E-payments are to cash what Robin is to Batman

8 August 2013

United Kingdom

Paul Race



I am in the cash industry, but I am still not blind to the reality that societies, governments, and central banks worldwide are doing their utmost to reduce the number and value of cash payments.

Cashless is being embraced with aplomb and there's no reason why it shouldn't be. It certainly provides a number of advantages in terms of production, recycling, holding, handling, and transportation costs. But will this lead to the ultimate demise of cash?

Not according to the latest figures from the U.K. Payments Council: U.K. consumers and businesses made 20.8 billion cash payments in 2012, compared with 20.6 billion in 2011.

In my view the reason for this increase is that e-payments are complementary to, not competing with, cash. In fact, e-payments are to cash what Robin is to Batman — a very handy accomplice. They're not the Joker, Penguin, or Riddler, as sometimes portrayed.

E-payments are there to make up for the shortcomings of cash; yet, as we have seen recently, man cannot survive on e-payments alone.

For example: The 2012 London Olympics showed that cashless technologies have their teething problems; numerous surveys have concluded that consumers are wary about contactless adoption; and when all else failed during Hurricane Sandy it was cash that came to the rescue.

On the basis of these three examples, it's clear that cash still has a role to play in the way in which we choose to pay, and consumers are recognizing this in their continued use of cash.

While there are some early adopter societies that may go fully cashless in a matter of years, such as Denmark, Norway and Sweden, they are the exception rather than the rule.

The fact that Scandinavian nations are world leaders in cashless in unsurprising — they have the right preconditions for widespread adoption: They are wealthy, hyper-connected and sparsely populated. Can the same be said for the rest of the world? Definitely not, and herein lies the main reason I think that the much-mooted death of cash is a gross exaggeration.

There is no escaping the fact that cash remains the only payment instrument for billions globally. There is much talk about cashless as the big opportunity to finally bank the unbanked, but a number of practicalities inevitably will get in the way. Even though efforts to reduce cash in cities such as Lagos, Nigeria, have been moderately successful, turning whole countries cashless is a bigger nut to crack.

We also need to start thinking about the end user more when having a cashless debate. My role at Glory Global Solutions takes me to a lot of places around the world, and I always smile to myself when people suggest going cashless in places such as rural Indian villages, the slums of South and Central America, the Indonesian provinces, and so on.

A mobile phone in these regions can cost roughly two to three months' worth of food for a family. In relative terms, telecoms and internet connectivity are 50 percent to 75 percent more expensive than in America.

Therefore, the infrastructure surrounding cashless can be quite a serious barrier to adoption and a contributor to financial exclusion, something the European Foundation for Financial Inclusion has picked up on in its latest report.

This is not to say that cashless forms of payment won't grow rapidly — I just don't think it will happen on a global basis to the point where cash is extinct anytime soon.

It's definitely true that there has been a surge in e-payments, particularly in emerging markets, but what tends to get neglected when we are looking at these statistics is what exactly they are being used for.

One of the main reasons that e-payments have been adopted is that they are preferred choice of migrant workers wiring money back home to their families. Most other daily expenses are paid in cash; hence they are complementing each other and not competing.

Finally, it must be said that the future is coming and there's no doubt about that. The use of cash will spark wholesale changes in the world of banking and beyond.

However, just like a Batman villain, the Achilles' heel of cashless may lie in its ambitious plan to take over the world, before the world is ready.