Going cashless: myth & reality
Cash is king, or is it?
Cash first originated as means of trade, when exchanging grain and
pelts was no longer feasible. Although largely inefficient, inconvenient, and
costly to process, cash has been around for millennia and it is still the
preferred method of payment in many economies worldwide. Today, we know that cash
money has inherent shortcomings, such as becoming obsolete or devalued in cases
of political or economic instability like hyperinflation, or the more trivial –
the ease with which it can be taken away. Still, having cash on hand tends to
provide people with some sense of security, more so than abstract digital
account balances could.
Better alternatives to paper and metal
As our lives become more digitalized, the number of online-only banks
and mobile payment options has gone up exponentially. In a bid to attract or
retain younger consumers, traditional banks and financial institutions are
scrambling to build their own user-friendly apps, with the goal of enabling users
to do everything from transferring money and taking care of utility bills, to
investing and paying government taxes.
Asia leading the way
With smartphones disrupting our lives entirely, from regulating our
thermostats to mobile shopping and meditating, we would expect the usage of
financial apps to be on the rise, too. Nevertheless, recent research by
Clarabridge has revealed that fewer people rely on their smartphones for
banking and managing finances than expected. Among the reasons cited for infrequent
mobile banking are the lack of enough banking apps for Android, and in America,
the inability to transfer money to people who bank elsewhere.
Still, among millennials there is a significantly higher level of adoption
of smartphone banking and investment apps like Apple or Google Pay, Paypal,
Transferwise, Splitwise, WePay, Robinhood, E-trade mobile, Mint, or RD
Ameritrade mobile for managing finances and completing daily financial transactions
on the go.
In Asia, digitally advanced economies have been completely cash-free
for years now. Smartphones are used to pay at the doctor’s, for utilities like
water, gas and electricity, for public transport, and at most retailers. Mobile
payment options are even seamlessly integrated in chat apps, such as Chinese
favorite WeChat, facilitating m-commerce and peer-to-peer payments. Sweden’s very
popular payment app Swiss is often used to pay for second-hand clothes and
shoes at flea markets, in addition to traditional point-of-sale settings.
The role of cryptocurrencies
In Venezuela, many citizens have converted their local currency
(bolivars) into bitcoin to curtail daily inflation rates of 3.5% or more. They
convert bitcoin into bolivars daily to buy essential suppliers, like bread or
milk. When financial institutions, currencies and governments fail –
cryptocurrencies offer a viable alternative to preserving one’s assets. The
concept of borderless money is more than a buzzword to many who live in states
of political crisis, governmental monetary control, or hyperinflation.
The frequency of cryptocurrency trading and usage of smart crypto
wallet apps like Coinbase, Binance or Blockfolio, are also on the rise for
those who have decided to own or transact with virtual currencies.
The future of cash
Will cash become completely obsolete in a couple of decades? That’s less than likely, as the reservations towards a fully digital financial system’s risk of collapse are driving many to maintain a supply of cash for emergencies. That isn’t completely unwarranted, given the current state of many financially volatile markets. Still, going forward we can expect it to become more difficult to make large official payments in cash, as governments become more stringent about persecuting tax evasion and tracing the source of citizens’ incomes. The proliferation of internet connectivity and smartphones in developing markets will also be a game changer for cash-free payments and banking.