A new report by global management consultancy A.T. Kearney has found that the first truly cashless society will be reached in five years, with Sweden predicted to be the first country running solely on digital and card payments.
Cashless transactions have increased substantially following the introduction of contactless payments and mobile payment options like Apple Pay and Google Pay. According to A.T. Kearney’s analysis, they are expected to grow annually by more than 21% in emerging markets and over 7% in developed markets by 2021. In Sweden, cash payments are decreasing fast. In 2016, only 15% of retail transactions were paid for with cash, down from 40% in 2010.
The trend continues globally, with cash making up only 15% of all payments made through dominant mobile payment applications, such as Alipay and WeChat Pay in China. In 2018, cashless transactions accounted for only 45% of all payments made in Russia. Elsewhere, other countries are putting the steps in place to be fully cashless, with Rwanda setting a goal of hitting this milestone by 2024 and South Korea aiming to eliminate coins by 2020.
A.T. Kearney’s ‘Retail Banking Radar 2019’ released earlier this year analysed data from 92 banks across Europe and predicts one in 10 banks will disappear as customers increasingly favour digital banks such as Monzo and Starling Bank, with branch networks being phased out and replaced by a multichannel network incorporating AI, analytics and new technologies to meet changing consumer needs and expectations. This shift in consumer behaviour and rise in fintech dominance will have an impact on the traditional payments landscape, driving the way for a cashless future.
The advantages of digital transactions including convenience, cost savings and electronic record-keeping are driving adoption from the financial services sector. In the UK alone, the costs associated with bank branches and ATMs are approximately £5 billion .
Innovative payment methods such as biometric authentication and facial recognition, which are already adopted in India and China, will play a big part in the cashless transition.
Simon Kent, global Head of financial services at A.T. Kearney said “The global economy is increasingly powered by digital transactions and in the next few years, the world will see the first truly cashless economies. This represents an enormous opportunity for banks, but for those established in the days when cash was king, it will require some tough and astute strategic decisions to ensure they thrive in a cashless society.”
“Traditional banks have put enormous effort, resources and human capital into cash management and strategies will need to change as digital payments become the norm. Banks will also need to find new revenue streams to replace those previously gained through cash activity.”
“By making strong strategic choices and asking themselves what role they want to play in the world of payments going forward, traditional banks can maintain their legacy as longstanding customer institutions.”