The bank for a changing world

Is cash on its deathbed?

  • 19.09.2016

Is the disappearance of cash inevitable, or is it just some utopian dream? While some observers still feel that a cashless world is impossible, the director of a major international bank predicted at the Davos Global Forum in January 2016 that cash would not survive the next decade. And he is not alone in this opinion. Find out more below.

Examples in Northern Europe 

In November 2015, Nordea Bank, a Norwegian bank, stopped using and processing cash at its branches. In light of decreasing demand and the continued risk posed to its tellers (theft, robbery, etc.), the bank opted to leave cash behind. And this one-of-a-kind initiative may well spread to other institutions. 

Scandinavian nations (Norway, Sweden, Denmark, Finland), in fact, are currently leading the pack on the road to a “cashless” society. 

Take the case of some churches in Sweden’s larger cities, for example. They now display their bank information during Sunday services so those parishioners who forgot to bring cash can simply donate through a mobile app. No more passing the basket for coins and bills! Even the country’s homeless now have access to card readers, so they can solicit the kindness of strangers without cash. Moreover, paying in cash is now looked upon with mild suspicion… For all these reasons, Sweden—which is also removing its ATMs—seems poised to make the “all electronic” leap.

Not far behind, a third of Danes no longer use cash, as mobile payment apps continue to enjoy massive success in the country. Another telling example: retailers in Denmark now have the right to refuse cash payments. 

Meanwhile, Norway has simply planned for the disappearance of cash by 2020. 

some churches in Sweden’s larger cities display their bank information during Sunday services so those parishioners.the country’s homeless have access to card readers, so they can solicit the kindness of strangers without cash

Economic and security reasoning

Does the recent announcement of the elimination of the €500 bill augur the eventual demise of cash in the Euro zone? Europe decided to retire this bill to fight fraud and trafficking of all types. Dishonest taxpayers and mafia both use large denominations to aid in tax evasion and money laundering. In France, it is now illegal to make cash payments above €1,000. In each case, the goal is to favor the traceability of payments made by electronic and contactless cards, wire transfer and mobile apps.  

But there are also economic reasons to end the reign of cash. For central banks, issuing and managing bills and coins is a costly undertaking. Also for small businesses and retailers, handling cash is expensive, it wastes time, and it leaves room for error. In addition, cash has also produced numerous risks of theft, burglary and other such crimes. For banks, eliminating these risks is another way to protect the safety of their staff and cash escorts. 

Spontaneous extinction…  

So do we really need to actively eliminate cash, since it already seems destined to disappear “naturally”? Should we simply let time—and digital technology—do its work?

The rise of digital payment methods also benefits consumers, who are increasingly opting for these tools. No more risk of loss or theft, no need to find an ATM or dig through your pockets for change, digital tech also makes it easier to manage your accounts and reduce mistakes… Benefits all around! 

So many advantages, in fact, that little by little French consumers are turning to electronic payments, leaving cash and checks behind. According to the latest figures released by the French Banking Federation, in July 2016, cash accounts for only 5% of all transactions by value (though the number of cash transactions remains significant, a good number of consumers pay for small purchases – like their baguettes and newspapers – in cash). 

Cash is gradually giving way to a variety of payment forms:

  1. online shopping, which is growing fast (the number of online transactions rose 19% from 2014 to 2015), 
  2. card payments, fueled by the fact that virtually all retailers accept credit or debit card payments for all purchases above 1 euro (92% of French consumers prefer to pay for their everyday purchases by card), 
  3. contactless payment, which is growing more popular (it was used in 46 million transactions in the month of May 2016 alone), 
  4. wire transfer, which is now made easier by online banking services (the number of wire transfers increased by 7% from 2013 to 2014). 

With so many options, bills and coins are already disappearing from pockets throughout France and Europe!