The Future of Cash in A Digital World

According to Wikipedia, cash is money in the physical form of currency, such as banknotes and coins. In bookkeeping and finance, cash is regarded as current assets comprising currency or currency equivalents that can be accessed immediately or near-immediately. Others view cash as a reserve for payments during times of structural negative cash flow.

While other forms of currency have emerged, research shows that cash still accounts for at least 8 of every 10 payment transactions, making cash the undisputed champion of payments half a century after the invention of electronic means of payment.

The question is, why is cash in the hand or pocket, still so popular five decades after money first took the form of plastic?  Experts argue that cash has survived over the years because it is a simple, human-friendly technology. Futurist Michio Kaku advances what he calls the Cave Man Principle to explain the increasing popularity of cash. According to him, society wants, dreams and personalities have not changed much in over 100,000 years and that when modern technology clashes with this primitive human self we carry around inside us, the primitive desires win every time.

He discusses the competition between high tech (e.g., watching a sporting event on television) and high touch (e.g., attending the live event in person), with most people choosing high touch over high tech. He describes cash as high touch, and digital money as high tech.

Cash is physical and, it is the reason why it plays a vital contingency role in society. Anytime there is crisis, the only acceptable payment system is cash.

In spite of the benefits of using cash, we need to accept the fact that the world is growing increasingly digital. Technological development will continue to revolutionize payment in both the real and virtual worlds across the globe. Over the past couple of years, we’ve witnessed what others call  the ‘silent revolution’ in the financial services sector with the emergence of Financial Technology (FinTech) companies. This has given rise to new forms of digital or electronic payments, generally regarded as a payment process carried out electronically. It is regarded as a form of non-cash payment that doesn’t involve a paper check.

As dependency on cash subsides, many forms of electronic payment systems have emerged. Among the prominent ones are online credit card payment system, electronic banking institutions, digital cash, mobile payment, smartcard based electronic payment system (fuel card), and electronic billing.

What will happen to money, and especially cash, in this new electronic age? Will all money eventually be digitized or disappear?

People like David Wolman have gone far to write a book depicting the “end of money”. He argues that the smartphone will become a seamless wallet, remittance and payment tool that will provide financial inclusion to billions of the unbanked around the world. And, there has been an aggressive drive toward a cashless economy. This movement has been spearheaded by tech giants specialising in mobile peer-to-peer payments to mainstream. Among them are Venmo by PayPal, Alipay by Ant Financial, WeChat Pay by Tencent, and Go-Pay by Go-Jek are some of the services offered by tech giants to enable cashless transactions for billions in three of the four most populous countries across the globe.

Advancement in mobile technology, an increase in migrant workers sending money back home to their families, and the rural-urban dichotomy have facilitated the movement of money through electronic payments.

The popularity in mobile payments is attributed to recent collaborative efforts between banks and telecommunications operators to reach the unbanked sections of society which current account for around 70 percent across the world.

Some of the telecommunications companies operating on the continent have launched their own forms of electronic payments. For example, MTN’s banking service allows customers to open and access accounts using their mobile hand sets. The availability of such a service has enabled MTN’s numerous mobile phone subscribers, many of whom are under-banked or unbanked, to be involved in mobile banking This has given rise to a new trend-mobile airtime. Pioneered by MTN, the technique is based on using pre-paid phone airtime vouchers as virtual currency. This enables users to use a part of their phone’s airtime to exchange for goods and cash.

Today, a number of mobile operators with international and inter-regional footprints are now deploying financial services that makes it possible for them to deploy services that allow consumers to send and receive money transfers using their mobile phones. This ability to move money with a mobile phone has transformed the landscape of financial services. Researchers in the field predict that there would be more than 500 million users around the world who use their mobile phones for international money transfers by close of year 2020.

Electronic Payments has several benefits over traditional forms of payments. Among them are convenience, flexibility, speed, security, reduced transaction costs, and a global reach. Its use has increased globally and continues to rise the world over.

In addition to mobile payments, research is underway to explore the use of new types of wearables in financial payments. Many wearables are currently used for health and fitness tracking, but manufacturers are now working on incorporating additional features, such as payment functionality in order to make them an everyday essential. Wearables offer a real point-of-difference over smartphones and contactless cards that enable cardholders to make payments or withdraw cash from their deposit accounts at ATMs and POS terminals.

A number of banking institutions continue to offer electronic bill payments.  Specialized online bill pay services have emerged to take advantage of the electronic payment platform. Paytrust and Yahoo Bill Pay are two of such services.

With such payment platforms, the movement of money over mobile devices has been made very easy; people in remote communities can receive money without any travel time; people can buy groceries with a few punches of keys without money changing hands.

The enactment of the Payment Systems Act (Act 552) in 2003 and the introduction of the e-zwich system in Ghana are healthy developments that have facilitated electronic payments. The emergence of eTranzact Ghana Limited has facilitated e-payments in the country. Through a partnership with selected banking institutions, mobile and internet-based applications, the company provides services such as Mobile Topup; Mobile Banking, Bill Payment and Online Purchases.

While it can be said with a fair degree of certainty that cash is unlikely to go away soon, contemporary trends in digital payments will reduce the dependence on cash payments.   Nana Prof. Osei Darkwa, President African Virtual Campus  

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