Cash is here to stay - cards are the true dinosaurs

Thursday, January 23, 2020

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by Finextra

Far from sounding the death knell for cash, the rise of digital payments will instead lead to the extinction of the plastic card, according to Deutsche Bank research on the future of payments.

The paper takes a contrarian view from the popular assumption that the days of notes and coins are numbered, instead forecasting that cash will be around for decades to come due to a deep-rooted trust in its value during uncertain times.

"When people discuss the future of payments they tend to predict the end of cash," the study states. "Our view is different. Not only do we think cash will be around for a long time, we see the transition to digital payments as having the potential to do no less than rebalance global economic power."

Instead, the coming decade will see digital payments grow at light speed, leading to "the extinction of the plastic card", as mobile payments come to comprise two-fifths of in-store purchases in the US, quadruple the current level.

Similar growth is expected in other developed countries, however, different countries will see different levels of shrinkage in cash and plastic cards. In emerging markets, the effect could arrive even sooner, where many customers are transitioning directly from cash to mobile payments without ever owning a plastic card.

For a glimpse into the future, the analysts look to China, where the value of online payments is equivalent to three-quarters of GDP, almost double the proportion in 2012. Today, just under half of in-store purchases in China are made via a digital wallet, way above the levels in developed markets.

Deutsche Bank is also bullish about the potential for private digital currencies, pointing out that if the growth in blockchain wallet users continues to mirror that of internet users, then by the end of the decade, they will number 200 million, quadruple the current level.

"This will be encouraged by governments, banks, corporates, and payment providers who all stand to benefit from the digitalisation of payments," the paper notes. "And when countries and companies eventually look back at the way they transitioned to digital payments, it may become very apparent how they achieved their standing in the world economy."

View the original article here.

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