Card and phone payments now dominate at many cafes and shops

Last time you bought a coffee, a sandwich or a beer you may well have paid with a card or mobile phone. Cash is playing a much smaller role across the developed and emerging world.

Globally, around 85 per cent of transactions are still in cash, but its usage has already peaked in some countries. Changing consumer tastes, government policies and rapidly improving technology mean we are moving towards a more ‘cash-lite’ world. Further, new ‘cryptocurrencies’ such as Bitcoin are also gaining prominence.

We are moving towards a world where cash will no longer be king

With the smartphone as the catalyst, mobile phone and contactless payments are increasingly taking over from cash. Driven by young populations and technological advances, these new payment methods mean we are moving towards a world where cash will no longer be king.

In Sweden, many shops won’t take cash. Many banks there don’t stock it. Even church collections and donations to the homeless can be made via a mobile-payments app. The move is so extreme that cash in circulation has fallen by 44 per cent since 2010.

Payment evolution: Barter to cashless

Cash’s share of UK transactions fell to 47 per cent in 2015, down from 58 per cent in 2011. South Korea, meanwhile, is aiming to remove coins from circulation by 2020. 

In Africa and some parts of Asia, young people’s adoption of new technologies has led to a boom in mobile payments. In 16 African countries, more people already hold a mobile money-account than a traditional bank account. In China, a popular app that allows mobile payments means its digital-payments market is now 50 times larger than that of the US.

But while these countries lead the way, we expect to see a cash-lite outcome, where cash usage continues to fall but small notes and some coins survive because many parts of society still rely on cash.

We see a two-speed move from cash. While many countries will see its usage diminish quickly, the transition elsewhere will be slower. Some developed markets, including Japan, Italy and Spain, have older populations and a lower rate of technology adoption. Older populations and established banking systems may slow the push in parts of the emerging world, such as Eastern Europe and Latin America, too.

The implications of relying less on cash could be vast. It means consumers do not need to find ATMs, wait for change or risk theft – making spending quicker, safer and easier. Businesses will save on security, storage, counting and transporting cash.

In terms of monetary policy, central banks may find negative interest rates easier to implement. And reducing uncollected tax by cutting corruption, crime and tax evasion will affect fiscal policy – although cryptocurrencies may be used more by criminals.

Given the benefits, it’s no surprise so many countries are moving away from cash. Soon we may be swiping cards or mobile phones for almost every purchase we make.

This research was first published on 17 May 2017.

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