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The ongoing debate of the future of cash money is not coming to an end soon

The ongoing debate of the future of cash money is not coming to an end soon

Marcel Woutersen

Senior Communications Consultant

4 May 2016

The ongoing debate of the future of cash money is not coming to an end soon


Even with the growing popularity of electronic payments, mobile banking and digital wallets cash remains resilient. That is the conclusion of the recent publication of G4S, a cash management company, on cash use across 28 European countries. ‘The volume of cash in circulation has increased 11 percent up to 2015 with cash now making 60 percent of all payment transactions’, according to the report. Is cash here to stay? The answer of that question depends on who is answering it. “In five years the vast majority of the cash will be out of the system”, says the opposing side MasterCard.

Let’s zoom in on the various opinions and beliefs on the future of cash payments. To say something about the future, it is eminent to research the present state; how many transactions are made with cash and is there a trend in cash payments?

The status of cash payments

Cash transactions are anonymous and not registered, therefor it is difficult to monitor the usage of cash. Based upon key signals such as the total amount of cash in circulation (value, volume and ratio of GDP) and withdrawals from banks and ATM’s (value and volume) it seems plausible that the number of cash transactions increases. According to the report there are many differences between the various EU members when it comes to the usage of cash. In 20 of the 28 countries more than 50 percent of the transactions are made with cash. In 26 of the 28 nations cash is the most important payment method in terms of volume. Since 2002 the amount of cash in circulation in the euro zone has grown steadily by 13 percent each year. The amount of cash in circulation not only grows in the euro zone, but also in the United Kingdom, the United States and Japan.

Although cash payments are still dominating in the majority of the EU, it seems that the number of cashless payments grows faster. Ergo: the share of cash payments in the total number of transactions decreases. The total amount of electronic payments has increased to 103.2 billion transactions, an annual growth of 4,3 percent since 2009. The recent years we have seen multiple alternative payment innovations, such as e-banking (iDEAL, GiroPay, Sofort, EPS and MyBank), online payment methods (PayPal), mobile payment methods (digital wallets) and virtual currencies (Bitcoin).

Will the phone replace cash?

With the growing population of alternative electronic payments methods, it is almost unbelievable that cash will remain resilient over time. “Mark Barnett, the boss of MasterCard in the UK and Ireland, believes that in five years time cash will be practically extinct in Britain and Ireland — and in 30 years it will seem as old fashioned as the horse and cart”, according to Business Insider. Barnett thinks that in the near future the phone will be responsible for the demise of cash payments. Indeed, that seems the next big step, according to a UK supermarket. This supermarket predicts that contactless payments via mobile phones will outstrip cash within a decade. “Bank cards and cash are becoming a thing of the past like cheque books.”

Alternative payment methods are emerging rapidly, but does this growth of electronic payments affect cash payments? That does not seem to be the case, because the total amount of cash payments is not reducing, says the G4S report. This could mean that electronic payment methods compete with each other and not with cash payments. One of the big worries about the electronic payment methods is the interoperability; there are too many different payment methods, which makes the electronic payment market fragmented. This is why cash still has a great value to offer, because since the introduction of the euro in 2002, consumers can pay easily and everywhere with the same currency in the euro zone.

Remain a clear value

What if the problem of interoperability with electronic payments is solved, will that be the ‘end of cash’? Not according to cash management company; the conclusion is that stakeholders are more aware of the clear value of cash in our society and the attitude changes from ‘a war on cash’ and ‘a cash-free society’ to a more open attitude; the world cannot do without cash. Those who are in favour of using cash state that cash will remain an important payment method, because it has a legal tender and has valuable features such as anonymity, reliability, the feeling of security, direct handling, tangibility and it is suited for budgeting.

Although digitalisation leads to the reduced use of cash and more use of electronic payments, cash will remain a payment method, next to electronic payments; consumers will always the choice. How to make sure that this choice will be there in the future as well? Maybe the answer lies in the combination of all the alternatives, such as Samsung Pay and the possibility to withdraw cash from ATMs. The most important lesson to learn is that each supplier has a different view on the future, but that in the end the consumer will choose his preferred payment method.