Cash Is Going Out of Style September 2018
Want more free featured content?
Subscribe to Insights in Brief
Retailers are attempting to design checkout processes more efficiently. In many retail chains, self-checkout stations enable consumers to scan and pay for their items themselves; although such stations still accept cash payments, they eliminate transactional friction, which is a major part of retailers' efforts to reduce costs. Other retailers are attempting to hide the transactional aspect of the shopping experience and even eliminate cashiers to highlight service aspects of the shopping experience and reduce operating costs. The July 2016 Pattern, Hiding Cash Registers, discusses how luxury-fashion-store chain Rebecca Minkoff (New York, New York) is handling purchases via mobile devices that salespeople carry and digital interfaces in fitting rooms that enable customers to make purchases with PayPal. Removing physical cash from traditional financial transactions has become the goal of many companies. Prominently, Amazon.com (Seattle, Washington) recently opened its checkout-free Amazon Go physical grocery store to the public, touting that it enables shoppers to grab items and go without waiting in lines or paying at checkout stations. And computer-vision company AiFi (Palo Alto, California) plans to offer a technology package that transforms existing stores into checkout-free stores that work much like Amazon Go does. In stores that use AiFi's scalable system, customers tap a card or smartphone as they enter, cameras track the items customers place into their basket or shopping cart, and the system automatically charges customer accounts when the customers leave. Even some small retailers and chains provide anecdotal evidence of a move toward a cashless future. For example, salad-restaurant chain Sweetgreen (Culver City, California) and Park Cafe & Coffee Bar (Baltimore, Maryland) stopped accepting cash. The owners of these businesses cite several reasons for going cashless: Eliminating cash promotes a more hygienic environment and accelerates transaction speed, and having no cash in stores eliminates incentives for robbers and keeps employees safe.
Even allowances that parents give their children are not safe from becoming cashless. Current (New York, New York) has developed an app-controlled debit card for children that enables parents to ensure appropriate spending. Metropolitan Commercial Bank (Metropolitan Bank Holding Corp.; New York, New York) issues the card according to a license from Visa (Foster City, California), and parents use the Current app to manage how their children can use it. For example, parents can set restrictions that prevent their children from using the card at specific stores and types of businesses such as airlines, bars, casinos, and hotels. Perhaps surprisingly, financial institutions are also toying with the idea of removing cash from their offers to customers. For example, a Deutsche Bank (Frankfurt, Germany) branch in Berlin, Germany, is cashless but features a café, a coworking space, and a short-term babysitting service. Stephan Dietzel, a manager at Deutsche Bank, explains that although the bank is cashless and offers unconventional features, clients can still open bank accounts, secure mortgages, and build retirement plans. Looking into the future, Dietzel highlights that cash is unlikely to have the same meaning in five to ten years. Recent developments in the United Kingdom corroborate Dietzel's claim. Consumers in the United Kingdom are using cash in far fewer transactions today than they did just a decade ago. According to UK Finance (London, England)—the trade association of the UK finance sector—consumers used cash to make 40% of all payments in the United Kingdom in 2016, which is a significant drop from 62% in 2006. Also in 2016, UK ATM use hit its lowest level since 2010, and people in the United Kingdom used ATMs to withdraw £6 billion ($8.2 billion) less cash in 2016 than they did in 2015. An increasing percentage of people are choosing to make payments with credit and debit cards or through mobile-payment platforms instead of with cash.
Many countries are also advancing plans to introduce or promote the use of digital money. For instance, the People's Bank of China (Beijing, China) has been working on a plan to enact a cashless monetary system since 2016. China is seeking to create a digital currency that will integrate smoothly with existing services and financial-management systems, enabling people to begin using it very easily. The launch of this state-run digital currency will also give the government of China access to information about all the economic activities of Chinese citizens. Similarly, Sweden is on the way to becoming a cashless society. Many bank branches in Sweden no longer have cash and do not accept cash deposits. And according to a study by Visa, Swedish consumers use bank cards three times more often than does the average European consumer. In October 2015, KTH Royal Institute of Technology (Stockholm, Sweden) researcher Niklas Arvidsson argued, "Cash is still an important means of payment in many countries' markets, but that no longer applies here in Sweden" ("Sweden Uses Cryptocurrency Technology to Become Cashless Pioneer," NewsBTC, 16 October 2017; online). Other regions have environments different from Sweden's but are developing in a similar direction. For example, because of a lack of bank branches in many parts of Africa, Vodafone Group (London, England) and Safaricom's (Nairobi, Kenya) M-Pesa mobile-money service, which enables users in Kenya and several other countries to use text messages to transfer money, has become tremendously successful. But Somaliland—an autonomous region of Somalia—has a very unique history with cashless transactions. Somaliland's currency, the shilling, is inconvenient to use and lacks stability, so Somalilanders have taken to using two private e-commerce services as an alternative: Telesom Company's (Hargeisa, Somaliland) ZAAD Services (www.zaad.net) and Somtel's (Dahabshiil; Dubai, United Arab Emirates) e-Dahab (http://edahabonline.com).
Cash remains an important element of commercial transactions, but it is much less important today than it was only a decade ago. Consumers, businesses, and entire countries are moving away from the use of cash and toward the use of electronic-payment options. This switch will increase the efficiencies of transactions, create new opportunities, and require a rethinking of procedures that involve cash.