Article

Commentary: Prospects for cash

ATMIA's Mike Lee weighs in on why the instinctive human reliance on cash shows no signs of abating.

March 6, 2012 by Mike Lee — CEO of the ATM Industry Association, ATM Industry Association

The following is an excerpt from "ATM Future Trends Report 2012," published by ATMmarketplace.com and ATMIA.

My parents used to comment on the need for an additional pair of eyes in the back of their heads. Does that sound familiar to you? I guess four energetic children were very difficult, if not impossible, to watch and monitor at all times of the day and night. Futurists, like parents, need an extra pair of eyes in the back of their heads. That is because they look backward and forward at the same time.

Futurists certainly need to look forward in time to make forecasts and write scenarios describing plausible and alternative landscapes of the future. Yet they also look backward to understand the trends, underlying patterns and key drivers of change which we can identify in a study of past social development. There is no such thing as foresight in a vacuum. Foresight integrates this hindsight, or knowledge of the past, with insight, which can be gained through scanning the multidimensional environment in which society (and nature) operates. A futurist takes this hindsight and insight and then uses the imagination to project a current understanding of reality into a time period located somewhere in the future, whether five or 500 years hence.

The future is no airy-fairy domain: science takes it seriously because most of the laws of nature tell us that behavior, which is understood, can and should be predicted because it will still be subject to those laws and recurring patterns which scientists already have identified and documented. All things, from planets to people, evolve and change through time, and we know a lot about these processes of evolution and change.

When we look at the future of global cash, we need that extra pair of eyes my parents longed to possess to give them greater power to keep track of their highly active children. The story of cash is a very old and rich one, going back to the invention of coins in the earliest civilizations several centuries B.C. The story continues into our own time, which has seen a remarkable global bounce-back effect since the credit crisis of 2008 turned our economies, and the global economy, upside down. This bounce-back has given rise to positive figures for the growth of cash, and the ATM industry which distributes that cash, on a truly monumental scale.

It is important to contextualize the strong current global demand for cash by looking at how challenged the global economy really is today, with rising prices, growing unemployment, social unrest and the eurozone crisis. Christine Lagarde, head of the International Monetary Fund, recently stated that the world runs the risk of a downward spiral of uncertainty, with the global economy at risk of being plunged into what she termed a "lost decade." This makes the good performance of cash in circulation and the growth rate of global ATMs even more impressive.

Take the latest press release from London-based Retail Banking Research, for example, which said, "The total number of ATM cash withdrawals worldwide is expected to increase at an average of eight percent per year between 2010 and 2016, compared to an average of six percent per year in the number of [ATM] installations."

And again: "Strong demand for ATM cash withdrawals will remain one of the major drivers of ATM growth in the next few years. RBR expects the global installed base of ATMs to increase by 42 percent, to 3.2 million terminals by 2016."

How many countries in today's economic slowdown would not die for a GDP rate of six percent? And here we have the leading retail-banking research institute forecasting a six percent growth rate in ATM installations and an even higher eight percent growth rate for cash withdrawals — figures well above current global economic growth rates. In 2009, there were a total of 62 billion ATM cash withdrawals worldwide, and that number is forecast to rise to 94 billion cash withdrawals in 2015. This strong growth rate for cash will push the number of ATMs well beyond the three million milestone within five years.

Euromonitor International reported in May that $14.413 trillion in consumer payments was made with cash worldwide in 2010, compared to consumer payment card transaction value, excluding commercial payments, at $9.582 trillion. It is no wonder, given these and similar figures, that the second edition of "Money: A History" said, "Despite the rise of plastic cards and electronic money transfers, cash is still the most important kind of money in the world."

The current eurozone crisis, dominating the news at the moment, has not stopped euro cash in circulation's continued growth. The European Central Bank, in a presentation on the use of euro banknotes in November, noted that the value of cash in circulation at the end of Q3 2011 reached EUR 857 billion and increased 5.4 percent compared to the end of Q3 2010. The way in which cash in demand is growing at rates higher than economic growth is a very pleasing indicator for the cash and ATM sectors. A similar increase can be seen in the United States during 2011, compared to recent years.

A visit to the websites of central banks in virtually every country of the world will reveal similar healthy year-on-year growth in banknotes in circulation, in both developing and developed countries. It is the universal popularity of cash which lies behind its success as a technology and behind this continued global demand. This instinctive human reliance on cash shows no signs of abating.

Mike Lee is CEO of the ATM Industry Association, a nonprofit trade association with more than 1,100 members in about 50 countries. He also is founder of the Global ATM Security Alliance, and is a qualified futurist with an MPhil degree in Futures Studies (cum laude) from the University of Stellenbosch business school in Cape Town.