Since the ancient Greeks began minting the first coins over 2,500 years ago, cash has remained a staple of doing business all over the world. However, the time of notes and coins may finally be drawing to an end, as consumers, retailers and financial services companies increasingly embrace digital money alternatives.
Ten years ago, six in every 10 transactions involved cash; 10 years from now, that figure is expected to be only around one in 10. Today, more than five million people in the UK are already leading a practically cashless lifestyle, according to the finance industry body UK Finance.
In 2017, card payments overtook cash payments for the first time, and debit cards now account for the bulk of all card payments. As well as the increased convenience and speed that card payments offer compared to cash, the switch to card payments has been driven partly by the sharp rise in the adoption of contactless technology, which allows consumers to pay for goods and services under £30 by tapping their card against a reader – and without needing to enter a PIN.
At the same time as consumers are losing their appetite for cash, there are fewer businesses – particularly small businesses – willing to accept notes and coins. Not only does accepting contactless payments mean retailers can get more customers through the tills in a shorter time, it also helps with accounting and means fewer trips to the bank, all of which bring associated costs for the business.
Accepting digital, rather than physical payments, also helps businesses reduce their losses, including cash going missing due to light-fingered or inattentive staff, or customers passing counterfeit currency.
By 2028, UK Payments estimate that over one-third of all payments will be contactless. However, cards are not the only contactless game in town: mobile contactless payments are also growing in use.
Payments made by taping a mobile phone against a reader to make a payment, are gaining greater acceptance thanks to Apple and Google launching their respective wallet apps, as well as the technology needed to make such payments spreading to more, and lower-end, handsets.
As the cost the NFC hardware that underpins contactless payments continues to fall, the technology is likely to spread to greater numbers of non-mobile devices (it's already available in jewellery, for example) which should ultimately increase transaction volumes.
It's not just mobile wallets that are driving the move away from cash: digital wallets are also providing an alternative for those who don't want to use hard currency. Digital wallets allow users to gather all their payment methods into a single wallet, and are proving handy for making cross border payments.
Digital payments, too, offer an easy way to accept and send money internationally, allowing users to transfer money to any number businesses and individuals in tens of countries, in the currency that suits them.
As the adoption of digital wallet and digital payment solutions continues to grow, financial institutions are continuing to evolve their offerings: Bank of America, for example, recently filed a patent for a wallet that would accommodate cryptocurrency as well as conventional currencies. As financial services companies increasingly offer innovative new forms of wallet, expect to see uptake rise both among enterprises and consumers.
Cryptocurrencies may once have been considered a relative outsider by the traditional financial services world, but the tide appears to be turning. Transaction volumes continue to follow an upward curve and the upcoming entry of companies such as Facebook and even Walmart into the cryptocurrency market looks set to increase adoption. While cryptocurrencies may still be more volatile than cash, growing regulatory scrutiny and big-name backers are likely to entice more businesses to accept them, which in turn is likely to spur greater adoption among their customers.
For those attached to hard cash, there may be some good news. Cash may be in decline, but it's not dead yet: cash will remain a dominant, though not the dominant, payment method for a number of years to come.
Cash has its advantages: it's free to use, it never experiences an outage, it's not hackable, and it's still available to those who can't, or don't want to, use smartphones or other digital technology. By 2028, it's predicted cash will still account for around nine per cent of all payments – around 3.8 billion transactions. Cash's popularity may be waning, but it won't disappear entirely for many years to come.