Cash is losing ground by leaps and bounds but are we living the end of ‘cash’? As alternative forms of payment, such as credit card, payment through applications or with the mobile phone, continue to grow, the number of people who continue to use the physical format is decreasing. According to data from the Bank of Spain in its latest , 35.9% of citizens recognized this as their most common means of payment, while 54% decided on cards.
As has happened in Spain, it is increasingly common for the credit card to take the lead and become the ‘king’ of transactions in the most digitized countries. However, although it is common to hear of the short-term end of cash, especially after the pandemic that forced many businesses to go digital, the reality is that ‘cash’ resists. According to the European Central Bank, 48% of all payments are made through banknotes. Cash in circulation in the United States reached an all-time high of $2.09 trillion, according to data from the Federal Reserve.
This the end is near or not, the reality is that there are countries in which the debate is about to end. Various economies are already testing formulas to give the last push to paper as currency value to move to a digital model. Whether it is because its citizens have decided to opt for other alternatives or that governments are undertaking plans to facilitate this transition, these are the cases in which the death of cash is on the way.
Sweden and Norway
Sweden is one of the great bulwarks against cash. Its central bank, the oldest in the world with more than 354 years behind it, has been leading a crusade against cash since the beginning of the last decade. From 2011 to 2020 the Swedes have reduced the use of cash from 39% to 9%. As the country itself explains on its website “Sweden is leading the way towards a cashless society” and adds that “cashless payments go hand in hand with the Swedish lifestyle”.
Despite everything, Sweden is at a point of no return and, although it is one step away from the complete elimination of paper money, the State is asking them to increase the use of physical money because businesses, banks and other organizations are accelerating this transition and refusing to accept cash. The problem is that although a good part of society is ready for a Sweden without cash, there are rural areas that resist its disappearance and, due to this, the Executive of the country wants the transition not to be so fast that This great change leaves part of its population behind.
To stop the end of cash, the Government has asked its citizens to keep cash at home. However, they do not give up on the ultimate goal of complete digitization and it is one of the leading countries in its digital currency (eKrona), which was one of the first in the world and which they hope will help this paradigm shift even more. Apart from this formula, the Swedes use mobile payments, highlighting the Swish, a payment method launched by six large Swedish banks and which is the absolute leader in the country. They are also at the forefront in other payment methods such as the Klarna app.
Apart from Sweden, its neighbor, Norway, is the other great example. According to Norges Bank, the country’s central bank, Norwegians only use notes or coins for 3-4% of their transactions. It is the country of the old continent with the least use of cash and this generates concerns within its own borders. Although they are only one step away from full digitization, they are currently taking their foot off the accelerator. The Norwegian Consumer Agency has been receiving complaints since the coronavirus about situations such as not being able to pay for the bus in cash or not being able to buy a coffee in Oslo. Specifically, the country’s Retirees Association has expressed its complaints and concern about the direction that the transition to a society without physical money entails for the less digitized population.
Netherlands
Despite the fact that the Nordic nations take the cake, the Netherlands is one of the fastest evolving countries on the entire European continent and, therefore, in the world. In 2005, payment in cash represented more than 52% of payments in the country, in 2011 it rose to 40% and in 2015 it was already 30%. Currently the figure is already below 24% and efforts to digitize payments have been redoubled after the arrival of covid.
According to the Dutch Association of Payments, the use of cards already exceeds 75% and their estimates are that the value of payments through this means will reach 196,300 million in 2024. In addition, payment is growing more and more clearly. through mobile with a 30% increase in transactions by this means last year.
However, in this case, the ones that are pushing the most for Dutch society to go digital are the banks. These are trying to quickly move customers to digital banking to save on structural costs such as branches or ATMs. Digital customers in this country already account for 89% while the European average stands at 60%. In addition, all the large national entities such as AMRO, ING and Rabobank agreed five years ago to collaborate to jointly maintain a minimum service with which to attend to those who want to use cash to reduce costs in the transition to a society without banknotes.
China
Curiously, paper money may see its end soon in the country where it was born. China has recently experienced a few years of accelerated change towards digitalization. It has gotten to the point where the People’s Bank of China is launching a round of fines against public and private organizations for refusing to accept cash payments. The institution in its latest statement on the matter commented that it undertook these sanctions to “protect the rights of citizens to use cash.”
The country’s companies are faced with a widespread use of new payment systems and, in particular the banking system, has to maintain a system to secure the cash of its clients, which is no longer profitable at a time of low income. For this reason, there has been a general disbandment of cash that is being settled with several entities completely disowning it. Many banks are trying to achieve the status of digital bank so as not to be subject to the obligation to provide this service.
One of the latest cases has been that of Zhongguancun Bank, the Beijing entity that has suspended all its cash services, including ATMs and window withdrawals since April this year. NewUp Bank also made this decision recently. The largest banks in the country are not yet close to joining this measure, but digitization is a fact and proof of this is that digital payment services such as WeChat Pay and Alipay (from Alibaba) have multiplied in recent years.
According to the latest survey by the People’s Bank of China, 66% of payments are made via mobile while cash represented only 23%. Especially in the big cities of the country, paying using a ticket is really complicated and everything is done through QR codes. Paying using a card is also somewhat exotic in the eastern country, where only 7% of transactions are made through this means.
For its part, the country is also advancing in another digitized payment method such as the digital yuan, which still does not have great popular support. The digital currency created by the country’s central bank accumulates 13.68 billion dollars in transactions, still far from the goals set by the institution.
South Korea
Seoul is a city where cash is almost a thing of the past. The Asian country is immersed in a roadmap set by its Government to digitize its payments in a monetary experiment that began in 2016 and that can set the course for other countries. Cash in circulation in the country represents only 40% of the total, a historical minimum. In addition, cash represented only 17% of the country’s total transactions.
Since 2017, the Government and the country’s central bank have been offering citizens cards and alternative payment systems for small payments to encourage transitions. In fact, Korea is the fastest growing ‘independence’ of cash in Asia.’ As in China, they maintain this change through a strong presence of mobile payment companies and a digital currency experiment called S-Coin.
Canada and Australia
Apart from Europe or Asia, in America there is a great benchmark of progress towards the end of cash: Canada. The country led by Justin Trudeau is on this route, in fact Visa defends that Canadians “are ready to stop using cash” because the country has “one of the highest penetration of credit card payments in the world (70%)”.
Although cash in circulation in Canada remains high at an average of $70 per person, cash transactions have fallen to just 17% of the total in 2021. Meanwhile, among credit, debit and prepaid cards they add up to a total of 60% of all operations. Electronic payments account for 12%.
Australia is also another great example. According to the latest report from The Global Payments, the Oceanian country will experience an even faster transition until cash payments account for just 2% of all transactions in 2025. The latest RBA Consumer Payments Survey Australia Reserve) June, showed that the proportion of in-person cash payments made in Australia fell from around 75% in 2007 to around 30% in 2019.
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