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Is Cash Dead? An International View

0aaRalf Gladis Computop
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It’s widely believed that the ancient Greeks invented money as we know it. On the contrary, however, the first coins to ever appear came from a coastal kingdom on the Aegean Sea in ancient Turkey, about 2,700 years ago. The amount that each coin was worth was embossed on gold or silver flat coins. They were used to trade with visiting merchants from overseas.

That’s a far cry from the “international payments” scene today. Nevertheless, it would be fair to say that for thousands of years, not much really changed with money. Cash was king. Even as credit card payments really took off during the 1980s, they were initially mostly for domestic, not international, use.

Fast forward to the present day. With all the advances in payment options, some retailers may be wondering if cash’s days as a payment method are numbered. 

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Well, there’s life in the old dog yet, particularly internationally.

Why? Cash is very popular in geographies where people mistrust their banks and governments. Electronic payments require trust in data privacy because consumers can be tracked. So where is cash still strong, and where is it faltering globally?

International Feelings About Cash For Payments

Many Germans and Italians have more trust in cash than they have in banks or in governments to treat their data privacy properly. And recent scandals around the NSA and GCHQ haven’t helped to build that trust. As long as consumers have good reason to believe that they will have their privacy infringed, it will be impossible for politicians to introduce a cashless society. Trust comes first.

Sweden, however, is a good example of a place where established trust is enabling the decline of cash for payments. People in this country trust their government and their society is innovative, so Swedish consumers have learned to cherish the convenience of electronic payments. Therefore, Sweden is leading the way to a cashless society in Europe.

Bridging The Gap Between Cash And Electronic Payments – For Now

Solutions such as Amazon Cash and Barzahlen in Germany are evolving to bridge the gap between cash and electronic payments. Unbanked people can use these solutions to buy online and pay cash at a retailer’s cash register.

However, the vast majority of future payments will be electronic and processed via apps, e-wallets and initiated by mobile devices, wearable devices and standards such as Near Field Communication (NFC).

Alternatives To Cash Payments In The Coming Years

As mentioned, e-wallets, including ones like Alipay, Masterpass, PayPal and WeChat, will become invaluable in coming years. Wallets will process payments online, in-app and in-store via NFC or QR code.

Convenience is and will continue to be the driver behind the rise of e-wallets. For instance, driving to an ATM to take out cash is inconvenient. And then how do you carry and protect the cash? Avoiding the effort and cost involved with handling cash has been driving the global success of credit and debit cards ever since the first Diners Club cards were issued in 1950. Plastic cards, however, do not provide the convenience desired within the digital age. Who likes to type in a 16-digit card number, validation date and validation code on a keyboard — let alone on a smartphone?

E-wallets have paved — and will continue to pave — the way to a convenient digital shopping experience in an omnichannel retail world.

In addition to digital wallets, a rather old-fashioned payment method will soon regain mainstream popularity: bank payments/transfers.

We are starting to see evidence of the rising popularity of bank accounts for payments due to the introduction of Faster Payments in the U.S. and UK and Instant Payments in Europe. These make it much faster, easier and more convenient for consumers to send money from account to account. Historically in Europe, with 28 member states and just as many banking systems, it had been difficult, expensive and slow to transmit money between countries. However, with SEPA Instant Payments announced for 2018, it will be easy, fast and cost-effective to send money to any European account within 10 seconds, 365 days per year.

Being able to process payments instantly from account to account will be a big leap forward towards a cashless society. However, without complete consumer trust in data privacy, it will still prove impossible to replace cash altogether.

Much has been said recently about the rise of electronic payments and cryptocurrencies and the demise of cash. In fact, Blockchain co-founder and CEO Peter Smith said “cash will be extinct” in recent interviews. But that statement is a bit premature.

Retail payments are a serious business, and the industry is built on trust. And trust is built from experience. Every country has its own history of payment preferences and habits.

Cash is still popular in many geographies — but it is on the decline. Cash will eventually disappear as consumer trust in data privacy and security increases. However, it will still take a couple of decades to get to that point.


 

Ralf Gladis is the co-founder and CEO of Computop, Inc., a leading global payment service provider.

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