Cash has been with us for thousands of years and yet it has only been in relatively recent times that its usage in the money supply has declined to the extent that it is now such a very small part of the payments system. Electronic payments has been the driver of this change, and the accelerator has been contactless payments.

The role of cash has been reduced to provide for small value payments and to enable the ‘unbanked’ part of the population (those that do not participate in the banking system) to function in the world of commerce.

‘Unbanked’ is a sad reflection on our society.

A Forbes study in 2014 determined that 28% of the US population (88 million people) were unbanked (no use of financial services) or underbanked (minimal use of mainstream financial services, and mainly reliant on payday lenders). Typically, it is the disadvantaged in society that is unbanked or underbanked and these people, according to Forbes, can spend up to 10% of their modest incomes on fees and charges from the likes of payday lenders to provide their source of cash.  This cost does not include the loss of funds through theft, fraud and other risk exposures.

The solution to this reliance on expensive sources of cash will undoubtedly lie in the use of technology and innovation in payment products that enable people to store income and make payments through non-cash and non-bank means such as mobile payments.  We have already seen successful use of mobile payments technologies in Africa (e.g. m-Pesa in Kenya) and elsewhere to facilitate the inclusion of previously unbanked people in a secure payments system.

In developed countries, Sweden is often quoted as a case study in the move towards a cashless society.  In Sweden 70% of bank branches are cashless (contributing to the lowest level of bank robberies in 30 years!).  Currently only 20% of Sweden’s payment transactions are in cash representing less than 3% of the economy.  In the UK, 4% of GDP is cash, Australia 6% and the US, 8%.

The trends in technology provide a very compelling roadmap in the way economies move away from cash to more efficient means of exchange. The experiences in developing and developed countries alike will provide hope for laggard economies, such as the US, that there is a better world ahead.