Article

Missing the question: Do we want to go cashless?

The persistence of cash globally should not be underestimated.

October 16, 2015

by Brendan Doyle, CEO, Cash Management Solutions

Media attention on the prospect of a cashless society has intensified, with the card networks leading the propaganda charge. In its latest report, MasterCard Advisors has measured the progress towards a cashless society in more than 30 economies across the globe.

Here we analyze the missing question: Do we even want to go cashless?

A huge opportunity exists for card networks in a cashless world. Since the introduction of credit and debit cards, card networks have taken a huge slice of the payments pie.

While traditionally, large-value consumer transactions comprised the majority of card use, their popularity and issuance has since spiraled, taking a cross-section of both payment values and volumes in most major economies.

The world's top 10 economies

Extracting the top 10 economies from the report shows a differing picture of progress for "cashlessness" around the world.

In these economies, cash transactions range from 41 percent (France) to 98 percent (India) of all consumer transactions (chart, right). Erosion of such significant shares would be implausible in any of the economies with any significant speed.

If this is the case in the top 10 economies, then the possibility of a cashless world becomes close to impossible as 85 percent of global consumer transactions occur in cash.

The persistence of cash globally should not be underestimated.

Prerequisites for a cashless society

As for whether an economy is ready to go cashless, MasterCard Advisors outlines four factors that they believe are required for a cashless society, and which it used to measure readiness to go cash-free.

Based on these factors, half of the top 10 economies do not generate a readiness score of 50 or more out of 100 (chart, right).

This alone, coupled with substantial cash use in these economies, indicates that we might be a long way from cashlessness.

Is cash the problem?

The MasterCard Advisors report suggests that cash is a problem when it states:

Even though the world's population has access to multiple payment options, cash still accounts for 85 percent of all consumer transactions throughout the world.

Is this really a problem? If so, it won't be resolved by MasterCard Advisors' proposed solution:

MasterCard Advisors created a global study that showcases cash use and the conditions that lead toward cashlessness.

If the dominance of cash as a payment instrument is seen as a problem, then the solution shouldn't be to go completely cashless, as then the same issue exists.

Lack of desire

A lack of choice and limitations imposed on consumers and businesses will occur regardless of whether that choice is restricted to cash or card.

An economy might be primed for cashlessness based on MasterCard Advisors' four factors. However, the success of it depends on an economy's appetite for it.

While this might be included within "macroeconomic and cultural factors," the extent of pushback might not have been considered — especially in the top 10 economies, many of which have aging populations with a greater preference for cash.

The bottom line

Economies across the world are seeing great change, which makes them more prepared for a cashless society than ever. However, the success of this depends on society itself.

Do the people want a cashless economy in which their payment choice is restricted? This might be a roadblock that MasterCard Advisors' journey to cashlessness hasn't considered. 

photo istock