Cash is king, but for how long?
Cash is king, but for how long?
Once upon a time, there was a king called Cash. He was a powerful king, known across the length and breadth of the world by many different names. The king was believed to be invincible until of course, the king met with his match. Demonetisation and the ongoing pandemic have weakened the dominion of Cash. The newer and easier modes of payment are bringing Cash’s monopoly close to its demise.
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Government restrictions
Cash is trusted by traditional buyers and sellers. To the payer and payee exchange of physical currency notes offers a transparent transaction however, cash exchange leaves no proof of transaction for future reference and hence is used for illicit activities like money laundering.
Hygienic contactless payment methods
The Covid-19 pandemic played a key factor in accelerating the growth of the Digital Payments industry. During pandemic lockdowns when brick and mortar stores have to remain closed, e-commerce became indispensable - along with it the need for online payments. With contactless options, people could do curb-side pickups, complete transactions without endangering health. Furthermore, even as the market slowly opened back up, businesses that adopted multiple contactless options were valued by their customers, for providing convenient, safe options, and for valuing their well-being.
Mobile money
Digital wallets are fast replacing cash. Credit Cards and Debit cards, invented almost half a century ago, eliminated the need to carry cash. However, the use of credit cards was restricted among the developed nations with higher per capita income. The advent of the new millennium saw the dawn of a new kind of technological advancement. Easy accessibility of the internet and smart devices is leading to another revolution in the payments industry. Services like PayPal, PayTM, M-Pesa are the leap forward in the payments industry.
Banks ride the Digitization Train
High-speed data is now more affordable and easily accessible than ever. Banks leverage the Internet to create applications that enable a customer to do transactions through a website or mobile application from the comfort of their homes and offices. Senior citizens and differently-abled persons no longer need to stand in long lines to deposit money or encash cheques. Digital banking provides more inclusive ways of conducting business.
Cross-border trade made simple
Digitization has accelerated globalization. It has revolutionized global trade and international transactions. Cross-border payments are often costly as it involves exchanging one currency for another and has to pass through separate national payments systems with different regulatory requirements.
Rise of Cryptocurrency
Cryptographic currency exchanges are carried out digitally without involving a bank or government. The rapid rise of cryptocurrencies is forcing governments and financial institutions to co-opt changes in their payment methods.
Conclusion
The shift away from cash is both a consequence and a manifestation of other big changes afoot. The world of finance is on the verge of major disruption. In many small advanced economies, and in some developing economies, cash is playing a smaller role in retail transactions. Rapidly adopting new, inclusive ways of conducting transactions allows financial institutions to be part of this shift, leapfrog to the next generation of the financial landscape.
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