Despite the attempts to limit its use, cash today remains the preferred payment instrument by consumers all over the world.
In a context of major technological, economic, social and political changes, payments are subject to radical transformations concerning all their aspects.
The World Cash Report 2018¹ by 4GS highlights how cash circulation has developed in different continents: in Africa it has grown by 39,8% in the 2011-2016 period, while Asia experienced a growth of 45,6%. We have evidence of the same trend in North America (+6,13% in 2016), South America (+61,9%) and Oceania as well (with an average YoY of +6,5%).
Even in Europe, in 2018 cash accounted for 79% of transactions and 54% of the total value of payments². Cash in circulation in the continent increased by an average of 39.5% in the 2011-2016 period, with the exception of Sweden, which recorded a decrease of 34.9%.
Countries in Northern Europe have been investing for many years in achieving a cashless society, with Sweden leading the way.
However, the Central Bank of Sweden has underlined the importance of the freedom of choice also regarding payments,³ and the same issue has been perceived in Norway.
Moving to Central Europe, according to ECB⁴, in 2016 80% of the volume of transactions in Germany were in cash (54% of the value of all payments). Austria’s numbers are similar to the German ones (85% and 67% respectively) while in France cash payments account for 79% of the total volume and 54% of the value, respectively.
Also in Switzerland, cash represents the most widely used mean of payment by households⁵ (70% of payments, 45% of total spending).
On the other hand, in South Europe we observe a higher use of cash compared to the Northern countries⁶, with Malta at the top of the rankings (92% of transactions in cash, 74% of the value), followed by Greece and Cyprus, both at 88% (75% and 72% of the value), Spain with 87% (68% of the value), Italy with 86% (58% of the value) and Portugal at 81% (52% of the value).
Pros and cons of cash use
The reasons for migrating to alternative electronic payment systems concern economic and social aspects.
A recent Mastercard⁷ whitepaper illustrates that the cost per year of cash in the United States is 200 billion dollars and large-scale use of cash worldwide accounts for between roughly 3.2% and 4.8% of global GDP.
Furthermore, Visa in its Cashless Cities report⁸ identified five types of costs of cash, such as transport, security and bank charges; managing costs; robberies, shortages and counterfeiting; expenses for payments to suppliers; and the opportunity cost of cash.
Roubini ThoughtLab8 estimated the time needed for an individual per year to complete transactions involving cash and cheques:
- 4 hours for visits to an ATM
- 3 hours for visits to a cheque cashing business
- 3 hours for visits to a bank branch
- 12 hours for various types of cash payments
- 3 hours to fill in cheques and manage the related activities.
If we consider the hours spent on these actions as a whole and we quantify their costs we can easily identify how much they contribute to a company’s budget.
In spite of the benefits of a cashless society, the majority of transactions are still carried out in cash.
According to the latest Global Findex database⁹ available (2017), in many developing countries the adult population that receives payments for micro or small company activities, use cash primarily.
On the other hand, in the Western world, particularly in Europe, the reference rates have been close to zero or actually negative for some time and any cash paid into a current account would not be remunerated, unlike other periods in history.
Another reason for the choice of cash is often just habit, as it is something that has always worked and is reassuring at the same time. Ease of use and no (apparent) cost for use make it an easy-to-use instrument for anyone.
Digitizing cash
There is no shortage of initiatives to reduce cash. A contribution to the creation of useful instruments for this purpose has come from technological innovation, which has made it possible to develop hybrid, digital and “physical” platforms, able to manage the cash handling process at points-of-sale with uninterrupted processes that require increasingly less intervention from the merchant.
We refer, more specifically, to smart safes or “Cashin” machines.
“Cashin” machines are a new method of managing cash and represent the most innovative solution on the market today.
The service allows the merchant to manage and control cash completely securely through the installation of a smart safe linked to the service provider’s systems, which, thanks to an on-line dashboard, provides the ability to check all information relating to cash paid in real time.
Among the first companies to offer advanced solutions like those, Axerve is now able to meet the needs of merchants looking for a unique and integrated solution for managing all collections, in any form and on all sale channels.
Do you want to read more? Download our free whitepaper.
1 World Cash Report 2018 | G4S
2 World Payment Report 2019 | Capgemini
3 Sweden’s Cashless Experiment: Is It Too Much Too Fast? | ECB
4 The use of cash by households in the euro area | ECB
5 Sondaggio sui mezzi di pagamento 2017 | Swiss National Bank
6 Trends and developments in the use of euro cash over the past ten years | ECB
7 Cashing Out: Economic Growth through Payment Digitisation | Mastercard
8 Cashless Cities – Realizing the Benefits of Digital Payments | Roubini ThoughtLab e VISA
9 Global Findex database 2017 | Global Findex
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This article was also published in The Retailer, our quarterly online magazine providing thought-leading insights from BRC experts and Associate Members.