and that withdrawals from ATMs have reduced.

However, that's still almost half of all transactions still being paid for in cash, and as the value of the sale decreases that proportion increases, with cash making up 69 per cent of payments of $20. Additionally, around 10 per cent of the Australian population in 2013 were making all of their in-person payments in cash.

A global perspective

A look around the world suggests that in some countries there is an active push to reduce cash in the economy, (understandable when you consider that some of the major winners in a cash economy are tax dodgers and criminals). Sweden is really leading the way here, with many banks not even dealing with cash in their branches, and cash only accounting for 15-20 per cent of transactions (even the homeless sellers of a street magazine in Stockholm apparently take mobile payments!).

It does seem though that Stockholm is the exception rather than the rule, with many other western countries having figures similar to Australia. In Germany, the number of cash transactions is as high as 80 per cent, and globally it stands at 85 per cent.

Consumer attitudes towards cash

So with the increased convenience and security offered by digital payments, why is cash still so popular? A lot of it comes down to individual preferences and attitudes. Some people just prefer using cash, don't trust digital payments, find using cash an easier way to budget, or maybe don't have ready access to digital infrastructure.

The RBA study noted that cash use decreases with education and income, and also that many older generations use cash more frequently, which is something you would expect. It's very likely then that as the younger, more digitally-savvy generations start to account for a larger and larger proportion of the population we will see digital payments become even more dominant.

However, the overall consensus among experts is that cash isn't going away any time soon, and if it does become obsolete it won't be for many decades yet. Perhaps we'll leave the last word to European Central Bank Board Member, Yves Mersch - "The cashless society, as appealing as it may sound, is probably just as elusive as the much vaunted paperless office."