The days of physical wallets and bank-issued currency notes are becoming something of a relic from a not-so-distant past. Digital wallets and currencies are quickly claiming supremacy over cash.
From cash is king…
The Chinese were at the forefront of paper-money usage, with some of the first examples reported in 700 B.C. However, it wouldn’t be until after 960 AD that paper money became the norm across the country as a whole.
By the 16th century, the practice of paper money had been readily adopted across most of Europe and the US.
While paper money has remained part of day-to-day life, its presence is dwindling with the introduction of online banking and digital transactions. Virtual currency, most famously Bitcoin, now stands as the next great step in the world of cash.
Yet, World Atlas reported some of the places most dependent on cash to be countries such as:
The most recent World Cash Report highlighted which First World countries are still reliant on cash usage. They found the countries where cash was still king to be:
…to long live cashless
In the 5-year span between 2009 and 2014, cashless payments increased across the world from 269 billion to 390 billion. By late 2016, North America was making as many as 52% of all payments using non-cash forms and Western Europe was making 34% of payments in non-cash.
According to Global Data, some of the countries which are closer to a completely cashless form of society include:
- South Korea
- The UK
The UK has moved a big step closer to becoming a cashless society after the number of payments made using notes and coins fell by 35% in 2020.
Changes in spending habits have been dramatically accelerated by the coronavirus pandemic, with 13.7 million people leading a “cashless life” last year, almost double the 7.4 million figure in 2019. Five in six payments now involve no notes or coins, compared with half of all transactions a decade ago.
A growing number of businesses both big and small now refuse cash, with many having opted to go card-only over the past year.
Cash was used for 17% of all payments in 2020 – down from 45% in 2015 and 56% in 2010.
“There has been a significant fall in cash use by consumers in a relatively short period of time,” said the banking trade body UK Finance, which issued the figures. “Since 2017, cash use had been declining by around 15% each year, so 2020 represented an acceleration of this decline.”
Singapore speeding towards cashless
The ongoing COVID-19 pandemic is hastening the demise of cash-based transactions in Singapore by at least four years, Visa said in its ‘Consumer Payment Attitudes Study’ published recently.
The survey shows a preference among Singapore consumers for contactless card payments (31%), followed by online card payments (23%). Visa said that more than 9 in 10 transactions of its transactions by Singapore consumers are contactless – one of the highest in the world.
Also in Asia, the Japanese government has pledged to try to reduce cash spending to 40% by the year 2025.
Dangers of cashless on spending
Digital spending could be dangerously different. It’s where consumers are continuously nudged into easy payments like endlessly renewable subscriptions, internet connections, online yoga resources, access to online movies, apps for mindfulness, language learning, and others.
Companies love it when we spend fast, easy and on impulse and modern technology enables them to realize that.
Not only are we paying for all this, but we’re also paying without a clear idea of when or sometimes how much the payments are.
At least with a physical wallet, a shortage of bills and a slower way of payments can give consumers better degrees of control overspending.
Digital currency is coming but in what form?
One of those digital alternatives to paper money is of course the now much-discussed cryptocurrency with Bitcoin as the most visible cure.
Central banks and their national governments will be reluctant to give up control and allow cryptos to overtake the use of their own currencies.
Central Bank Digital Currency or CBDCs are one way for banks to control things using their own crypto.
The Bank of England, which will in the next five years or so end the issuance of notes and coins and switch over entirely to its own digital currency, is doing just that.
China is close to doing just that and the advantages for that country are obvious:
- As all digital transactions are instantly traceable it makes it much harder for money launderers to operate successfully.
- Digital transactions are demonstrably more efficient than lugging cash around the place.
- Switching to digital potentially gives China a very valuable first-mover advantage in that it can insist on those countries that want to do business with trade only in the Chinese digital currency thus bringing about a challenge to the dollar as the world’s reserve currency.
On this last point, the US Fed is very well aware of such issues, which is why it has recently stepped up its research into whether it goes the digital route sooner rather than later.