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Is Cash Still King?

Is cash soon to suffer the fate of the dinosaurs? There is no denying that an increasingly large number of goods and services are moving onto digital platforms that do not accept cash. This past year, due to the pandemic, and subsequently, the inundation of new online and mobile payment apps, has put a spotlight on the notion of an eventual cashless economy. In fact, the U.S. House Financial Services Committee Task Force on Financial Technology held a hearing this past January reviewing the rise of mobile payments and posing the question, “Is cash still king?”

As COVID-19 continues to impact businesses across the country, many business owners are looking for cashless options for monetary transactions like electronic and credit card payments. There has been a huge shift to online and even phone e-commerce transactions during the pandemic. A recent Federal Reserve survey revealed that cash, especially over the past two years, has had a major decrease, with cash as a percentage of the average consumer’s total payments declining from 40 percent in 2009 to 30 percent in 2019.

Interestingly, however, according to the Fed, consumers were holding more cash post pandemic. In October 2019, 43 percent of consumers has less than $25 in their wallets, compared to over 50 percent holding more than $100 in April/May 2020. This increase was most likely due to the round of stimulus payments and because there were fewer places to spend cash during the pandemic.

Cashless payments have definitely seen a surge during the pandemic, according to a new report from financial technology company Square, and it seems doubtful there will be a reversal of this trend. Square’s small business owners cited a 23 percent increase over the past year, with online spending mostly on entertainment, retail, charities, education and beauty care. According to a report from Statistica, released this past February, $130 billion is expected to be digitally spent between now and 2023, with a significant increase in mobile payments.

Anticipating sweeping technological disruption in the decade ahead, as we increasingly digitize every aspect of our day-to-day lives, from grocery shopping to taxi fares, Global Data, a leading data and analytics company, forecasts the following countries as the most likely be the leaders in moving towards a truly cashless society in the near future:

Finland

Finland ranks second to Ireland in terms of frequency of use of cards, fifth in e-commerce spending as a percentage of their gross domestic product (GDP), third in internet penetration and second in smartphone penetration.

With a population of only 5.5 million, cash in Finland, in both rural and urban areas, is increasingly irrelevant.

Sweden

Sweden’s government has very aggressive policies to rid the nation of cash. Due to these policies and increasingly higher internet banking penetration and the frequency of use of credit /debit cards, the nation is poised to be the first truly cashless society by 2023.

China

Over the last decade, China has become a serious contender to be the next dominant superpower. One area of extreme development is the rapid adoption of mobile payments. One of the most popular phone payment methods is QR code scanning. This method has been successfully adopted by both urban and rural areas. China has a leading position in e-commerce, with spending to account for 11.6 percent of its GDP by 2022.

South Korea

South Korea is considered the cashless champion of Asia, with most of the cashless infrastructure in place nationwide. With approximately 6 percent of the country’s GDP being e-commerce spending and more than 100 transactions on average per card every year, South Korea is well on its way to becoming a cashless country in the next couple of years.

United Kingdom

The UK, and specifically London, has geared up its finance technology, especially the digitization of money. The UK ranks second globally for e-commerce as a percentage of GDP. The British have become very comfortable using their phones or debit/credit cards to pay for just about everything. At this rate, the UK is expected to be predominantly a cashless society by the mid-2020s.

Australia

Australia is seriously gearing up to digitize most of its economy by 2022. It’s expected that by then most of the population will have at least one smartphone, and internet banking penetration will reach almost 70 percent of Australians.

While there is a global move towards a cashless society, most economists believe that the United States won’t follow suit anytime soon. Cash remains the most popular method of payment for Americans for transactions under $25. Cash will persist in the U.S. for the elderly, those in remote areas, and most significantly, the un-banked.

Although the growth in online and app-based goods and services significantly benefits consumers with lower costs and greater convenience, people cannot access those savings without access to low cost or free digital payment options. Currently, one in 15 households in the U.S. are un-banked, don’t have access to a bank account or debit or credit card. Without this access, these consumers often have no way to make digital payments.

Rather than a cashless society being around the corner for the U.S., the demand for cash remains strong, especially for low dollar notes. So, for now, cash is still king in the U.S.!

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The Hot Bank Technology Trends – Creating the Perfect Blend for Our Customers

As we move into the second quarter of 2012, we see the U. S. community banking industry stepping up their technology budgets.  This movement is a result of the industry trying to capture their future market; the Generation Y (Gen Y) customers (Yurcan, Brian, “8 Bank Technology Trends That Will Shape the Industry in 2012,” www.banktech.com, January 3, 2012).

The Gen Y market, comprising people born between approximately 1979 and 1999, is enormous.  The immensity of this demographic is only outsized by its future earning potential.  This group, made up of approximately 80 million adolescents and young adults, earn approximately $214 billion annually and are expected to earn $3.4 trillion, compared to the estimated $2.8 trillion earnings of the baby boomers by 2018 (Constantine, Greg, “Tapping Into Generation Y: Nine Ways Community Financial Institutions Can Use Technology to Capture Young Customers,” www.firstdata.com, April 2010).

In an effort to meet the growing technological demands of a technologically savvy market and to make banking easier and more convenient for our customers, Intracoastal Bank is initiating several exciting new services in 2012.  Some of these new services include:

  1. A newly installed ATM which will eventually be an automated banking center, allowing transactions to be done 24/7.  Business and Personal customers will be able to make deposits using image technology; no deposit slips or envelopes are needed.  This ATM will allow bulk cash and checks to be deposited.  The machine will add up the checks and cash to be deposited and confirm that this number matches what the customer enters.  The customer will receive a receipt of their transaction with images of all checks deposited for their records.  This machine is so smart that it can even detect counterfeit bills and will reject them.
  1. A new and improved Mobiliti Banking. We currently offer mobile banking, but we are taking it to a whole new level.  There will be 3 ways to access the mobile banking feature: text messages, website or by downloading an app to your phone. Besides checking account balances, making transfers and looking at account history, customers will be able to pay bills with their smart phones.
  1. The addition of Account Create to our website.  This allows new and existing customers the opportunity to open accounts 24/7. This new service alleviates having to come into the bank during designated hours to set up an account.
  1. The addition of LinkLive to our website.  This gives our customers the opportunity to have online chats with our Personal Bankers when they have questions.  This program also allows our Personal Bankers to view a customer’s desktop in order to assist them with their online banking issues.

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