Our money is in so many places, bank accounts are just part of the story and cash is everywhere, or is it? Are we moving to electronic payments for everything?
If cash is disappearing, do we need to do anything else in coinr to aggregate the total picture of your finances? Well lets look at the arguments from both sides, the global picture is pretty amazing.
Globally visa, amex, mastercard and the others are taking more and more of your wallet flow. They have increased reach, range and hence convenience, ironically credit card fees and bank fees which once looked like dropping now look like they are back on the increase partially because their market power is so great. But a flood of new competitors are arriving so this won’t last long.
A key change has been the introduction of debit cards, this reduces risk for the card companies and makes it more accessible for people who don’t want to go through (or can’t get through) the credit approval process for a credit card.
The demise of cash is predicted by 2050 according to UK Payments Council 2010 Q1 report.
- In the last ten years debit cards use is up 400%, up from near zero to 158 uses per annum per adult.
- Debit cards are up from 1 in 20 transactions to 1 in 4 by 2018. An amazing 18b transactions were conducted this year under GBP15.00.
- Probably most telling is that while it was 9 in 10 pints of ale (beer) paid by cash now, it is predicted to be 6 in 10 this year and 2 in 10 by 2018.
- On the salary front, cash wages (remember that old yellow envelope?) were 1:8 and now is 1:20 and is expected to the 1:20 by 2018.
A few questions need answering. Will cash be replaced entirely, what is replacing cash? It is all going to credit cards or debit cards or is it going to other bank accounts? Just because some countries are going cash-less is the same happening globally?
The answer to all these questions seems to be no. New methods are arriving. But cash will still shrink, eventually.
Cultural barriers are still huge in many countries that are hooked on cash and will continue for a long time yet, these include tech leaders and increasing tech savvy ones like –
- China and
Those countries also represent most of the world’s population and are persistent innovators and represent most of the growth now. Hence they will soon have most of the wealth albeit unevenly distributed.
This may change over time but other non-bank non-traditional payments methods are exploding. Stored value integrated circuit cards like –
- Suica and Pasmo in Japan,
- Octopus in Hong Kong,
- Oyster in London,
- EZ-Link and NETS in Singapore,
- Smart Rider in Perth and soon TCard or similar in Sydney Australia – and many more around the global especially in Asia
These and lots of other integrated circuit cards (or RFID – Radio Frequency Identification used at short range line 10cm) have upwards tens of millions of card holders and daily transactions each, some have 20m or more cards issued.
We’ll do a separate post on these SVCs (Stored Value Cards) another time.
Things to consider for the future of the cash based economy include at the core the biggest developments in non-cash payments. These electronic alternatives have never been so powerful. While historically they have only handled larger amounts down to say $10 or $20 in most physical stores this is all changing –
- Paypal | is releasing their micropayments service which is supposed to be as easy as putting a coin in a slot and cost effective even for very small amounts. Paypal are arguably the world’s largest payment system these days with around $75bn turnover and up to 300m users so anything they do will have a big impact. Not to mention they are owned by eBay the largest auction site. News flash – Paypal just launched their micropayments service and Facebook has already signed up as a customer so there is a nice 500m users added to the pile, albeit with lots of duplication.
- Apple | is supposed to be about half paypal’s size and is the gorilla in the room because all of these accounts are tied to a credit card so have more depth than most. Arguably they have 100m or 200m families rather than individuals so are probably at least twice the size in impact. Don’t forget they also control the devices which brings even more market power.
- LinkedIn | has nearly 70m users that are mainly in the professional market and very very highly interconnected, arguably much much more valuable than the average customer on other platforms. So why doesn’t LinkedIn offer a payments network? Well no doubt they are getting there, they are just taking their time about it which is their own tradition and hey it hasn’t hurt them yet has it? I suspect it has but hey who wouldn’t like their customer base and they seem to have managed to work their way into the twitter news stream world and the group discussions against google/yahoo groups without too much trouble despite being late to market in both. Don’t underestimate these guys either.
- Skype | is now the largest phone service in the world and is growing into chat, groups, video, business services, local numbers and a heap more. Skype is also part of the extended eBay family and already integrated into multi payment methods these guys are already displacing national in-country telecoms players and with something like 220m users they could play tough. There have also been a bunch of
rumours in the last few months that Skype is looking at a micropayments acquisition or development.
- Google | has $30bn in the bank and launched google checkout with limited success, no doubt they are working on round two.
Xmas 2010 will show ecommerce is back and booming after the GFC, most people will do at least some of their gift purchases online.
So in summary, the cash based economy is facing the largest challenges ever, it will inevitably decline but much slower in Asia than elsewhere. Also, the amazing rise of the internet enabled non-bank alternatives has just started and this story has a long way to run. In the interim normal people like us have an even more complex and fragmented picture to pull together to make sense of our money.
All the above applies not just for individuals but also business, particuarly small business. We also need to develop ways of unobtrusively handling personal and business financial management in the family, friends, clubs and wider network of our lives, here at coinr we call these groups or circles. The use cases for group financial management or GFM (or circle financial management or CFM) are extensive so we will cover those in another post.
The need for coinr has never been greater and is only increasing.
Image courtesy of ‘the consumerist’ web site.