Pundits have been predicting the death of cash for decades – a germ-laden artifact unnecessary in a digital age, according to some. But tell that to a Kenyan with her M-Pesa account who relies on the cash from her village agent to buy food for her family, or the 99.7 percent of Americans who, in the most developed economy in the world, use cash 8.5 times a month despite three credit cards each in their wallet. So is cash really being displaced by cards and digital payments?
Karen Webster and Jonathan Simpson-Dent, Chief Commercial Officer of Cardtronics, recently presented findings from the PYMNTS Global Cash Index on the use of cash in Western Europe. Simpson-Dent provided his insights into the idiosyncrasies of the most recent cash trends in the WU-15 and its growth in a region that is experiencing economic challenges, including the fallout from Brexit.
“People Still Love Cash”
Although the share of cash transaction volume may be declining, its growth is increasing as consumers spend more and populations swell. For example, in 2015, 2.1 trillion euros were used in cash in the WU-15, which accounts for 89 percent of the E.U.’s GDP including the U.K. This doesn’t imply that cash transactions are dying.
According to Simpson-Dent, the growing cash trend began post-Lehman and is consistent with the demand for ATMs. “During the last public holiday weekend in the U.K., cash withdrawals through ATMs were up 7 percent year on year.”
Anti-Cash Agendas
Cash use for the big players – France, Germany, Italy and Spain – is predicted to grow, especially in Italy. The decline found in Germany is surprising to Simpson-Dent, but then the cash share in Germany is extremely high to start with at 21 percent. Moreover, the German population was “up in arms” about the withdrawal of the 500 euro note, another sign that cash’s popularity is not waning.
Perhaps mistakenly, some states, such as Sweden and the Netherlands, have anti-cash agendas and aggressive bank closure programs, but a consumer backlash to the withdrawal of cash as a choice of payment has Simpson-Dent suggesting that some of those anti-cash markets may have bottomed out.
Economic Uncertainty Leads To A Flight To Cash
So, what are the reasons for the consistent trend in cash usage? Is there a correlation between cash-centric economies such as Spain and Portugal and economic uncertainty, for example?
Simpson-Dent pointed to unique consumer behavior in Southern Europe that is driving high cash percentages: a propensity for people to rely on cash during economic uncertainty. This dynamic cements the habitual use of cash, “Try telling someone in a café in Florence to pay for their cappuccino with a contactless card – it’s just never going to happen.”
Cash Use Over The Next Five Years
The data indicate that cash will continue to grow over the next five years along with the growth rate. The aggregate of these countries represents 89 percent of the GDP of the E.U. Cash is a staple, and “the notion of a negative interest rate in times of economic uncertainty is a difficult concept for many, even for financial experts, and this concern draws people back to cash,” said Simpson-Dent.
As the world becomes more digital and more complex, increasing cyber fraud is at the top of people’s minds. With cash, there is a direct link with the bank when a consumer withdraws cash at an ATM, and the likelihood of fraud occurring through an ATM transaction is extremely remote. So consumer habit, even in a digital age, is not going to change rapidly unless the consumer is convinced that new systems are secure.
Digital And Mobile Payments Highlight The Need For Access To Cash
According to the research on ATM usage in the U.K., over a third of people are broadening their payment repertoire and using contactless. For example, the underground now runs on tap-and-go technology but, despite this, people still use cash consistently. Simpson-Dent noted the absolute amount of the transactions. Digital transactions, particularly tap and go, are typically sub 10 pounds, but cash withdrawals average 50 to 60 pounds. So there is a change in the method, but cash is still popular and driven by lifestyle.
Cash Ubiquity And The Community
The ubiquity of a payment method is key to its adoption and is one problem facing mobile players. Consumers and merchants with the right devices must come together at the same time. The research found that if an ATM is not present on a main shopping street, 44 percent of ATM users will not visit that street anymore. So 11.7 million Brits are primarily going to a high street location to use an ATM and shop at the same time. Also, each time an individual withdraws money from that ATM, they reinvest around 40 pence of the pound back in that particular high street and straight back into the local economy. If those ATMs are withdrawn, the damage to those communities and local markets would be in the range of tens of billions of pounds – around a third of total high street spending. So ATM placement and their ubiquity are key as bank branches close.
ATMs: The Fabric Of Society
Consumer behavior around cash usage has changed in the last five years. Previously, if a person wanted cash, they would go to their bank branch ATM. This custom has now changed to fit daily routines. ATMs are strategically placed on the way to work, in grocery stores, wherever people might be and where it is convenient for them to grab cash or to make a deposit. Points of access to ATMs now tend to follow the footfall.
ATM technology has also changed with recognition of an individual’s favorite transaction, contactless ATM technology and on-screen questionnaires. On a “payday Friday” in the U.K., one of the busiest days of the month for ATMs, 2 million Brits are served by Cardtronics’ ATMs, so the potential to reach a large part of the U.K. population through these on-screen questionnaires is massive. One of the recent on-screen polls found overwhelming doubt among the U.K. population concerning the security with contactless tap and go.
According to Simpson-Dent, these polls are highly accurate. In the two weeks leading up to the Brexit decision on June 23, ATM surveys asked 40,000 people whether they wanted to be in or out of the E.U. Simpson-Dent said, “Fifty-two percent told us ‘out,’ which was exactly the vote on the day. So, the ATM has a broad range of uses, tremendous reach and is the ‘fabric of society.’”
The Future of ATMs
So what will the future ATM look like? Mobile ATM service delivered by drone perhaps? Well, not yet at least. Innovations being considered include loyalty to support retail partners in North America, in-store advertising for retailers, and machines that facilitate charitable donations and events. Eventually, theater and train tickets may be available.
Offering a sneak peek into the U.K. edition of the Global Cash Index and the fallout from Brexit, Simpson-Dent agreed that financial and political uncertainty causes many people to vacation at home, which could increase cash use in the short-term, and economic uncertainty could increase its use in the long term.
Overall, Simpson-Dent said, “We are seeing a hunger to keep using cash – it’s not an arm wrestle between digital contactless and cash – it’s about how people want to run their lives.”
Find the Global Cash Index here.
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