Is cash still king? In the world of global payments, not so much anymore. Cash usage is at an all-time low giving way to the transformation to card/digital. According to the latest Nilson report, cash made up less than 20% of US payment volume in 2019 (by total reportable $ value), and is forecasted to fall to less than 15% by 2023. The demise of cash is one of the trends that has been in place for decades but has been accelerated by circumstances arising from COVID-19. The ability for card payments to now be administered in a contactless manner via ‘tap-to-pay’ has been a useful tool for consumers that want to avoid contact at the checkout aisle. Pair this with most consumer spending shifting to Ecommerce channels during quarantine and the demise of cash has been expedited.
The scale of the large pure-play payment networks, Visa and Mastercard, is staggering. Visa alone processes over 160 billion transactions per year totaling trillions of dollars in network spend. It may seem trivial to us as consumers to just swipe at checkout or place an online order using our debit/credit card but the logistics of what goes on behind the scenes is astonishing. The ability to instantly connect millions of cardholders to thousands of banks and merchants in 200+ countries is almost an impossible network to replicate. This decreased payment friction has also allowed cards to be used for smaller purchases that were once dominated by cash. Consumers in the past were hesitant to use their credit/debit cards on small ticket purchases but with the increased convenience of today's payment mediums that is no longer the case.
Convenience and speed has also opened up a whole new market for the digital payment networks. For many years non-cash payments were primarily a business-to-consumer dynamic. Today fintech companies such as Venmo and Cashapp have moved digital payments into the peer-to-peer market. Many consumers no longer even carry cash in their wallet.
The trend runway remains long as other countries, particularly emerging markets, are starting to follow the same path as the US. Although cash isn't disappearing for good anytime soon, we think the rise of non-cash payments is one of the COVID-19 trends that will be here to stay even after the virus is behind us.
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