PayThink

Will cash survive? Probably not.

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You may have seen the recent Deutsche Bank report, Cash: the Dinosaur Will Survive … For Now. The report notes, “While we believe cash will stay, the coming decade will see digital payments grow at light speed, leading to the extinction of the plastic card. Over the next five years, we expect mobile payments to comprise two-fifths of in-store purchases in the U.S., quadruple the current level.”

I agree plastic cards are currently a bridge technology towards mobile payments. As soon as very sophisticated wallets arrive, which are directly connected to a bank account, the card will become obsolete. But for this, wallets will have to offer more services than they do today. To overtake cards, wallets will need functions like chargebacks, authorization, refunds and fraud prevention tools. As of now, these are provided and monitored by the card organizations, which is a valuable part of their service. Without them, a wallet would be incomplete. China, with its advanced wallets like WeChat Pay and Alipay, is already far ahead both in smartphone usage and mobile payment adoption.

I do not agree, however, with the prediction of cash sustainability. And this has been proven by events in countries where mobile payments are further advanced. For example, in Sweden, cash has lost nearly all of its relevance.

A recent Deloitte study showed that Danish consumers withdraw cash only eight times a year on average, but each person makes about 500 cashless transactions annually. Looking at China again, cash usage shrinks with the age of the consumer - younger generations are used to paying via their mobile wherever they go. In a world of easy smartphone payments there will be little space for exchanging coins and bills.

There is also pressure from another side: the rise of the Internet of Things. The ability of these Things to purchase and pay will inhibit cash payments as well. It's unlikely we'll see a robot in the future counting cash, nor will a printer when ordering a resupply of ink or a dishwasher when purchasing more detergent.

So will cash survive? I think not. All in all, the space for cash payments will become smaller and smaller with every passing year of increased digitalization. And it won’t necessarily be governments or regulatory authorities that put an end to cash – it will be us, the consumers that desire payment ease and convenience.

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