Is Cash Dead?
In an age of credit cards, QR codes and mobile payments, is there any future for cold, hard cash? More and more people around the world are going cashless, carrying less physical currency and opting instead to swipe, tap or click to pay.
In South Africa, a 2017 study by Mastercard found that cash costs local consumers about R23 billion a year. “From the consumer’s perspective, the perceived benefit of using cash is largely driven by the misconception that cash is cheap,” Mark Elliott, division president of Mastercard, Southern Africa, said at the time. “While South Africans are generally aware of the direct fees associated with accessing cash, such as bank transaction fees, they do not consider the indirect costs such as travelling to cash-in and cash-out points, the often billable time lost spent accessing cash, as well as the risk of theft.”
No to cash
Cash still accounts for about half of the total value of all consumer transactions in South Africa – and most of those transactions involve low-income earners. But that’s not stopping South Africa, and other emerging markets, from moving steadily towards a cashless economy. In India, Prime Minister Narendra Modi said in his 2019 Independence Day address that, “Shops should put up signs of ‘Digital Payment ko haan, nakad ko na’ (Yes to digital payment, no to cash).”
Meanwhile, in April 2019 all Mexican banks with more than 3 000 accounts were required to start integrating a QR code- and NFC- (near-field communication) powered mobile-payments platform called CoDi, as part of a coordinated, nationwide push towards a mostly cashless economy by 2025.
In the United States, the Federal Deposit Insurance Corporation (FDIC) estimated that cash represented just 30% of all payments in 2017, prompting one Harvard Business School professor to ask: “Is the US on its way to becoming a cashless society?” Associate Professor Shelle Santana found that it’s more likely to be a “less cash” society, writing that, “An entirely cashless society is unlikely any time soon – especially when 70% of Americans still report using cash on a weekly basis. But 50%, 60% or 70% cashless is certainly conceivable, and we are already there in a number of markets around the country.”
There’s a clear opportunity here, both for businesses and for the customers they serve. BMW South Africa, for example, is launching an online portal through which BMW drivers (or prospective drivers) can customise, order and pay for a new BMW vehicle, entirely online. You may still want to take the car for a test drive, which you can do at your local dealer, but the personalisation and purchase can all be done from the convenience of your computer or mobile device.
It’s a cashless innovation in the truest sense of the word, and the natural next step in saying yes to digital payment, as Modi would put it.
There’s a significant social aspect to it, too. As Mastercard’s Mark Elliot explained: “Cash is the enemy of financial inclusion and of the poor. Too many South Africans still need to trade off the demands of an hourly job with the need to travel long distances to access cash or stand in line to pay a bill.” Time, ultimately, is money – and the quicker you can transact, the more of both you’ll save.