Cash is dead?
Keep a lid on the casket talk.
In the latest webinar series, PYMNTS’ Karen Webster jumped into the findings of the Global Cash Index, gaining a sense of the story behind the numbers in the United States and the Americas in general.
In conversation with Cardtronics’ Brian Bailey, managing director for Global Financial Institutions, and Tom Pierce, chief marketing officer of the firm, Webster noted that even with the rallying cry of a war on cash in the digital economies — and in emerging markets — cash is alive, doing well and actually growing in terms of usage.
Cash on the Barrelhead, Preferred
Cash remains a preferred method of payments, and, as noted in Webster’s own discussions with payments executives, sometimes it is the only way people can pay. Cash is also growing as a slice of the spending pie, and thus the onus is on the payments industry to make access to cash both safe and easy for those who prefer to use that conduit for payments.
The Cardtronics executives noted that the studies are not all that surprising, and where once the findings reflected increasing cash adoption across, say, Europe, recent research has borne out the same trends in Europe and the Americas.
Turning to the Americas — defined as the U.S., Brazil and Mexico — the total amount in cash payments for the region was $3 trillion in 2015, with weighted average cash use at 14 percent of GDP, with an estimated increase, annually, of 4 percent through 2020 in absolute dollars but a decline in percentage of GDP by 1.2 percent over that time frame.
The trends indicate that though cash as measured as a share of GDP may be waning, the spending of the currency remains robust.
Pierce stated that “we’ve been involved with several cash-related studies over the past several years and … we’re seeing that people continue to want a mix of payment choice, and cash is a healthy part of that mix.”
He stated that in one study conducted last fall in the United States, 89 percent of respondents claimed they had used cash at least once during the previous six months, higher than any other payment form that was given as an option. As many as 56 percent of those surveyed said they were using cash as frequently as they did a year ago; 23 percent were using it more often. Among the core reasons for this: The perception that the use of cash was more secure. Another lure, according to Pierce: “Being able to budget their money.”
Cash as a Budgeting Tool
Bailey noted that beyond the small-dollar transactions typically coming under the purview of cash, “the self-budgeting value of cash is a really important one that extends beyond low-value purchases,” stating that as his firm works with financial institutions on their branch transformation strategies, discussions typically arise as to how consumers use cash inclusive of bill payments, especially for utilities and even large transactions such as mortgage payments.
“There’s an immediacy aspect of cash,” Bailey said, whether done at the teller in a branch or increasingly at the ATM.
Against this backdrop, agreed the executives, banks are investing heavily in digital while rapidly reducing their physical branch footprint — but at the same time boosting ATMs as a sort of hybrid, satisfying the need of some consumers to have a physical point for withdrawal of funds.
Regional banks have struggled to keep pace with technological shifts and maintain market share and have undertaken efforts to increase ATM counts to look bigger, perhaps, than they actually are, eyeing both brand presence and functionality. A cash and ATM strategy also complements what Cardtronics views as a “leave behind” strategy that still serves consumers in markets — especially with a deposit-taking functionality — where an FI’s presence has been severely truncated.
Bailey added that in expanding the services offered by ATMs amid the aforementioned shifts, technology enables some smooth transitions — converting, for example, a bill payments function to be accessible across a web-enabled technology platform.
“The bigger thing on our minds,” Bailey continued, “is how do we inform and educate consumers so they now have access to those services in a whole new way at those very prevalent retail places that they frequent with their families … it’s good for the FIs and also for the retailer in terms of traffic.”
Cardtronics has recently struck partnerships with FIs for cardless cash services, and with attendant offerings such as ATM locators and fee alerts (for ATMs levying fees) via SMS.
As for demographics, Pierce stated that tech use does indeed skew younger, but that millennials do use a hybrid of cash and digital payments. He pointed to a study via Cardtronics that showed 55 percent of millennials used some form of digital payments in the previous 12 months, even as they were also using cash.
“They don’t have that built-up credit,” said Pierce, “that their parents may have … cash users tend to be heavier budgeters,” and, he said, millennials are using cash to plan their spending.
Webster circled to Cardtronics’ partnerships with FIs such as Citibank and with retailers such as Target and Kroger to glean insight into how retailers are seeing a pickup in traffic amid ATM usage. Pierce stated that his own firm’s research shows that six in 10 shoppers said that the presence of an ATM has influence over where they choose to shop.
Furthermore, eight out of 10 people surveyed said that when they went to the ATM to get cash, they made a purchase of some type at the retailer. By way of example, consumers that use an ATM in a drugstore spent on average $36, while non-users spent half that at $18. The same impact is even greater at the convenience store, with $27 vs. $9, respectively.
Cards are perhaps proving a sticking point in the move toward electronic payments. Pierce stated that the first thing that cardholders are doing upon getting prepaid cards (loaded with everything from tax refunds to general government benefits) is going to the ATM and withdrawing cash from those cards. These are among the heaviest ATM users, said Pierce. But cards alone are not on the cusp of overtaking cash, according to Cardtronics. ATM access is critical for some services, as 55 percent of small businesses in the U.S. do not accept cash.
Queried by Webster on digital banks and as to how they can grow their businesses, Bailey said, “Digital banks are no longer the minority in our industry. I think large retail financial institutions have to think of themselves going forward as a digital bank, and as such, we’re seeing … interest … in how do they shape their points of access and interaction with their consumers. Clearly operating efficiency remains a priority but [so does] consumer engagement.”
Retailers have, in some cases, proven themselves to be experts in location, while FIs are looking to leverage that real estate to continue to provide a point for interaction with the “new digital consumer.”