As countries like the United Kingdom, China, India and the Nordics rapidly move towards demonetization, driven by innovative technology and enhanced policy, the social and structural implications of getting rid of cash could exacerbate economic divides within these economies. Even the US is grappling with how to deal with the evolution in payments, as certain states have banned cashless checkout at retail locations (here). Based on a recent Financial Times article, the United Kingdom represents a key example of how significant regional variations in adoption of cashless transactions could leave millions, who rely on cash, isolated, exploited, and subject to increased cash handling costs. ATM withdrawals are a strong indicator of demonetization. Given this, during the first four months of 2019 compared to the same period in 2018, cash withdrawals on average declined by 8.1% across the Southern regions of England, including 8.7% in London. By contrast, withdrawals on average declined by a mere 4.7% in the remaining regions of the United Kingdom.
Additionally, in a developed economy like the UK, the share of retail transactions in cash has fallen from 54% to 41%, and is projected to land at 10% by 2026, constituting a 81% decline. In China, the share of retail transactions in cash relative to cards (excluding all mobile payments for the moment) has fallen from 64% to 48%, and is projected to land at 42% by 2020, constituting a 32% decline. Financial services infrastructure, with bank accounts as basic entry point, remove friction involved with physical cash. Point of sale solutions provide access to digital rails, which are intermediated either by finance firms, governments, or telecoms. Access to banking allows for savings and investments as well; however, there may be regressive implications for the unbanked or groups subject to specific barriers to entry in a fully card-based world.
Notably, a 2019 independent review stated that “around 17% of the UK population – over 8 million adults – would struggle to cope in a cashless society”. This reliance on cash within the United Kingdom stems from (1) the lack of infrastructure, such as reliable and extensive mobile data coverage affecting approximately 5.3 million adults, (2) the lack of financial accessibility, including those in financial difficulty, affecting 5.4 million adults, and (3) convenience, whereby 34% of the UK population wish to have the choice of payment medium to use. We expect there to be a $200B emerging new market opportunity for “Mixed Commerce”, which we define as the intersection of the payments industry, commercial activity and mixed reality (read more here).