Which will expire sooner? Cash or plastic?

Deutsche Bank published series of reports on January 2020 about the future of payments. The series of reports is built on the findings of a research with 3600 respondents, which was done by Deutsche Bank.

The series starts with answering the question: “Is cash dead?” and according to writers of the report; Marion Laboure and Jim Reid, the answer is not yet.

The report starts with a quote from 1968: “As a result of the proliferation of credit cards, there has been widespread speculation about the possibilities of a checkless, cashless society in the future Jack Lefler, in the July 24, 1968 edition of the Las Cruces Sun-News (Las Cruces, NM)” So this discussion of cashless society and end of cash is not something new. But cash somehow survives and according to a research done by Deutsche Bank, on average 60% of the respondents believe that cash will always be around. But on the other hand, the writers believe that next decade will be the end of plastic card with the increasing dominance of digital payments. Digital wallets and mobile payments will take the place of plastics.

Currently there are three types of digital wallets:

• The wallets like Samsung Pay, Google Pay, Apple Pay in which you record your credit card info and make the purchases through your phone and with Android Phones you can even use NFC technology of your phone to make the contactless payment.
• Second type is store cards like Starbucks rewards cards with which you can make your payments and collect Starbucks rewards.
• Examples for the third type is the Chinese digital wallets like Alipay or Wechat with which you not only make payments but send money, buy tickets, order food online, call taxi etc. So they are rather like ecosystems than payment tools. And according to a research done in 2017, 92% of the Chinese who were living in big cities were using either Alipay or Wechat.

According to the research, people will prefer contactless cards and mobile wallets more, which shows a trend away from chip and pin technology.

When it comes to the cryptocurrencies the writers believe that the cryptocurrencies might be a mainstream payment method but they need to “… become legitimate in the eyes of governments and regulators. To win that legitimacy, cryptocurrencies must achieve price stability and offer advantages to merchants and consumers. They must also allow for global reach in the payments market. To do this, alliances must be forged with key stakeholders: mobile apps, card providers, and retailers. If these challenges—and others, such as energy consumption—can be overcome, the future of cash is at risk.”

I totally agree with the findings of the writers about cash. Cash is not dead yet. Especially for SMEs B2C transaction cash is still important. First, payment acceptance commissions are still high and it affects the profitability levels of SMEs, second in the developing world, cash means, you can evade tax to a certain extend. Third, they receive their money instantly rather than waiting the payment to be cleared to their account. Also for their B2B transactions, cash and cheque will still be important (especially in the developing countries where post-dated cheques are available. It is the traditional method of buy-now-pay-later which works for SMEs B2B transactions.)

I also agree with the writers about the extinction of plastic in the next decade. Mobile payment methods and wallets are on the rise and they are more practical. Especially in the countries where the population is younger, it seems like it is going to be main payment method instead of plastics.

For cryptocurrencies I am still indecisive. On the one hand I agree with the writers about the need of legitimization in the eyes of governments and regulators to be widely used but on the other hand I think this is totally the opposite to the “free spirit” of the cryptocurrencies. I need to think and need more to make comments.