Post #55: Dash for cash(less)

Cash is king; right? You might be forgiven for thinking that at the beginning of the third decade of the 21st Century that no one uses cash anymore. We are all content to tap and/or swipe. In the future, money might leave our bank accounts based simply on a scan of our retina or even an analysis of our heartbeat.

However, consider the statistics. Globally, by volume¸ some 75% of payments are still done using cash (by value, the figure is estimated at a third of this) and even in a market as large and developed as the US, almost one-third of payments by volume are still conducted with cash (per the Federal Reserve). MasterCard says regularly that cash is both its biggest competitor and its largest opportunity, a view held by the other larger processors too. The debate will continue to run.

Consider first the competitive threat. We noted with interest that stores in New York are now required to accept cash, per a bill approved by the city council at the end of January. Businesses are prohibited from only accepting credit card, mobile payment or other forms of digital currency. “Consumers should have the right to choose if they want to pay in cash or not,” per the councillor who initiated the bill. Analysis shows that ~17% of black residents and ~13% of Latino residents living in New York do not have bank accounts, compared to just 3% for white residents (per Bloomberg). Other cities that have approved similar bans in the US include New Jersey, Philadelphia and San Francisco.

Payment processors and consumer finance businesses would argue that their business models seek to reduce ‘friction.’ Put another way, they are trying to make digital payments as easy as possible. MasterCard highlighted, for example, at the time of its Q4 2019 results in late January that the introduction of contactless technology has had a significant impact in displacing cash. Globally, over 30% of face-to-face transactions are now contactless (versus 22% at the end of 2018). As an indicator of where the market might head, MasterCard noted that in Australia – an advanced user of contactless - over 80% of transactions under AUD$100 (~US$65) are contactless. Encouraging progress, for sure, but the real challenge will be for businesses to embrace explicitly solutions for the unbanked.

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