The way of the future is a cashless society, but it's not just around the corner. For several years innovators and political leaders have sought to promote a cashless society. It's a long journey, and there is still a ways to go.
Mobile wallets, digital currencies, peer-to-peer payments, QR codes ... cash alternatives are proliferating and are becoming increasingly important: according to the World Payments Report 2018, in 2016 cashless transactions reached $482.6 billion, with an average annual growth of 9.8 percent between 2012 and 2016.
This gain is not only the result of the digitalization of the economy. In many countries there is clear political momentum to put an end to cash, which would both result in a cost savings for central banks as well as give a boost to the fight against money-laundering and corruption.
But doing away with an instrument – like cash, which humankind began to use almost 3,000 years ago in Asia Minor – is not easy, as was made clear in two recent lectures on digital payments at BBVA Open Summit.
Chris Skinner, the renowned fintech expert and author of several books on the topic, stressed that alternatives such as embedding microchips under our skin to facilitate contactless payments generate questions about key issues such as privacy and security in the face of possible hackers. He also complained that even in technologically advanced societies like the United Kingdom, checks are still used. "How are we going free ourselves from cash if we can’t even get rid of checks, which make us go to a bank?” he exclaimed.
In his opinion, China leads the way, thanks in part to a boost given by large companies such as Ant Financial, considered to be the largest fintech in the world, and Tencent, owner of WeChat, an application with one billion users. Also playing a fundamental role, according to Skinner, is China's significant demographic power – with the ensuing creation of economies of scale – and the relative unimportance of cash-based financial structures, which on the contrary do carry significant weight in the U.S. and E.U.
The Scandinavian case
The Nordic countries are also pioneering the journey toward a cashless society. BBVA Open Summit benefited from the distinguished participation of two representatives from Scandinavian cashless payment solution providers who are enjoying success at home.
From left to right, Chris Skinner, Aditya Menon, Danielle Neben and Gunilla Garpas during their meeting at BBVA Open Summit.
"I haven't touched Swedish money in two years.” Gunilla Garpas, an executive at Nordea Bank and head of their Swish, solution said almost with pride at the beginning of his presentation. Swish is a P2P (peer to peer) payments platform that has significantly contributed to the declining use of cash in Sweden: between 2009 and 2015 circulation of Swedish krona fell 25 percent. In Garpas’ opinion, for digital alternatives to take hold “partnership and collaboration with banks is key,” in addition to the adoption of flexible structures, fast-acting and amenable to change.
Danielle Neben, is director of marketing for Finland’s, ePassi, the largest provider of mobile payments in Scandinavia. She explained that with an agreement with Alipay (the Ant Financial payment platform) they have had "considerable success with the Chinese tourism market, which is of particular interest due to its significant purchasing power". These tourists shop in Finland just as they would in any Chinese city, and such convenient payment mechanisms help increase turnover. In Spain, BBVA also has an agreement with Alipay to cater to Chinese tourism.
China may be leading the way in cashless payments, but there are problems to be solved there too. Skinner raised the paradox that while the world moves toward financial inclusion the opposite phenomenon also emerges: those who do not have access to technology are financial excluded. "Two hundred million Chinese don't have smart phones, and in some cases, they are beginning to have problems paying for things.” he said. Twenty-first-century societies are moving quickly toward the disappearance of cash, but we still need to have a few coins in our pockets.