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The digital evolution has brought a different way of conducting financial transactions. With the strong growth in digital payments, some believe that physical currency is going to disappear eventually. In spite of this increase, physical cash is still crucial to the global economy .
The Rise of Digital Payments
Digital payment methods have been growing over the past years, and the Covid-19 Pandemic accelerated this process. The use of technologies like mobile wallets and contactless payments have made financial transactions more effective and convenient. The COVID-19 pandemic further accelerated this trend, with many opting for contactless payment methods to minimize physical contact.
For instance, the article “Shift from physical cash to digital currency” from Satchel platform, reflects on the declining use of physical cash driven by technological advancements, changing consumer preferences, and the rise of contactless transactions during the COVID-19 pandemic.
Advantages of Digital Payments
- Convenience: Transactions are completed quickly and easily from anywhere. There is no longer a need to carry cash since is possible to make purchases, pay bills, and transfer money with simply a smartphone or some watches.
- Efficiency: Since digital transactions are faster than cash ones, customers and companies can benefit from shorter checkout lines and quicker payment processing.
- Security: Reduces the risk of losing physical cash or theft.
- Tracking and Management: Digital transactions leave a clear record, making it easier for companies to track spending, manage budgets, and prepare financial reports.
Survival of Physical Cash
While digital payments are rising, physical cash remains part of the economy for several factors:
- Inclusion and Accessibility: Physical cash is accessible to everyone, even for those who do not have access to banking services or digital technology. The World Bank estimates that 1.7 billion individuals worldwide still lack access to official banking services.
- Cash only: Furthermore, there are situation in which only cash is accepted as a payment method, such as with street vendors, local markets and small business or eventually if the system somehow is out of service.
- Privacy and Security: Physical cash offers a different level of privacy compared to digital payments. While digital transactions leave a record to track, cash transactions are anonymous, providing protection against data and identity theft. This aspect of privacy is especially relevant for those who are concerned about the surveillance and data privacy practices associated with digital payments. On the other hand, when it comes to security carrying large amounts of cash can be risky.
- Resilience and Reliability: In times of crisis such as natural disasters, digital payments systems are unavailable. Physical cash will be needed as a backup during emergencies. Also, the ability to transact in cash ensures continuity and resilience in the face of technological failures.
- Fees associated: Cash transactions don´t involve fees, making it a cost-effective option for both consumers and small businesses.
An article from Finance Monthly provides some reasons why cash is still valuable. It describes that cash is necessary in situations where card payments aren’t accepted, like street vendors, small businesses or even when digital systems are failing. It also focusses on the role of cash in terms of privacy and preventing overspending, since cash transactions aren’t tracked and make spending easier.
Balance Between Digital and Physical
In fact digital payments and physical cash can coexist, each meeting different preferences and needs. Each method has its unique advantages and challenges, a balanced approach would be the ideal scenario. Ensuring that everyone has access to their preferred method.
Conclusion
In conclusion, while digital payments are becoming more popular, physical cash is not doing to disappear completely. The future of payments is finding a balanced approach with the strengths of both digital and physical payment methods.
Generative AI used: copilot
Image from: https://credits.com/en/news/614-from-cash-to-convenience-embracing-the-digital-revolution.html
Sources:
https://www.finance-monthly.com/2019/12/5-reasons-why-we-still-need-cash/
https://intheblack.cpaaustralia.com.au/business-and-finance/6-reasons-why-still-need-cash
The author underscores the importance of a balanced approach to payments, recognizing the benefits of both digital and physical forms of payment.
While digital payments continue to evolve and become more sophisticated, I doubt that physical cash will ever vanish entirely as it remains absolutely crucial in the contemporary world.