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A mounting backlash against cashless stores is not slowing growth in the $95-trillion payments industry.
Even as some US cities seek to protect low-income consumers by barring stores and restaurants from shunning physical currency, digital payments are building acceptance around the world. A Citigroup index that measures the readiness of 84 countries to adopt electronic payments has increased 5.5 per cent in the past five years, the bank said in a report this week.
It is a tale of two different philosophies. The situation on the ground inside the US is very different than the situation abroad, said Jeff Sloan, chief executive officer of payments processor, Global Payments. Most governments outside the US are really focussed on digitisation.
A $150-billion boost
Sloan’s company is one of many that have benefited as countries encourage electronic payments to better track the flow of money inside their borders and collect more taxes. A 10 per cent increase in the adoption of digital money would result in a $150-billion boost to consumer spending, Citigroup found. Governments, meanwhile, would pocket $100 billion more in incremental taxes with increased payment digitisation.
The movement away from cash has proven a boon for payments companies. Mastercard shares have gained 38 per cent in the past year, and Visa is up 32 per cent, compared with a 15 per cent increase in the S&P 500 Information Technology Index.
The payments networks are each up more than 1,000 per cent over the past decade, more than double the information tech index and triple the S&P 500.
But in the US, politicians warn that the trend will marginalise disadvantaged residents – those lacking the means to maintain a bank account or without access to electronic payments, a market that’s been estimated to be worth $95 trillion globally.
In February, Philadelphia prohibited discrimination against customers who want to use cash, and lawmakers in San Francisco and New York are considering similar measures.
Amazon upset
The backlash has sparked warnings from companies, including Amazon.com . The retailing giant told Philadelphia city officials that it would not bring its Amazon Go stores, which don’t have cashiers, to the area if they passed the law banning cashless stores. The conflict is in its early days: The vast majority of stores and restaurants around the US still accept physical currency, and cash continues to be the most common payment method in the nation, representing 30 per cent of all transactions, according to a 2018 Federal Reserve study. For in-person transactions, cash use is closer to 39 per cent, the central bank found.
“I would argue we’re anything but cashless,” said Lu Zurawski, who leads the retail banking consulting practice at payments company ACI Worldwide.
The world, he said, is inexorably moving to less cash but I don’t believe we’re in a world where we’re going to see cashlessness in my lifetime.
Indeed, the use of cash remains high around the world. At Western Union Co, the world’s largest money-transfer business, most transactions are still paid in cash, CEO Hikmet Ersek said.
“Our customers, they prefer cash,” said Ersek. “Most of the cash we send globally is about $300 on average, and it’s used for immediate spending. People take the money and about 30 per cent goes for education, so they buy books for the kids or the uniform.”
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