Cash will die in 10 years, says The Co-op…but is it right?

Contactless card being used at payment terminal

“Cash has too many benefits to disappear,” said YourCash CEO, Jenny Campbell.

 

Cash is not likely to die out any time soon,” said the Bank of England.

 

Cash is still the most popular method of payment in the US, said Cardtronics.

 

Cash will die within a decade, said The Co-Op.

 

Wait, what?

A new report by the supermarket chain, which has 2,800 stores and almost 12,000 contactless paypoints, has found that…almost two-thirds (65%) of all transactions are paid for with cash.

That doesn’t seem to make a convincing case for the death of cash…

But, when you think about it, makes perfect sense. Of course The Co-op’s report wasn’t going to announce ‘Cash will die tomorrow. Go forth and charge your mobiles’. That’s not how things work. Last year, a reader commented on an article about the future of cash, saying that new payment methods are incremental and do not simply eradicate previous methods using the example of payment cards not eliminating cash by any stretch of imagination – concluding that the end of cash is far from near.

 

Can I write you a cheque?

Very reasonable thinking- especially in an industry that gets carried away about most things new – and following the logic further, you come to the following conclusion: if innovation is incremental, at a certain point those increments will build up and push older methods out. Cards came and cash is still here…but how many people still write cheques?

This ties into one of the biggest takeaways from Money20/20 Europe and one of the least revolutionary ones: “If you build something easy to use, people will adopt it,” said MasterCard’s Ann Cairns in a keynote speech. Amazon’s Patrick Gauthier stressed the importance of taking away “the burden of payment”.

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And is cash more convenient than contactless or mobile?

Here is where things get murky. “The new technology is perfect for convenience stores as shoppers buy fewer items and speed is important to them,” said Cheryl Marshall, Retail Chief Information officer at The Co-op Food. And it’s true, recent studies showed that people’s shopping trips have become fragmented into more frequent, lower-value trips – perfect for contactless purchases. This has been supported by research from Barclaycard.

However, according to The Co-op, despite the spending limit being raised to £30 on contactless payments, shoppers still choose to use the chip and pin service, rather than tapping the contactless pad, for transactions over £10. Trust was the main barrier when making a more expensive purchase, and the ease of contactless loses its appeal as soon as the spend gets in to double figures in consumers’ minds.

The average basket spend for contactless in convenience stores is £8.66 compared with an average of £18.16 when using chip and pin. Similarly, the average spend on customers buying fuel using contactless is £9.38, compared with £23.28 for a chip and pin purchase, despite the £30 limit.

“The demise of cash has been predicted for a long time but it remains the currency option the general public turns to for confidence, convenience and security,” a spokesperson for the Royal Mint is quotes as saying in The Co-op research.

So while contactless and card is undoubtedly is more convenient than cash, unsurprisingly, the physical nature of cash is still the big draw for consumers. They feel in control of the cash because they can feel it.

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Convenience will always come out on top

But as ACI Worldwide’s Mark Ranta told PaymentEye, “Convenience will always come out on top.” That is precisely why Co-op’s research highlighted that contactless use has trebled in a year as more bank cards with the technology come into use and following the launch of mobile payments such as Apple Pay. Convenience will always come out on top.

By 2025, 65% of all transactions are predicted to be by mobile phone. That number is familiar because that’s exactly how many respondents currently said cash is their preferred method of paying. In ten years, mobile phones, will become the preferred payment method, with bank cards and cash becoming a thing of the past like cheque books.

The figures from The Co-op show contactless has topped almost 11m transactions in a month, up 1.4 million (15%) on the previous period.

A huge part of convenience is knowing where you can use contactless. Using London as an example, contactless technology is popular because it taps into the things we use the most: public transit, supermarkets, soon Black Cabs, let’s not forget Uber and its huge push to get people paying on mobile.

Once this sort of infrastructure expands further and further out from the capital and concerted efforts are made to address customers’ concerns about using digital payments, cash usage start to drop.

Ultimately, let’s not forget that last year was the year that digital payments overtook cash transactions for the first time. The increments are building up…

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