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  • Thierry Spanjaard

Cash displacement may not happen

Many in the payment industry have set displacing cash as their ultimate goal. A payment scheme even made it its motto in the 1990s!

There is always more research studies that tend to get into the cash displacement direction. For instance, eMarketer established that the US mobile payment market increased 41% from US$ 69.8 billion (EUR 61.7 billion) in 2018 to US$ 98.8 billion (EUR 87.4 billion) in 2019. Also, according to their research, 64 million individuals in the US, or 29.0% of smartphone owners, made a proximity mobile payment in 2019. Some 69.2 million made a P2P transfer via a mobile phone, which translates to roughly a third of smartphone users.

Also, the FIS 2020 Global Payments Report anticipates that, in the United States, digital wallets are being used more often inside retail stores and will reach 10% by 2023 and US consumers spent US$ 944 billion (EUR 835 billion) in 2019 online and US$ 9.4 trillion (EUR 8.3 trillion) inside stores.

The evolution to mobile payment is partly due to the generation change: the increase in the digital native – those under 40 years of age who have grown up with technology – are more trusting of technology and using their smartphones in all aspects of their daily lives, says the Payments Journal.

Northern Europe is ahead of the rest of the world for everything that relates to citizen rights and technology. Up to a few months ago, Sweden was expected to become the world's first cashless society by March 2023, when cash would no longer be accepted as a means of payment. Already, just SEK 56.6 billion (EUR 5.3 billion) in cash was in circulation in Sweden at the start of 2018, which at just 1.2% of GDP, is the lowest level in the world, comparing to more than 10% for the Eurozone. Consequently, the number ATMs and cash deposit points have been decreasing over the last few years.

However, a new law came into force in January 2020, to protect rights of the elderly, people living in remote places, the mentally disabled, and … tourists. The new law aims at making sure it will be possible to keep on paying by cash even in rural Sweden. Now, banks will have to offer cash services across the country. This will lead to the reappearance of more ATMs and cash deposit points, especially in the countryside. So far, no law makes it mandatory to increase cash acceptance in retail although the Swedish Civil Contingencies Agency suggests that supermarkets, pharmacies, petrol stations and health services, all of which would be essential in a crisis, should be required to accept cash.

While the Swedish administration anticipated a crisis that would block the use of technologically advanced payment means, it did not anticipate the current coronavirus crisis that makes cash less attractive than electronic payments. The World Health Organization (WHO) is now advising people to not use paper tender and to use as many cashless options as possible to help contain the spread of the coronavirus. “We know that money changes hands frequently and can pick up all sorts of bacteria and viruses,” a WHO spokesman said. “We would advise people to wash their hands after handling banknotes and avoid touching their face. When possible, it would also be advisable to use contactless payments to reduce the risk of transmission.” However, "So far there is no evidence of the coronavirus disease having been spread via Euro banknotes. (…) The probability of contagion with a virus via a banknote is very low in comparison with other surfaces," a spokesperson from the European Central Bank said.

So, what’s safer and best for society? Cash or no cash?

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