Future of money: Cashless, cardless, paperless
Technology is repainting the payments landscape. Given the complexity of the payments ecosystem in various countries, change happens slowly. Sometimes it takes decades, but change does happen. Newer digital technologies may accelerate this evolution. This post looks at the future of money and how it will evolve to become cash-less, card-less and paper-less.
The MIT Technology Review recently created a report, entitled “The Future of Money,” which looks at the overall industry and factors leading to greater digitization of payments. Mobile phones have been a catalyst for much of the change, but it is important to remember that it is still very much a cash-based world… as estimates show that 85% of consumer transactions worldwide are still done with paper bills and metal coins.
This report states how the digitization of payments is growing the overall market opportunity:
As technology drives a shift in how we buy things, the revenue that the payments industry extracts could grow to more than US $2 trillion a year by 2023, double the 2013 figure, the Boston Consulting Group predicts. Much of that increase will come from a reduction in cash payments in developing countries.
It goes on to say:
Across the globe, BCG predicts a time of ‘disruption and opportunity’ driven by digital technologies that will require the existing credit card system to prove that it’s better than its new competition.
The Nilsen Reportfrom December, 2014 states that check usage is projected to decrease by 46% from 2013 to 2018 in the U.S. Globally,check usagehas been on the decline for many years. In fact, many Asian countries have never adopted this paper-based form of payment.
While countries differ in terms of moving toward cards, mobile phones or other new digital technologies for payments, one thing is clear: ALL countries are trying to move away from using relatively expensive and inefficient paper money and metal coins for making payments.
The Bill & Melinda Gates Foundation recognizes the opportunity for new technology to help the world’s poor realize the banking services that so many in the developed world take for granted. In their2015 Annual Letter, the Gates Foundation says one of their “big bets” is how mobile banking will help transform the lives of the poor.
With 2.5 billion people unbanked, it is clear banks have not been able to appeal to or service this segment in a cost-effective manner using today’s cash-based and card-based payment services. New digital and mobile technologies provide a potential solution which can lead to much greater financial inclusion.
“The future is already here; it is just not evenly distributed.”
This quote is credited to William Ford Gibson,an American-Canadian writer who also coined the term “cyberspace” in the early 1980s. IMHO it sums up the state of mobile money/digital payments perfectly.
Some countries have begun to move away from cash to primarily plastic cards for payments, while others are leap-frogging cards to use their mobile phones. Still other countries are exploring new all-digital bank accounts accessed by the consumer’s mobile phone number and PIN.
The one common denominator is the evolution away from cash, which has many obvious andhidden costs. With greater recognition of increasing income inequality around the world, new mobile money/digital payment solutions can also help to alleviate this problem.
The future of money will leverage digital and mobile technologies to enable the creation of new lower-cost, highly efficient payment solutions. This future will be cashless, cardless and paperless. It may take a LONG time to become reality, and it will surely be unevenly distributed. Let us know what you think.
Dan Glessner / Dan Glessner is CMO of Quisk, Inc., a Silicon Valley-based start-up that partners with banks and merchants to enable anyone to use their money without needing cash or cards.