Maintaining the Balance Between Digital and Cash.

While the idea that cash is in decline is not a new narrative – especially in advanced economies – there are increased voices amongst sections of the payment industry that the landscape will be changing more rapidly. The biggest movement away from cash is happening in the Asia-Pacific region, followed by Europe and North America.

A recent study by WorldPay has tracked the usage of cash over the next five years across Europe. It claims that cash will account for 7% of purchases made in the UK by 2020, with the shift to digital payments accelerated by the COVID-19 pandemic. It predicts that a number of countries, including the UK will aim to be cashless by 2025.

Similar patterns can be seen in South East Asia. The Vietnamese Central Bank set up an electronic network for financial transactions aimed at promoting cashless payments in the country. In China cash payments are declining by three percentage points of GDP due to their model of a “cash-lite” society, and this trend looks to continue.

Even if the use of cash may have declined for the majority, its use has become essential to a certain sections of society. Indeed these groups reliance is now more entrenched in their daily habits than ever. Recently, Sweden was forced to back-track on previous legislation pledging a cashless society as it became clear this was failing to protect the most vulnerable in society.

Despite the fact that some of Sweden’s most senior bankers have claimed the country will move to a Central Bank Digital Currency (CBDC) within five years, new legislation is being implemented that requires banks to provide adequate cash services.[1]

Similar fears are present in the UK, prompting retailers to sign a public commitment to keep accepting cash in stores. Thousands of the UK’s biggest names, including Waitrose, Asda and John Lewis have signed the cash-friendly initiative which also has the backing of the Bank of England.

Like Sweden, the UK Government is looking at legislation to safeguard its use, with increasing pressure from lobbyists to set out when legislation will be issued to protect cash payments.

It is clear that both governments and consumers are not willing to relinquish using cash for now, rather a range of payment methods will co-exists that can complement each other. After all, cash remains the most accessible payment method, and it is fundamental in allowing all citizens to be able to participate in society. It is here that central banks and cash management companies need to take the opportunity to realise efficiencies in their cash management methods and ensure they are operating in the most effective way. They will need to balance the move to digital with the need to protect cash for businesses and consumers that rely on it.

Vaultex is in a unique position to offer independent advice based on considerable experience. We can help organisations make strategic decisions measuring the costs of change against potential savings and increases to overall efficiency, while factoring in cash payments trends and forecasts.

In recent months we have seen a number of organisations approach Vaultex Consulting to ensure their cash operations remain fit for the challenges of the next decade.  If you would like any more information on our consulting services, or advice about your cash management strategy, please get in touch.