I don’t think cash will be around for much longer, and the reason is not what you might think
Future of money: cash will disappear within two decades!
If you go to the DeLaRue website, you won’t be surprised to see a long list of reasons why cash is never going to die. DeLaRue is the business of printing cash, and it is very keen to point out that 8.5 out of every ten transactions are carried out by cash.
“Over a third of the world’s population has no access to any other method of finance except cash,” it states.
The arguments put forward to support DeLaRue’s case are compelling however, I disagree. You can sum up the reasons why I disagree with one word, convergence. I’ll explain more in a moment, but first let’s revisit the arguments to support the continued hegemony of cash:
- First off, it’s about practicality — over a third of the world’s population don’t have a bank account — in the UK, seven per cent of the adult population don’t have a bank account.
- Secondly, it provides anonymity, so cash supports privacy.
- Thirdly, cash makes it easier to keep tabs on how much you are spending.
- It’s psychological — people trust cash.
- Cash doesn’t require technology — if there is no internet connection you can still use cash.
- Cash protects against fraud.
- It’s the cheapest, quickest and most convenient form of payment.
- Its popularity shows no sign of waning — 85 per cent of consumer transactions worldwide are conducted using cash.
Given that list, it feels like an open and shut case — cash is king, queen, prime minister and president.
I am not so sure though. Re-consider the above list. The real reason why people prefer cash is because it’s what we are used to. Technology has a response to just about all the above arguments.
- In Africa mobile phone credits or airtime have become accepted as a form of payment — there are alternatives to cash even among people who don’t have a bank account.
- There are technological solutions to the anonymity argument — bitcoin is just one example.
- Banks such as Monzo provide a service where it is much easier to keep a tab on spending — every time you use your card you get a notification. I am not sure whether you can set yourself a daily budget — like withdrawing £100 from the ATM and saying this is my budget for today — but I see no reason why this can’t be done.
- Cash can be stolen; I think there are safeguards that can be employed to afford greater protections to digital money from fraud.
That leaves the psychological argument, the convenience argument and the fact cash is still popular.
I will respond to those arguments in reverse order.
Sure, globally cash is still popular but look towards countries that often lead the way in term of new ideas. Take Sweden, the country that made it compulsory to wear seat belts in cars, or which banned smoking in public places, when such regulation felt inconceivable in the UK. In Sweden, only one percent of all payments in 2016 were conducted using cash.
Or consider convenience — plastic is only a short-term alternative to cash. More people are using their smartphones but that is also a short-term alternative to cash. Soon we will carry electronic wallets which are either a part of our smartwatch or perhaps like a kind of tattoo — our skin becomes our wallet. What can be more convenient than that?
Convergence, where different technologies come together, will change the psychology of digital money. Electronic wallets we wear on our wrist or embedded into our skin, 5G providing ubiquitous internet connectivity, improved reliability of internet connectivity, and Monzo style presentation enabling us to easily keep an accurate record of our spending, will combine, creating a powerful user experience.
Companies that provide these technologies— Apple for example with smart payment hardware, banks that adopt a Monzo style interface, companies that provide digital alternatives to cash; they will be the winners.
And as these technologies develop and converge, the psychological rationale for cash will disappear like money down a drain.
These views are those of the author alone and do not necessarily reflect the view of The Share Centre, its officers and employees