Time and time again, we’ve heard the forecasts and predictions that cash is on its way out.
Though it’s easy to believe that, with all of the payment innovation and new technologies out there, cash would quickly be forgotten, it’s just not the case.
In fact, in many places around the world, the usage of cash is thriving.
Yes, the digital payments ramp-up is changing the commerce game, but that doesn’t mean cash has lost its foothold in the global payments mix. While cash may be used less than it has been in the past because consumers have added contactless cards or mobile wallets to their payment routine, the share of cash continues to grow because more people are spending more money.
The latest research from PYMNTS.com Q3 2016 Global Cash Index™, a Cardtronics collaboration, proves that cash use is alive and well in Eastern Europe, with $1.3 trillion being spent by Eastern European consumers in 2015.
Alastair Mayne, managing director of Continental Europe for Cardtronics, joined Karen Webster for a live digital discussion on Eastern Europe’s ongoing love affair with cash and why believing the usage of cash is going anywhere but up may be an inaccurate view of this truly ageless payment method.
The Power Of Consumer Choice
One of the most compelling arguments for why cash remains a payment method of choice for consumers is simply because consumers want it to.
Consumers — though they may welcome and appreciate digital payment innovation — still have a place in their hearts for the payment method that’s been around for thousands of years.
Eastern Europe in particular has a very healthy appetite for cash. In many economies, data has shown cash volumes and transactions increasing, while, in others, where digital penetration is higher, the usage of cash still remains stable. The region has a higher cash share than its Western European neighbors and even spends more physical currency per capita than the U.S.
While cash may be seen as the old-fashioned way to pay, it checks many boxes that digital payment methods haven’t achieved — cash is tangible, accepted everywhere, secure and gives consumers the control.
There’s no doubt that, when you’re paying with cash, you know exactly what you have and what you don’t have.
According to the latest Global Cash Index data, total cash in Eastern European economies is expected to grow by roughly 4.3 percent annually between 2015 and 2020.
This massive growth rate is proof that the share of cash is on the rise.
In many countries in Eastern Europe, the cash propensity is so high that looking at the total cash growth numbers alone doesn’t give a true picture of the overall preference for cash. In Lithuania, for example, the total cash growth rate is just 4.4 percent, but with a cash propensity of 86.5 percent, it’s clear that cash still reigns supreme as the payment method of choice in the country.
Mayne noted that, in the U.K., the large expansion of contactless has indeed driven a growth in the overall number of payments and has given people more choices, but what it hasn’t done is significantly impact the amount of cash used.
“It’s great to see people still have choices … and that they are still choosing to use cash,” he added.
Digital Isn’t Undermining Cash
It can be easy to forget that, with digital payments at play, the cash in a person’s wallet may last a little longer than it might have otherwise, but the fact of the matter is that the cash is still there.
As people continue to spend more, the share of cash continues to grow, even if people are using cash less.
It’s safe to say that digital payments and cash payments can coexist. Innovation doesn’t displace other methods of payment, though it certainly provides consumers with more choices in how they want to pay. It isn’t taking away from consumers still choosing to pay with cash.
Mayne stated that the preference for cash across Eastern Europe really varies by country, whether it’s attributed to uncertain economic conditions, old habits dying hard or cash just being a comfortable and convenient way to pay.
In Greece, where cash propensity is 57.1 percent, people more likely opt for cash because of the capital constraints, Mayne said. Cash is a payment method that enables them to guarantee their money is actually theirs, which can be very difficult in what has been an economically unstable environment.
In other places, like Poland, cash use as a share has dropped, but that’s not leading to a reduction in cash withdrawals. In fact, the contrary is happening. Though Poland is a country that is beginning to embrace a lot of payments innovation, the research shows that cash is still expected to grow steadily.
Mayne describes Poland as a large market that loves to have cash, so it’s no surprise that the country represents a big chunk (10 percent) of the cash withdrawals in Eastern Europe.
“Even where you see a whole mix of payment options and it’s great to see innovation happening, a lot of people are still using cash and still have that preference,” he said.
The Access To Cash
Though it’s evident Eastern Europe has a strong love for cash, the data also shows that the region has a lower density of bank branches and ATMs compared to Western Europe.
While this offers a unique opportunity to ATM operators, Mayne noted that there are many factors that contribute to why ATM popularity varies country to country.
The way the networks operate or the way that you can use an ATM differs quite significantly depending on the country. In some places, it’s very transparent for consumers at the point of use, while, in others, there are fees and incentives to not use ATMs that aren’t affiliated with a certain bank.
“We see a wide mix of different factors, but gradually, over time, we start to see some of those changing,” Mayne said. “The opportunities and the importance of the ATMs are growing, and over time, we expect to see the ATM channel start to change in terms of how it’s used as well.”
Making an investment in an ATM is quite different than investing in POS equipment, but the return on that investment can be significant, because, in cash-centric economies especially, ATMs have the power to drive consumers into a merchant location.
Traditionally, ATMs were always owned and operated by financial institutions, but even banks are looking to third-party ATM operators as they explore alternative locations and venues to provide cash access points for consumers.
“We see a lot of bank branches closing in different parts of Europe and pressure on the economics of bank branches, so I think having this alternative channel — which marries so well to the retailer business — is great,” Mayne said.
There’s growing evidence that banks are looking to ATM operators, who have the scale and efficiency, for help with this specialized part of their business, he added.
“The big takeaway for me is that there’s a great deal of articles and noise around technology and innovation, which is great and giving consumers choices, but what we often don’t focus on is just how resilient cash is and how important cash is as part of that payments mix.”