When it comes to cash in France one might be tempted to say « plus ça change, plus c'est la même chose ». Despite the much talked about onward march of digital payments, it seems la population de France still likes the familiarity and security of physical currency. But the way consumers access their cash in France is changing. Recent amendments to regulations have enabled “In-store Cashback” and the government is widely promoting the new approach to consumers. French merchants can now offer up to cash back 60€ to their customers, on the condition they make a card purchase for at least 1€.
This service, already available in many countries, such as USA, UK, Germany or Belgium, was established to meet the needs of both retailers and of consumers. Retailers are able to offer surplus cash directly to their customers who will, hopefully, come back again to spend it and for consumers it’s the added convenience of simply tacking cashback onto their transaction rather than making a specific trip to the bank branch or ATM. It’s a win all round when retailers reduce their cash volumes, and customers benefit from the convenience of getting cash while they are visiting the store.
In addition to branch closures, since 2014 Europe has seen a decline in the number of ATMs installed making it more difficult for consumers to access cash through more traditional channels and this is not a trend limited to Europe. If we look at the latest Global ATM Market Forecasts report published by London-based consultancy RBR a couple of months ago, this trend is expanding to other regions. RBR highlighted that 2018 would be the first year since ATMs were first introduced in 1967, that the global installed base would decrease. This decrease is primarily due to China and 4 other countries (Brazil, UK, Australia and Russia).
The report shows a drastic ATM market deceleration for the next 5 years which may indicate we have reached an inflection point. Only two years ago, RBR were forecasting a 27% increase in the installed base of ATMs over the 6 years from 2016 to 2021. Their latest data suggests this has transformed into 1% decrease between 2018 and 2023. Even though 2018 was the first year with a global decrease, the deceleration started in several regions some time ago. In Europe the downturn began in 2014 and more recently Asia has seen numbers falling since 2017 led by China.
Is the apparent end of growth in ATM deployment due to less cash?
The data tells us the answer to that is unequivocally, no. If we look at the regions where the decline has been happening for some time (EU, China etc.), we see the volume and value of cash in circulation has and will continue to grow. According to European Central Bank, between 2008 and 2017 the volume of euro banknotes in circulation grew by 5.9% per year and will continue growing throughout the next 6 years. All while the ATM installed base was declining. Similarly in China cash usage has continued to grow and, according to the Global Cash Index Report (June 2018), will continue to do so for the next 3 years despite adoption of new payment methods via QR codes such as WeChat Pay and Alipay.
Are we entering a new cash cycle? Is this the start of Cash 4.0?
So, if cash continues to grow while ATMs and branches decline, how will consumers access their cash? The potential answer may be retailers with cashback becoming the primary, or at least a much more important, access point for cash?
It’s not something completely new, indeed according to the ECB 7% of cash across the eurozone is already distributed via in-store cashback, but this 7% will only grow. Not just because of the decrease in ATMs and branches, it is also being driven by the implementation of the European Directive on Payment Services (PSD 2) which removes historic challenges for retailers to dispense cash to customers using bank cards. The implementation of this directive is extremely positive. It demonstrates that consumer opinion still matters, whereas many governments worldwide strive to impose digital payment instruments, thus restricting people’s freedom of choice.
During the next 5 years, retailers will deploy new ideas and solutions, such as cashback to customers to address their current imbalance between money received in the tills and money dispense through the change. The retail till can behave like a virtual ATM reducing the burden of frequent CIT collections or indeed staff time going to the bank to deposit takings. There are already examples of this implementations in supermarkets in Singapore and petrol stations in Germany.
Also, there is a clear industry opportunity and new startups are stepping up with solutions to tackle these pain points. Some examples include, soCash in Singapore - a simple mobile app that enables anyone who needs cash to locate the nearest retailer who has surplus cash. Free to use, and unbelievably convenient, their goal is to convert every shop and customer into a virtual cash distribution network. Similarly, in Spain WohCash launched last year with the same philosophy and similar business model.
These developments in different parts of the world suggest we are on the verge of a fundamental shift in the cash cycle. We are calling this Cash 4.0 and you can read more about this topic in our recent whitepaper.
But equally, we should not be fooled by the constant media coverage heralding the arrival of the cashless society. We’re running the risk identified by great French author Voltaire who said « Plus une bêtise est répétée, plus elle a l'apparence de la sagesse. » or,” the more often a stupidity is repeated, the more it gets the appearance of wisdom.”
