Cash holds some sectors, but pandemic's digital habits have dug in
Various efforts to limit cash were in motion well before the global health crisis, but merchant and consumer digital money habits being built during the pandemic will carry on for many years, thus leaving cash sidelined in many purchasing scenarios.
Still, cash remains stubborn in holding its place in commerce, despite the sudden rush to contactless payments, e-commerce transactions and digital money transfers. Even in a pandemic, cash remains vital for various demographics and markets.
Those pushing the advancement of bitcoin and other cryptocurrencies still view cash as a vital component in these early stages of building consumer crypto adoption, as it remains a major payment method for acquiring bitcoin.
"Cash may eventually go away, we hope in favor of bitcoin, but right now we are very pro-cash and want it to be an option out there beyond the banking system," said Daniel Polotsky, co-founder and CEO of Chicago-based CoinFlip, a Bitcoin ATM provider.
"We know the banking system doesn't work for everyone, and our research has found that 80% of people still carry some cash with them," Polotsky said.
In a June survey of more than 1,500 U.S. adults by CoinFlip, 53% of respondents claimed the COVID-19 outbreak did not change their cash-carrying habits, while 15% said they actually carry more cash now. Only 16% said they had cut back on cash use at this time.
"Cash is still a good thing to have for things like tipping others, and some people are just more comfortable with it than other payment methods," Polotsky said.
Many of CoinFlip's bitcoin ATM users offer cash into the machine to have a bitcoin purchase transferred to their phones via a specialized QR code. But CoinFlip doesn't rely solely on cash usage, as it has other technologies allowing it to accept checks or cards.
But if cash was suddenly hard to find overall, "it would be a bigger problem for the consumer" seeking to acquire bitcoin as an investment, Polotsky added.
On the other end of the cash spectrum, San Diego-based Mitek Systems has long been focused on creating systems that makes cash less necessary, such as technology to deposit checks via mobile phones, or providing technology for banks or businesses to onboard customers for digital money accounts and transfers.
"Our technology supports a cashless society in many ways," said Mitek vice president Sanjay Gupta. "When you look at what happens in society in general with the adoption of technology in certain countries, the GDP of those countries tends to increase. The amount of money available, per capita, goes up."
Indeed, industry experts point to developments in countries like India, Sweden and China, where use of cash has diminished dramatically as mobile and contactless payments took hold, especially with young consumers.
India's recall of larger bills four years ago, as a way to minimize tax evasion and money laundering also served as a signal that the vision of a cashless society could be feasible.
"In India, the government was telling people to put the money in the bank, and take out only a small amount of cash, and they showed them how to download banking and P2P apps on their phones," Gupta said. "I went back to visit family in India a couple of years ago and the street vendors were even saying they didn't want cash anymore; you had to use digital through your phone."
It's a good example when a country of 1.2 billion people is trying to figure out a way to go cashless, Gupta said. "If a society like that can move down the road to a cashless society — and maybe you don't ever get there fully — it does create an inertia for the freedom of not handling cash and also trying to figure out what to do without it."
Even in a largely cashless society, cash will remain a staple in certain demographics among immigrants, the underbanked or those who simply do not trust technology or banking networks, Gupta noted.
"You do get momentum," Gupta noted. "Even pre-COVID, we believe 60% of people were going mostly cashless, and now that could be up to 80%."
It becomes a habit to not use cash, he added. "Many people will change their behavior to what is more convenient to them, and as the pandemic goes on, you will see these changes."