Payments Innovation and the Use of Cash

In spite of the many payments innovations coming to market around the world, and efforts on the part of many, including banks and card networks, to shift consumers away from cash, a new study released today by Market Platform Dynamics (MPD) shows that the total use of cash is increasing in many developed and developing countries. The study findings were the subject of a keynote presentation made by MPD CEO Karen Webster at the ESTA World Congress and Convening in Marseilles, France. The study findings conclude that although payments innovation will eventually impact the consumers’ use of cash, significant impacts will take at least a decade to be felt. The study was sponsored by Loomis AB, one of the world’s leading cash processing and delivery organizations in an effort to understand the impact between cash usage by consumers and the payment innovations coming to market.

“Cash isn’t going to die – or not at least any time soon, in spite of the explosive growth of electronic payments, in spite of the bulls eye that it has on its back from players who want to see it dead and buried, and in spite of the convincing narrative that electronic payments pundits deliver, “ remarked Webster during her presentation. “Pundits have been predicting the death of cash for as long as the plastic card has been in existence – more than 60 years now but the existing ways of measuring cash tell us nothing about how consumers actually use it. We’ve developed a new methodology that provides a much more accurate understanding how much cash is used by consumers to pay for things at merchants in different countries over time.”

Lars Blecko, ESTA Conference Chair and CEO of Loomis AB stated that “it’s easy to lose perspective about the relevance of cash in society given the wave of news reports on payments innovation. The ability to have a more robust methodology for understanding how much cash is really used by consumers to pay for things at merchants is extraordinarily valuable and why we felt very strongly that this piece of work be done for the benefit of the entire cash ecosystem. It turns perceptions about cash into a set of tangible and actionable metrics that help the industry understand how cash will evolve alongside mobile and the other payments innovation that will certainly come our way over the years.”

Ten specific markets were examined in detail to calculate the growth or decline in cash over the next decade. The ten markets include the US, UK, France, Spain, Sweden, Portugal, Turkey, Poland, Germany, and Italy. In all but one market, Sweden where the percentage of spending done in cash by consumers is expected to decline, all study countries are projected to show an increase in total cash usage.

Webster’s presentation — which can be viewed below — also outlined six new observations related to cash and the impact of payments innovation to the consumers’ use of it as a result of the 10-country study.

The 16-page paper that is the basis for Webster’s presentation can be found here. The full technical paper, which includes a detailed discussion of the cash usage methodology and country cash usage projections, can be found here.